US embassy cable - 05MAPUTO1528

UNCLAS SECTION 01 OF 02 MAPUTO 001528 
 
SIPDIS 
 
SIPDIS 
 
AF/S FOR HTREGER AND JMALONEY 
JOHANNESBURG FSC FOR RDONOVAN 
JOHANNESBURG TDA FOR DSHUSTER 
USDOC FOR RTELCHIN 
MCC FOR SGAULL, TBRIGGS 
USAID FOR AA/AFR AND AFR/SA 
 
E.O. 12958: N/A 
TAGS: EAGR, EAID, ECON, EINV, ETRD, MZ 
SUBJECT: MOZAMBIQUE - OCTOBER ECONOMIC DIGEST 
 
REF: A. A) MAPUTO 1517 
 
     B. B) MAPUTO 1463 
     C. C) MAPUTO 866 
 
MAPUTO 00001528  001.2 OF 002 
 
 
 1. This is a brief summary of significant economic 
developments in Mozambique during October 2005.  We provide 
it as a supplement to our other reporting.  The items 
discussed are: 
 
 2. 800,000 people face food shortages due to drought 
 3. Water projects planned 
 4. Fuel prices rise 
 5. Deadline for overdue social security contributions 
 6. INSS Chairman resigns 
 7. Asian and European poultry imports banned 
 8. Germany and EU finance Inhambane development 
 9. French firm has invested USD 37 million in prawn farm 
 
 
800,000 FACE FOOD SHORTAGES DUE TO DROUGHT 
------------------------------------------ 
2. On October 28 Mozambique's Food and Nutritional Security 
Technical Secretariat (SETSAN) announced that 801,000 
(about 4 percent of the population) faced the risk of 
severe hunger until next March, when the next harvest is 
expected, due to the prolonged drought over much of 
Mozambique.  This is a substantial increase from May, when 
SETSAN estimated 428,000 faced food insecurity.  The worst 
affected areas of the country are in the south and center, 
with Tete the most affected province; SETSAN's recent 
survey counted 198,000 drought-affected people there. 
After Tete, the southern provinces of Gaza and Inhambane, 
with 146,000 and 119,000 drought-affected people 
respectively, were the next worst off.  In many rural 
districts in these provinces food prices have risen by 
30-100 percent.  One contributing factor to water shortages 
is that pumps and wells in many areas have not been 
maintained; SETSAN found half of the pumps broken in some 
areas.  According to Prime Minister Diogo, the 2005 grain 
harvest of 1.9 million tons was five percent below the 2004 
harvest. See reftels A and B for additional information. 
 
WATER PROJECTS PLANNED 
----------------------------- 
3. The Public Works Ministry is in the process of 
finalizing contract negotiations for the construction of 20 
small dams in Gaza, Inhambane, Sofala, Manica and Tete 
provinces.  The dams are intended to reduce the impact of 
droughts in these drought-prone areas.  The government 
intends also to increase the number of Mozambicans with 
access to safe drinking water and basic sanitation 
services.  According to the ministry, only 40% of rural and 
36% of urban Mozambicans have access to clean drinking 
water.  The goal is to raise those numbers to 55% and 60% 
over the next four years.  Mozambique's Minister of Public 
Works, Felicio Zacarias, made the announcement on October 
24, at the inauguration of a rehabilitated water supply 
system in the town of Namaacha, on the border with 
Swaziland.  The rehabilitation cost nearly USD 1.5 million, 
partially funded with a World Bank loan and partially with 
the government's own funds.  The system now serves 18,000 
Mozambicans in Namaacha and approximately 12,000 people in 
Lomaasha, in Swaziland.  A private operator, Aqua Gest, won 
the public tender to manage the system on a five-year 
contract. 
 
FUEL PRICES RISE 
---------------- 
4. After not adjusting fuel prices since June (see reftel 
C), on October 20 the Mozambican government increased fuel 
prices by up to 20 percent.  The price of kerosene 
increased the least - by only 9.7%, followed by diesel - 
10.3%, LPG cooking gas - 11.6%, petrol - 16.9% and jet fuel 
- 20%.  Until this year, the government's practice had been 
to evaluate fuel prices every month and adjust them when 
the price of imports moved by more than three percent.  In 
the face of a strong upward trend in world fuel prices this 
year, however, the GRM has delayed price increases, but has 
now boosted them sharply to bring them in line with world 
levels. 
 
MAPUTO 00001528  002.2 OF 002 
 
 
 
EMPLOYERS EVADING SOCIAL SECURITY OBLIGATIONS GIVEN UNTIL 
MARCH 2006 
--------------------------------------------- --------------- 
-------- 
5. In an effort to collect USD 1.6 million in overdue 
social security contributions, on October 31 the National 
Social Security Institute (INSS) announced that employers 
had until March of 2006 to make their owed payments.  Of 
the 16,384 companies registered with INSS in December 2004, 
only 8,402 are current with contributions.  As a result, 
only 163,582 workers are currently eligible to draw 
benefits out of the 542,582 workers registered under the 
social security system.  Companies that pay their social 
security debts prior to March 2006 will only be charged 
with paying ten percent of their debt interest.  It is not 
yet clear what will happen to those companies that refuse 
to comply with the March deadline. 
 
INSS CHAIRMAN RESIGNS 
--------------------- 
6. Meanwhile, on October 26 the chairman of the board of 
INSS, Aguiar Mazula, resigned.  The government has been 
reshuffling senior management at INSS for the past several 
months over mismanagement and corruption claims, beginning 
with the sacking of the INSS Executive Director Elina Gomes 
in August, and Mazula may have seen his dismissal coming, 
too.  Mazula held a number of prominent positions under 
former President Chissano -- including Minister of State 
Administration, Minister of Defense, and Minister of 
Labor. 
 
ASIAN AND EUROPEAN POULTRY IMPORTS BANNED DUE TO AVIAN FLU 
--------------------------------------------- ------------- 
7. On October 27 Mozambican government livestock 
authorities renewed their ban on Asian poultry imports and 
extended this ban to imports from all European countries as 
the result of recently recorded bird flu outbreaks.  This 
will not eliminate the possibility of migratory birds 
carrying the virulent H5N1 virus to Mozambique, however. 
For this reason, the National Livestock Directorate is 
training agricultural workers to observe domestic poultry 
for unusual die-offs.  There is great concern that should 
H5N1 spread to Southern Africa, the millions of individuals 
living with immune systems compromised by HIV will increase 
the likelihood that the virus will mutate into a form 
transmittable from person to person. 
 
GERMANY AND EU TO FINANCE INHAMBANE DEVELOPMENT 
--------------------------------------------- -- 
8. On October 26 the European Commission announced in 
Maputo that Germany and the EU will finance a USD 9.7 
million rural development project in Inhambane province. 
The project is in support of the GRM's stated goal of 
decentralization in that it will create a "Rural 
Development Investment Fund," which will be managed by the 
Inhambane provincial government.  Germany is contributing 
three-fourths of the funding through the German Development 
Bank, KFW.  KFW completed a feasibility study for this 
project in 2004.  The purpose of the project is described 
as poverty reduction in Inhambane through improved public, 
social and economic infrastructures, and through the 
strengthening of government and administrative structures. 
 
FRENCH COMPANY, AQUAPESCA, HAS INVESTED USD 37 MILLION IN 
PRAWN FARM 
--------------------------------------------- --------------- 
-------- 
9. Aquapesca, a French company, has invested approximately 
USD 37 million over the past eight years in its prawn 
aquaculture farm at Inhassunge in Zambezia province, 
according to press reports on October 25.  The prawn farm, 
which started on a 20-hectare plot in 1998, now covers 320 
hectares.  Aquapesca has so far produced 300 tons of prawns 
this year and hopes to expand production to 1,200 - 1,700 
tons in 2007.  The company employs 700 Mozambicans. 
Dudley