Over 30 percent of Mozambican roads built by Chinese companies, IMF report says

13 March 2006

Beijing, China, 13 March – The construction of over one third of roads in Mozambique is in the hands of Chinese companies, or a total of 600 kilometers, said Emmy Bosten, of the International Monetary Fund (IMF) in Mozambique, in a report to which Macauhub gained access Monday.

“The Chinese embassy in Mozambique actively informs Chinese construction companies about the next international public tenders for road building, and the result is that over a third of roads currently being built in the country are being built by Chinese companies,” said Bosten in an essay on Chinese construction companies in Mozambique, presented recently in St. Petersburg, Russia.

The essay, entitled, “Chinese Involvement in the Construction Industry in Southern Africa: the case of Mozambique,” also said that Chinese companies have taken part in international public tenders since 2003 and, according to Mozambique’s road administration (ANE), they offer lower prices than European and South African countries, and provide a good service.

ANE said in January it planned to invest US$1.14 billion in road safety, maintenance and rebuilding of the country’s roads by 2011.

“According to the Mozambican authorities, Chinese construction companies carry out work that is generally of good quality, within the contracted deadlines and at very competitive prices, which can be 25 or 50 percent cheaper,” the report said.

Bosten added that, despite Chinese companies not “yet” taking part in mega construction projects, due to restrictions on applying for the tenders, they are becoming ever more dynamic in specialized market segments.

“In building water and basic sanitation infrastructures, Chinese companies have also increased their participation in international public tenders,” Bosten said giving examples of, “refurbishing the supply systems of the largest provincial capitals, namely Maputo, Beira and Quelimane, at a total cost of US$30 million and US$15 million, respectively.”

In Mozambique, China Geo Engineering was granted a tender in October to build the water distribution network in Xai-Xai and Chokwe and China Henan International won the tender to supply water in Inhambane and Maxixe.

Bosten also said that, in the real estate sector, Chinese companies have restricted themselves to projects financed by the Chinese government, such as the Foreign Ministry building (US$12 million) and the Joaquim Chissano Conference Center (US$5 million), but that this may change.

“Infrastructures financed by Chinese cooperation are usually a way of entering the market for Chinese companies, followed by taking part in international tenders and, once they have been established locally, those companies invest in the real estate market,” the report said.

Bosten put forward several specific factors that contribute to Chinese companies offering competitive prices, such as costs of Chinese workers and building materials, all of which are imported from China, despite warning that “some of these factors are market rumors and need to be confirmed.”

“Construction areas are also very well-organized, with greater control of workers and therefore fewer stolen goods, which is also an important cost in other construction projects. As well as this, no Mozambican or regional suppliers are sub-contracted and from design to decoration following construction, all goods and services are supplied, directly or indirectly by the Chinese,” Bosten said.

According to figures from Mozambique’s center for investment promotion (CPI), Chinese direct investment now makes China Mozambique’s sixth largest trade partner, having moved from investment of 243,000 euros in 2004 to 4.6 million euros in 2005.

In 2005, trade between the two countries totaled 125 million euros, which represented a year on year increase of 100 percent.

In 2001 China and Mozambique signed a Trade Agreement and an Agreement for Reciprocal Promotion and Protection of Investment, as well as setting up a Mixed Commission for the Economy and Trade. (macauhub)