US embassy cable - 04MAPUTO776

UNCLAS SECTION 01 OF 03 MAPUTO 000776 
 
SIPDIS 
STATE FOR AF/S 
PRETORIA FOR JRIPLEY 
JOHANNESBURG FOR FCS - WCENTER 
USDOC FOR AHILIGAS 
SENSITIVE 
E.O. 12958: N/A 
TAGS: ECON, EAID, EINV, ETRD, MZ, EAGR, EFIS, Tourism 
SUBJECT: ECONOMIC ACTIVITIY INCREASES IN A REMOTE PROVINCE: CABO 
DELGADO RELIES ON TOURISM, SHRIMP AQUACULTURE, AND NEW INVESTMENT 
 
REF: MAPUTO 00406 
 
1. (U) SUMMARY. More foreign operators are moving in to take 
advantage of resource-rich opportunities in the poor province of 
Cabo Delgado. Operators of Middle-Eastern, South Asian, and 
European descent, are bringing employment and increased 
production to the community, although the lack of infrastructure 
and extremely high operating costs are still problematic for 
businesses. Cabo Delgado's hope lies in the development of 
tourism, which both the GRM and the USG have made a top priority. 
END SUMMARY. 
 
2. (U) Characterized by a majority Muslim population, 
considerably low living standards, and a shared border with 
Tanzania, the northern-most province of Mozambique, Cabo Delgado, 
is home to significant natural resources and generally untapped 
economic potential. The mining, forestry, agriculture, fishing, 
and tourism sectors have recently attracted several new investors 
in Cabo Delgado, giving the province a European, Asian, and 
Middle Eastern economic flair. 
 
3. (SBU) On up-country travel, econ/poloff and political 
assistant met with the Director of Operations of the port of 
Pemba, the provincial capital. A recently rehabilitated facility 
(1994), the port is small and only receives six to seven ships 
per month. With a depth of twelve meters, the port does not need 
to provide dredging or piloting for incoming traffic. Regular 
traffic hails from Mombasa, Kenya, and Maputo, bringing household 
goods and electrical equipment every fifteen days to be sold on 
the local market. Cotton and timber are the province's primary 
exports, with most goods being shipped to Asia (predominately 
China). Timberworld and Southgate, two UK-based timber firms, and 
Komatiland Forestry, a South African-based firm, have operations 
in Cabo Delgado. Of real concern is illegal Chinese logging in 
the Cabo Delgado Province. According to port authorities, Chinese 
operators manage the majority of timber that transits Pemba Port, 
subject to tax exemptions. More often than not, these operators 
are illegally logging throughout the northern and central 
provinces of Mozambique, thus destroying precious natural wetland 
forest reserves. The GRM seems to turn a blind eye to such 
activity, possibly due to the high profile aid the Chinese 
provide to the GRM and Mozambican military forces (for example, 
the Chinese have recently constructed an international trade 
center and new Ministry of Foreign Affairs building). 
Additionally, China and Mozambique have been long time trade and 
investment partners (REF A). Due to the rising cost of 
electricity across the country, the graphite and marble factories 
located in Ancuabe and Montepuez, respectively, have slowed 
operations, reducing exports. The port expects to be shipping 
large amounts of prawn in the near future, as Indian Ocean 
Aquaculture, a majority British-owned shrimp aquaculture firm, 
has shown intentions of exporting their product to Japan and the 
US by July 2004. Indian Ocean is still in the process of 
refurbishing their packing plant, but has projected plans to move 
forward with exports as soon as the facility infrastructure is 
complete. 
 
4. (U) Despite excellent economic opportunities, Cabo Delgado's 
population remains one of the poorest in the country. The 
population suffers from an infant mortality rate of 187/1000, a 
life expectancy below 40 years, and an illiteracy rate of 75 
percent (general population) and 93 percent (women) (data from 
Aga Khan Foundation). Cabo Delgado is far removed from the 
capital of Maputo and somewhat isolated from GRM activities and 
programs. The Muslim-based Aga Khan Foundation surveyed the 
province and found the coastal areas to be among the most poor. 
In 2001, Aga Khan began a program in Cabo Delgado focused on 
social organization, rural development, health care, and 
education to increase communities' living standards. The Coastal 
Rural Support Program's (CRSP) goal is to reduce poverty and 
improve the welfare of poor families living in seven districts, 
and gradually ten districts, by 2008. The program seeks to 
mobilize communities and their resources by initiating Village 
Development Organizations. The Foundation started a micro-credit 
program for fishing and farming associations, allowing the 
purchase of seeds, goats, boats, and nets. Additionally, the 
program supports increasing opportunities and skills for women by 
offering credit schemes and training in various professional 
skills, including accounting and marketing. On health, the 
program trains and develops health personnel and provides AIDS 
awareness education through village and women's organizations. 
The fourth and final program component, education, is enhanced 
through improved school management (training teachers and 
committees) and support for improved literacy, especially for 
girls. The integrated Aga Khan program has achieved marked 
success by evidence of increasing development in target 
communities and Aga Khan will continue to work as the most active 
economic and social aid organization in Cabo Delgado. 
 
5. (U) Tourism in Cabo Delgado is one of the most lucrative areas 
for investment, given the unspoilt beaches, remote islands, and 
preserved coral reefs. The 2003 National Tourism Policy 
identifies Pemba and the Quirimbas (an adjacent island chain) as 
a focus region for the GRM's current tourism investment strategy. 
The largest and most luxurious hotel in Pemba, the Pemba Beach 
Hotel, built with Saudi investment, attracts an increasing number 
of business travelers and vacationers. The hotel has proved a big 
employment generator for the local community; so much so, that 
the Catholic University in Pemba has developed and geared a 
Tourism Management and Hospitality curriculum that sends 
graduates to jobs at the Pemba Beach Hotel and approximately 187 
other tourism affiliated businesses in the province. The 
University's program is impressive and greatly benefits the 
community by linking students with businesses and providing 
targeted training. Studying at the University, forty-five 
percents of students hail from Cabo Delgado, twenty percent from 
Nampula, Maputo, and other provinces respectively. The USG 
provides support to the Catholic University by donating English 
language material (audiotapes and books) and Microsoft software. 
The University is expanding rapidly and will build a conference 
center, temporary quarters for lecturing professors, and increase 
classroom space in the near future. As USAID prepares to focus on 
tourism development in the northern provinces of Niassa, Nampula, 
and Cabo Delgado in the next six years, greater focus will be 
given to developing tourism infrastructure and capacity in this 
region. 
 
6. (SBU) Day-to-day business operations in Pemba are dominated by 
a Mozambican of Middle Eastern descent, Osman Yacob. Osman is one 
of the province's high profile characters and maintains excellent 
relations with the Governor of Cabo Delgado Province. Yacob and 
his family, including his son, Mahomed Assif Osman, import and 
sell a majority of Pemba's household goods and equipment. A visit 
to one of Osman's many stores makes clear a variety of goods for 
sale on the local market, including anything from hoses and 
bicycles to detergent and tires. Assif, who is at the heart of 
the operation, spoke openly about increasing development and 
continuing problems in Pemba. According to Assif, the Pemba Beach 
Hotel and Indian Ocean Aquaculture have created significant 
employment in the capital, increasing economic activity and 
raising the province's profile. Due to poor infrastructure, the 
biggest hassles businesses face are stiff transportation costs on 
goods, bureaucracy (obtaining licenses, claiming incentives), and 
corruption, specifically at the port of Nacala (the closest large 
port). The Osman operation receives 60-70 containers of goods a 
month into the port; most goods are produced in Brazil, China, 
and Dubai. An interesting trend that has developed in the 
northern provinces of Mozambique is the operation of Middle 
Eastern and South Asian (mainly Indian and Pakistani) businessmen 
working to distribute and sell on the local market. It is 
speculated that several of these businessmen pay bribes and cut 
corners in order to do business. 
 
7. (U)An interesting new development in Cabo Delgado, the Indian 
Ocean Shrimp Aquaculture farm is setting up operations at a rapid 
pace. On a visit with Patrick Wood, Managing Director of Indian 
Ocean Aquaculture (IOA), he showcased the firm's corporate 
headquarters, packing plant (formerly TexManta, the province's 
now defunct major textile factory), shrimp farms (consisting of 
14 ponds), and hatchery. IOA boasts a plethora of international 
investors (predominately British), with a minority share of 
American investment. Biologists and experts from Fiji, Great 
Britain, the Philippines, Australia, and other countries are 
living and working on IOA's several properties. Currently, IOA is 
designing product packages and completing construction on the 
packaging plant. The firm's export targets are Japan and the US. 
Wood expects the first prawn exports to hit the US by July 2004. 
 
8. (U) COMMENT: It is clear that economic activity in Cabo 
Delgado is heating up, employment is being created, and the 
development agenda is heavily reliant on increasing tourism. An 
interesting mix of investors is afoot, trying to get ahead in a 
region that is increasingly becoming a relative hotspot in the 
generally lukewarm Mozambican investment environment. Activity 
and access to Cabo Delgado will intensify as Pemba International 
Airport opens up more international flights. Of significant 
interest in the upcoming decade will be the results of how this 
development affects the poor, Muslim community of Cabo Delgado. 
With USG private sector interest in the North (privatization of 
Nacala Port and Railway and IOA) and significant USG support in 
demining and tourism development, the USG will have a hand in 
economic and social developments that transpire. END COMMENT. 
HANKINS