[stop-imf] IMF: From cashews to sugar in Mozambique (fwd)

[Robert Weissman]

The following is from Africa News Online
http://www.africanews.org/PANA/news/20000525/feat6.html
Richard Knight, The Africa Fund, www.theafricafnud.org

IMF Pressure May Force Investors To Pull Out Of Mozambique
May 25, 2000

MAPUTO, Mozambique (PANA) - New investors in Mozambique's sugar industry
may pull out if the government yields to pressure from the International
Monetary Fund to cut off protection for domestically produced sugar.
Attracted to Mozambique with the promise that the domestic market for
sugar was protected, the investors are now threatening to close down in
case government accepts IMF pressure to slash the protection.

One of the sugar factories to be affected would be Marromeu sugal mill on
the south bank of the Zambezi River.

Sabotaged during Mozambique's civil war, the mill has been rehabilitated
by Sena Company in which a Mauritian consortium holds majority shares.
Sena's manager, Anton de Wal, did not mince his words when he spoke to
'Metical', an independent paper published in Maputo.

If the IMF forces an end to the current protectionist regime, de Wal,
whose consortium is the largest investor in the sugar sector, said: "We
will close our doors in Mozambique."

According to him, investors are reluctant to put any more money into
Marromeu, since they do not know what position the government is taking
towards the IMF demands.

The investors "want to finance the industry within a normalised
situation," he said.

The Sena Company had envisaged a total investment of over 100 million US
dollars in Marromeu. So far it has spent 26 million dollars on repairs to
the factory and rehabilitation of 2,000 hectares out of the 13,000 hectare
plantation.

But if the IMF has its way, Mozambique will never see the rest of the
money. Meanwhile, a South African company, Illovo, has been investing
heavily in Maragra sugar plantation in Maputo province.

Its planned investment in the sector would amount to 240 million dollars.
By the end of 1999, the company had put 110 million dollars in the
venture. Mozambique has a quota for sugar exports to the US at a
guaranteed price of 400 dollars per tonne.

But what really attracted investors was the promise of the domestic
market, which the government protects against a flood of cheap imported
sugar from neighbouring countries.

The protection mechanism is a reference price for imported sugar of 385
dollars a tonne for brown sugar and 405 dollars a tonne for white sugar.
Those who import sugar that is cheaper than the reference price have to
pay the difference at the border.

The IMF knew all about this, and initially expressed no opposition.
Investors started to rehabilitate the sugar mills and the IMF said
nothing. However, in November, a visiting IMF team told the government
that the protection on sugar should be slashed so that by 2002 it would be
no more than 20 percent above the CIF price.

Investors protest that by that time they will be nowhere near to
recovering their investments. Nor would they be in position to compete
with world market prices.

"If the IMF forces these impositions on the government, the result will be
the closure of the factories," de Wal warned.

Sena Company had planned to take over another sabotaged sugar plant, at
Luabo, on the north bank of the Zambezi. But it is now dragging its feet
on investing in a second plant until the government gives a definite
indication of whether it will yield to IMF pressure or not.