Mozambique’s best and longest highway has about 3000 kms long from the south Ponta do Ouro village to the Rovuma River on border with Tanzania in the north. With low maintenance costs, this highway is the new and safest bet for the Mozambican Government in 2019 for many reasons. We know that cabotage sea service is not something new in Mozambique. What then has changed that can support this new era?
I would mention 4 main reasons.
That there is a perfect alignment in the Mozambican Government since the actual President and the current Minister of Transports and Communications have both worked in the national Mozambique Ports and Railways (CFM) company and, the Minister was also once the CEO of Cornelder de Moçambique (a JV between CFM and Cornelder Holland), the operator of Port of Beira since 1998.
Their past work experience has been fundamental for the effort being made by the government to give a new boost to this service since both have a deep understanding of the importance and the benefits of sea cabotage.
The new Regulation of the Maritime Cabotage Regime (published under “Diploma Ministerial” nº 31/2019, from 3th of April) is one of the new surprises that is sure to create the new conditions for the use of such service.
Simplification of procedures, dematerialization of activities, withdrawal of stakeholders in the process as well as associated costs, reduction of execution of operations, set up of an entire new regime for cargo of cabotage in “free circulation” (produced nationally and/or already imported), increased fiscal revenue control as well as customs control are just some of the new measures already published.
These changes will have a strong impact on this regime since it will allow, for exemple, the operators to start the process in their office directly into the customs system know as JUE, in same cases.
Freight prices and other costs
Although around 90% of cargo that circulates in Mozambique is transported by road freight, the current costs of maintenance of Mozambican roads are very expensive. The country’s current financial situation doesn’t allow maintenance to be done as it should and the storms in the rainy season also produce major damages every year.
In addition to fuel prices, these factors have an impact on the costly road freight charges being practiced in Mozambique. But this situation is about to change soon as we will see later below. For starters, on the sea freight side, for example, the cost of fuel per TEU can be 4 times less than the price for the same distance by truck.
If we add to this the fact that the Government of Mozambique has already introduced some discounts for some port services, this new reality will definitely help customers to look with a different perspective to this service since key factors they will look for are cost the transit time.
One of the objectives of the Mozambique Government is to achieve economies of scale and promote the reduction of the prices of products transported, making them more accessible to the population creating a more inclusive economy in the process.
Mozambican market evolution
The last 20 years have brought many changes to the Mozambican market. Companies that traditionally had their plants and/or logistics centres in Maputo opened new facilities in the center-north of the country, such as Coca Cola and Cervejas de Moçambique (The national beer company) to name a few.
Others started their operations in the center-north of Mozambique doing their distribution from the center to the north and to the south. Meaning that the past north bound full trip is not as strong as it was and that the south bound trip does seems to suggest more cargo instead of empty trips to Maputo. Another big change is the fact that most of the shipping lines calling Mozambique now call Maputo, Beira and Nacala.
The fact that agriculture production has been increasing constantly in the last years is another big change in the market. The government has pushed for stock warehouse capacity in the center north of the country. With more products and with the adequate logistic service it is possible to use the cabotage service to reduce the cost of such products, specially when this year due to cyclones the production of cereals was compromised and costs will increase to the end consumer. The use of the sea freight service will definitely be an option to look forward.
Finally, the long and awaited projects of oil and gas. The dimension of these mega projects in the north of Mozambique will oblige the use of all means of sea transport from the nearest ports to the projects in Afungui area. On this regard it is worth saying that, the road freight solution will not be the best option due to security reasons and associated insurance costs. Again, the sea highway offers the most affordable transport costs and a more secure option, not to mention that maintenance costs are way below the current road infrastructure.
Cabotage will bring all types of vessels for all required solutions.
Welcome aboard and have a safe trip.
Pedro Monjardino is the Managing Partner of Strategio Consulting