Evaluating local and regional supplier inputs to mega-infrastructure projects: lessons from the Moatize railway, Mozambique

Methodology

Qualitative analysis which included a combination of literature analysis and interviews with consulting engineering firms, civil construction firms, raw material providers and institutions in South Africa and Mozambique.

Research Objective

To analyse the ability of natural resource exploitation to foster local and regional value chains in the construction industry through the development of related infrastructure.

Synopsis

  • Examines the dynamics which determine whether local or regional construction companies are utilised in building rail infrastructure which is being developed to exploit coal discoveries in Tete, Mozambique
  • Lead firms in mineral exploitation (such as Vale in Mozambique) tend to procure from large MNC construction suppliers with pre-established relationships. This limits local capacity building
  • Local Mozambican construction firms struggle with financing, meeting health and safety standards, supply chain coordination (cost/shortages of inputs)
  • RVCs are being developed through the strong presence of South African construction companies (are competitive on price and quality with Chinese and other international firms)

Policy Recommendations

  • Mozambican government needs to take advantage of mineral linkages to infrastructure development and form a strategy to develop capabilities in its civil construction sector
  • Government should look to regional partnerships with South Africa which can assist Mozambican firms in capacity building while also increasing experience and opportunities for South African firms in Mozambique
  • Development financing and state ability to extract resource rents are required in order finance localisation and regionalisation of construction value chains
  • High cost of inputs suggests the utility of building a steel plant in Mozambique – not only local benefits but also regional benefits in lowering steel prices for South Africa
  • State procurement strategy needs to more heavily prioritise local (and regional) in practice
  • Mozambique needs to partner with South African firms to establish construction training facilities in Mozambique (right now training often occurs in SA facilities)
19 Apr 2018

Sector

Agriculture

Institution

SAIIA, Economic Diplomacy Programme

Country

Malawi, Mozambique, South Africa