US embassy cable - 05MAPUTO1059

UNCLAS MAPUTO 001059 
 
SIPDIS 
SENSITIVE 
STATE FOR AF/S - HTREGER 
DOC FOR RTELCHIN 
NSC FOR CCOURVILLE 
E.O. 12958: N/A 
TAGS: ECON, ETRD, EAID, EINV, MZ, AGOA 
SUBJECT: LAST AGOA GARMENT EXPORTER IN MOZAMBIQUE TO CLOSE 
 
REF: A. 04 MAPUTO 01211 
B. 03 MAPUTO 001697 
Sensitive but unclassified. Please treat accordingly. Not 
for internet distribution. 
 
1. (U) Belita, the only remaining garment factory in 
Mozambique exporting to the U.S. under AGOA, has announced it 
will close its operations on September 17. The closure will 
result in the loss of nearly 600 jobs in the city of Beira, 
Sofala province. Palmar Group, Belita's parent company 
located in Mauritius, has also abandoned plans to open an 
all-but-ready jeans production plant, an investment valued at 
USD 3 million, that would have employed another 550 employees 
(ref A). Palmar is now actively seeking buyers for its two 
Mozambican projects. 
 
2. (SBU) According to Palmar Group Project Manager Steve 
Wilson, the closure is a result of several factors, not the 
least of which was Belita's inability to secure orders from 
U.S-based buyers. Wilson told econ/poloff that U.S. 
customers seem to have lost faith in Africa, noting that even 
African textile powerhouse Mauritius was suffering from a 
drop in orders from the U.S. Other factors leading to the 
closure included increasingly expensive logistical issues 
with the ports of Beira and Durban and rising costs charged 
by its shipping agent, Maersk. Wilson added that Belita 
faced significant difficulties adjusting to the realities of 
a post-quota China trade environment. Mozambique's lack of a 
well-trained work force translated into lower labor 
productivity and quality control, both of which have made it 
difficult to compete with low-cost Asian producers like 
China. Belita's General Director Joao Nogueira stated that 
Palmar Group, which invested over USD 7 million in the Belita 
project, had struggled to make a profit in Mozambique. 
 
3. (SBU) Comment: Mozambique's last large-scale apparel 
exporter has fallen victim to many factors that have limited 
the African garment sector's competitiveness as a whole. Low 
labor productivity, inflexible labor laws, bureaucracy, and 
poor infrastructure are debilitating factors in the 
competitive post-quota world. The closure of Belita is 
particularly disappointing given earlier optimism about 
Mozambique's potential in the garment sector and USG efforts 
to enhance Mozambique's exports under AGOA. Moreover, the 
closure marks the virtual end of Mozambique's garment export 
industry and will result in the loss of hundreds of jobs in a 
country where unemployment is a major problem. 
La Lime