Market conditions and economic feasibility for medical supplies in Mozambique

Selling Medical Supplies in Mozambique

Mozambique is in South- east Africa, totally surrounded by South Africa, and this can be seen in the map given at the end. The country has three main cities of Maputo, Beira and Nampula. These are the only places in the country where individuals are rich and have money to spend. The major part of the people live on the gains from agriculture and this is the life of 80% of the people. The women are the major workers. It is the job of women to plant, nurture and harvest the crop. Then comes their responsibility for cooking maize, which is the staple food over a slow fire, and it is in the form of porridge. This is the main course of the meal. (Mozambique- people and society)

Since 1996, Mozambique has attained self-sufficiency in grains and, presently, cereal and cassava production is more than the national needs. But even now the agricultural productivity is below the African and regional average, and there is considerably great amount of unexploited potential for further growth. (Economic Overview) The capital of the country is at Maputo and the population is nearly 19 million. The life expectancies are very low with the figure being 37.83 years for males and 36.34 years for females. There are very few doctors and only a little over half of the population has access to safe drinking water. (Mozambique: Fact File)

Module-7

Economic environment

The total foreign exchange reserves of the country excluding gold are 715.6 million dollars as per the latest figures available for 2001. The exchange rate for the currency is 20,704 units of the local currency for every dollar, and this has risen from 11,773 to the dollar in 1997, on to 12,110 in 1998, 13,029 in 1999 and 15,447 in 2000. Thus the currency is continuously depreciating. The gross production of the country is 3.4 billion dollars and the per capita income is $193. (Economic Overview)

Start-Up Costs

The start up costs will depend on what type of activity is planned. It is clear that the business has to be located in one of the three major towns, preferably the capital, and there the costs are expected to be high. There are no details available about this and one will have to go through an advisor who will work out the details based on a survey. The country is not poor and has the Cahora Bassa Hydroelectric Dam, which has a capacity of 2,075 megawatts a year, and is now the main source for the current annual national consumption of around 200 megawatts. Once the newly constructed aluminum smelter in Maputo -- MOZAL is fully operational, then it will require another 450 megawatts. Electricity is at present also exported to Malawi, South Africa, Swaziland and Zimbabwe. (Economic Overview)

The attitude to foreign investment is not clear. Mozambican President Armando Guebuza, speaking to Mozambican journalists in New York after attending the United Nations summit, has mentioned that Mozambicans have to themselves put effort for their country's development. The president denied that he was against the issue of foreign investment since it was a form of neo-colonialism. Guebuza also said that he hoped to finalize the negotiations on the Cahora Basso Dam when he would visit Portugal in late this month. Mozambique wants to get the majority share in the dam operating company, Hidroelectrica de Cahora Bassa, though Portugal holds 82% of the shares now. (Mozambicans are responsible for Mozambique's progress)

Financing Resources

For financing any enterprise in Mozambique, one will have to depend on South Africa. This is clear from the map where one can see that Mozambique is surrounded on all sides by South Africa, and practically the existence of the country is dependant on the mercies of South Africa. According to a recent survey by the South Africa Institute for International Affairs - SAIIA, Mozambique has received some 49% of South African foreign direct investment. There are more than 262 South African projects that have been registered by Mozambique's Investment Promotion Center after it was started in 1985. This has resulted in an accumulated investment of U.S. $1.33 billion by the end of the year 2003. South African investors now control 3 out of the 4 sugar estates, 3 out of Mozambique's 4 breweries, all of the soft drink bottling plants and large amounts of cereal mills, and most important is that of the tourism facilities available in the country. (Mozambique-South Africa - Investment climate generally favorable, new report) Thus if it is felt that outside funds should be used for the project, and then it is only those sources that should be tapped.

4. Actions that might be taken to obtain financing for the Business

It is clear that funds will have to be collected from South Africa and the methods for collecting them would be to meet the objectives of those investors. Just looking at the investment figures it is clear that South Africa wants to be the dominating economic power in Mozambique, as that is the only reason for investing so much of money. South African investment in two sugar estates and their mills created 3,034 permanent jobs, as also seasonal employment for 5,398 workers. (Mozambique-South Africa - Investment climate generally favorable, new report) Thus it is clear that one of their objectives would be to ensure getting jobs for individuals from their own country. Considering the present position of the investment in the business, this would be a good solution. It would be difficult to continue with the business if a situation of enmity develops with South Africa.

Module-8

1. Global Information Needs

Reporting depends on the structure of the organization and what has been said till now makes it clear that there will have to be a venture in cooperation with South Africa. There will not be many employees of Mozambican origin as they are even employed by South Africans only for manual work and most of them are given only temporary positions. The Mozal aluminum smelter project created temporary jobs of about 5,033 and of these 70% was held by Mozambicans when the construction and expansion phases of the project were running. When both phases were completed, the full staff complement is now about 800 staff members. (Mozambique-South Africa - Investment climate generally favorable, new report) Thus no project in Mozambique really seems to be for helping Mozambicans and they are probably not suitable for such jobs.

2. Global Information Sources

The main sources of information used for this are listed in the bibliography at the end. The sources are of all types, but most of the sources are international and from South Africa. The country does not have many sources of information of its own, and even newspapers of the area have provided a lot of information. These sources are expected to be neutral and generally factual with the information that they provide. Research done by a country of this size is also very low and not easily available.

1. Staffing

What has been stated earlier is that it would be better to leave the enterprise to operations by South Africans and in that case, they will determine most of the staffing. It is not advisable clearly that many Mozambicans be depended on for operations at least due to their ability. An example of this has just been stated.

2. Training and Development

When we are talking about a business and a possible collaboration with an existing business owner, they would have completed the training in an operating business. This would be helpful as the culture of South Africa and Mozambique would be similar. The operations there are different from the operations in U.S.. Businessmen met at a private sector conference in the northern Mozambican city of Nampula have criticized the tax administration for its systematic failure to refund Value Added Tax -- VAT in due time. The highly respected business leader Kekobad Patel, who has been appointed by the Confederation of Mozambican Businesses -- CTA to deal with tax and customs reform, stated that the current tax administration is ineffective, arbitrary and likely to have corruption. Jorge Pereira is one of the leaders of the Nampula Commercial, Industrial and Agricultural Association -- ACIANA and said very simply: "This way it is not possible to have investment." (Businessmen Fume At VAT Refund Delay) The training for operation in Mozambique has to be received there.

3. Performance Appraisal

In a country like this performance consists of keeping the business running after satisfying all the legal authorities and still making money. This requires only practical experience.

4. Compensation

This question can be answered only after a decision is taken on location of the business, situation in surrounding business, and the performance of the business. Considering the nature of the people as is clear from various comments, fixed salaries should be low with a high bonus component, as that will probably make the staff work. There should also be an efficient and effective method of checking on stock, as otherwise it is likely that a lot of untoward incidents like theft of stock will occur.

Module-10

1. Economic and Financial Risks

It is doubtful from the examples given that a business there will be able to make much money, unless it is connected to an industrial operation and a large group of people are compelled to purchase their requirement from the business and pay in a manner which will not permit them to do anything about the payment. It is not that medicines are not required, but the people cannot buy it. There are now 91,000 children below the age of 15 having HIV in this country. By June of the current year, 500 children were registered on the government's free program, which was called as the ARV treatment program. At the same time more than 60-000 children who were 14 and below are considered to be in need of the drugs. AIDS is slowly becoming one of the most significant causal factors of illness and death among children in Mozambique. There were 97,000 people who died from Aids-related illnesses in the year 2004, and of them 17,500 were children below the age of five. An average of 500 new HIV infections is taking place every day, and of them 90 are children who get the virus from their mothers. Mozambique has an HIV prevalence of 15.6%, according to the government figures, but who pays for their requirement of medicines? (Mozambique's Aids Children Slipping Through the Cracks)

2. Social and Cultural Risks

The risks are for the people employed in the business and the greatest danger is from AIDS.

3. Political and Legal Risks

The country is not a stable country and there are events that cause trouble like floods in 2000 and 2001. These events cannot be controlled, and there are also political risks as the country has a lot of diamonds and oil within the soil, but the individuals are not really interested in taking a long-term view. The people have to improve their outlook.

4. Risk Management Techniques

Risk management here is a matter to be learned and that can be learned only within the country. It may take a few years during which a person may incur losses, but that is the only practical learning method.

Conclusion:

It is a good country for a visit but setting up a business there takes generations for individuals to understand the difference.

Map

Retrieved from: Mozambique-South Africa - Investment climate generally favorable, new report)