Mozambique: Projects With Huge Potential and Investment Opportunities

Interview with João Das Neves, Chairman of Zero Investimentos

Could you quickly describe what Zero Investimentos is about? What is its purpose and what are the advantages for investors in dealing with you?

Zero Investimentos is a holding company consisting of a number of projects we are involved with. It is the ideal gateway for taking part in the business investment opportunities Mozambique has to offer.

By working together with Zero Investimentos, you become aware of a large number of projects with opportunities for investment. You have two options for doing so. One option is to buy shares in Zero Investimentos as such, and the second option is to choose one of the projects in which Zero Investimentos is involved. Therefore, it depends on the investment, on the type of investor and on his or her outlook, but we do both things. We provide opportunities for investors in the actual projects, but we also provide opportunities for investors generally based abroad, who are looking for more stable opportunities, by investing in the group as such.

This is basically what Zero Investimentos is, as a Public Limited Company (S.A.) with reasonable assets on its balance sheet in terms of infrastructure. So we are open for investors to come and have a look at our portfolio.

Let’s now talk about the different kinds of investment opportunities you provide. Among these there is Empreendimentos de Moçambique. Can you describe what opportunity lies there and what kind of clients may be interested in buying into this?

Empreendimentos de Moçambique has a property of 10 ha in a prime area, along the new Maputo ring road, just outside of Maputo city. It links up with the N4, which is the bypass towards South Africa. This allows you to connect with the rest of the country’s transport network, since it is located right at the exit of Maputo. As a result, this property is earmarked for warehouse development. Essentially, we have an entrepreneurial park, consisting of a number of warehouses, and we are currently in the process of building these warehouses for sale.

Instead of having to search and look around, Zero Investimentos is able to go directly to the source, and help investors to do things in a feasible manner and invest correctly in Mozambique.

We are looking for two kinds of investors. On the one hand, there’s the investor who is purely investing the money and seeing the result as soon as we sell the warehouse. But we are also looking for suppliers who are interested in selling warehouse material, such as corrugated sheets, the structure, etc. If they see potential in this project, they take on the building of the sample units, i.e. the first two or three units; and once these are sold, they can carry on supplying their products until the project ends.

Basically, this is a short to medium term project and we expect these warehouses to be built over the next five years. In principle, there is enormous demand for warehouses, because the market is growing so rapidly in Mozambique. There is a huge need for warehouses, for the marketing and distribution of products to the rest of the country, so we are very confident this will be a project with rapid returns. Investing now would allow someone to expect a return and be able to cash out in six years’ time.

What are the real competitive advantages of these warehouses, given that there are so many other projects around? What makes this one different?

Location is the foremost competitive strategy, as well as the fact that all the licensing and project work has already been done, which means it’s ready to build. These are pretty competitive advantages in relation to other projects. Our location also means that the investment required is not so large. Because of this, if we look at the timing, this is probably the right time to go ahead with this project. In five years’ time, there will be too many other projects of the same kind. Since we are pioneers in this domain, I feel this project is very competitive.

You have already attracted investors here and you are already starting to build the first warehouse, which means it’s already working?

Exactly. We have already managed to sell the first warehouse and we are now busy building the second warehouse. We are in the process of carrying on with the next warehouse, which is definitely a good sign of this project’s potential. We already have a big sign on-site promoting the sale of these warehouses and we receive many enquiries daily, with many people showing interest. We are quite confident that this will sell well, particularly once people start to see the warehouses going up.

Now, let’s talk about another of your investment opportunities, called Chindzale Can you give us a brief explanation of what that is? What is the purpose and why would someone want to invest in this?

Maputo city is growing very fast, and its outskirts are growing particularly rapidly. We have a property of 7 ha of land strategically-located, right on the Maputo ring road and 12 km from Costa do Sol; which is not so far away from town but somewhat outside, with good infrastructure to get there. The project consists of 34 buildings with four floors each, including the ground floor. These are mainly apartments for the middle class, neither top-end nor basic accommodation. Mozambicans’ purchasing power is growing, so more and more people can afford a home that is a little better. As such, we are aiming precisely at this market, in order to provide accommodation to those who can afford slightly better housing, in a good area.

The project is already approved and we have all the licenses. It’s now a question of getting started and we are looking for investors who are interested in partnering with us, in order to start building the first sample units, which I’m sure we will then start selling and will be able to carry on with the project from there.

What kind of investors are we talking about?

We have three investment options. We are open to different investment possibilities, but we are essentially looking for people who can put the money in and expect to get a return, as we sell the apartments. The second option is a social project where the government or those supporting development in Mozambique consider the social development dimension and provide financing, with low rates of interest and allow us very good conditions for developing improved housing across the Maputo area. The third option is for builders and companies in a position to start building the first four or five blocks. Once we have those, we can sell them and they would carry on building the rest of the project. As you can see, there are many options available to investors and we are open to discussing the opportunities on offer with them.

What are the different kinds of return on these investments?

The return that we currently expect is in the range of 40-50% of the original investment, in principle over a period of three years. Of course, there are many variations that may affect or improve the return, but our analyses indicate that it’s relatively easy to achieve a return on investment above 40%.

Now, let’s talk about your third project, Marracuene Lodge, which has to do with the tourism industry. What is the project about?

Marracuene Lodge is a very interesting project, which is located 20 km from Maputo, near the new Maputo ring road. It’s extremely well located, because it’s very close to Maputo but you feel like you’re very far away from the capital. It’s surrounded by plenty of nature and it’s right at the mouth of the Incomati River. It has huge potential as an eco-lodge, where people can enjoy the environment close to Maputo. This makes for a great attraction.

Marracuene Lodge is aimed at clients seeking calm, those looking for conference services, as well as families and those in Maputo wanting to get away for the weekend; along with any other service that a lodge can offer, including accommodation, restaurants and activities. The activities on offer at the lodge are mainly kayaking, boat rides to Macaneta beach, which is located nearby, as well as horse riding and a few other activities.

Among the most popular activities available at the lodge is team-building, alongside conferences. Institutions, government bodies and companies usually gather at Marracuene Lodge for small meetings of up to 50 people, taking advantage of the tranquillity for organizing conferences, but also making the most of a further day or two to carry out a team-building exercise, in order to build capacity and promote interaction among their staff.

This is what Marracuene offers. Essentially, Marracuene is undergoing significant expansion, given the area of around 20 ha it has available. In the medium term, the whole project involves upgrading the conference centre and lodge to a five star facility, as well as a shopping centre and a luxury condo with around 70 private homes, all of which also offer opportunities to investors who are not just looking at tourism but also considering real estate and the retail business.

In terms of the time frame for returns, how long do you expect it would take an investor to recover his investment?

Marracuene Lodge is a very large project and in the longer term the total project may achieve around $ 50 million. To kick-start the project, around $ 10 million is enough. And the second and third phases would take place over the remaining investment. This can be done over a period of 5-10 years.

Can you talk to us about the range of projects Zero Investimentos has, in order to attract investors?

Zero Investimentos is involved in a large variety of opportunities, which go from opening a small bank to fisheries, aquaculture and agriculture, along with many other projects, including opportunities in the energy sector, relating to natural gas and the like. There is opportunity for many projects. Depending on the funds available, we are able to assist investors in seeking out good opportunities and take the necessary steps for the implementation of such projects.

Could you tell us a little about Autogás, as a concrete example of something that is happening now? Could you describe this project?

Another project I am involved with is Autogás, which aims to replace conventional fuel with natural gas. Mozambique has large quantities of natural gas available and it makes more sense to use our own resource instead of imported fuels.

We started with just two natural gas filling stations and we currently already have seven of these, across Maputo and Matola city, with a total of 1,800 vehicles running on natural gas. This is a project with enormous potential, which has the ambition of covering Mozambique as a whole and possibly even expand across borders throughout the region.

The biggest challenge is the availability of funds to invest in the network of filling stations. The total number of filling stations we hope to achieve over the next ten years is around 70, with the project amounting to about $ 100 million. In order to kick-start this project, we need about $ 20 million, after which the second and successive phases would be reassessed, once the initial amount has been implemented and depending on the project’s progress. But as of now, the company is already breaking even.

To begin with, there were many challenges, because of people’s perceptions of natural gas and a lack of knowledge, but we are managing to change these perceptions, by winning over people’s minds and making them aware of natural gas. They are ready to convert to natural gas, but they want to be reassured that if they change to natural gas, they can access enough filling stations across Mozambique where they can fill up and carry on with their journey. This is the biggest challenge we face at the moment. We do benefit from a gas allocation by the Government, which guarantees that we will have enough gas to supply our clients. Now it’s simply a question of continuing the good work we have been doing and roll it out across new filling stations, while maximising profit and volume.

Investors may also consider the potential of supplying filling station equipment, particularly natural gas compressors and equipment for converting vehicles. There may also be opportunities for suppliers of trucks and buses running on natural gas.

What are the returns involved?

So far, margins on natural gas have been very good. An investor can expect a return of 20-30% over a period of 5 years.

What is your vision for Zero Investimentos as a whole in two years’ time?

Zero Investimentos is basically a company that knows the market very well, and is extremely well established, in terms of connections with people, relations with the Government and local governments, as well as the private sector. We have strong links with enterprise associations and companies. One way or the other, this means that we have direct connections with those who get things done in Mozambique. I think this is the biggest strength Zero has to offer people who come to Mozambique and want to do business here: instead of having to search and look around, we are able to go directly to the source, help them to do things in a feasible manner and invest correctly in Mozambique.

The way I see Zero Investimentos in five years’ time, is basically as the best gateway for both international and local investors to grow their business in Mozambique. We are looking at having Zero Investimentos listed on the Mozambique Stock Exchange. We are already in that process and I’m pretty certain that we will achieve this within a year, which would provide us with the reputation investors are looking for, by ensuring that we are responsible enough and compliant with all the best practices, as well as good governance, in order to gain investor confidence.

At the moment, there is some worry about Mozambique, because of some political tensions, as well as the price Mozambique’s resources are fetching in the world market, which has been hitting revenues. All of this means that Mozambique is not as attractive as it used to be for some investors. Over the past ten years, Mozambique has been growing at an amazing pace, averaging around 7% per year over ten years, which is quite rare to find. What is your assessment of the risk investors face by coming here?

Let me say that any investment involves a certain amount of risk, anywhere in the world. Mozambique is no exception and also involves an element of risk. But I believe this risk is extremely limited.

If you look at Zero Investimentos’ portfolio, you will see that we focus on medium term investments, as well as infrastructure investments. We are not investing in commodities that may disappear or can have significant and immediately negative impacts; for instance, where you end up having to sell your commodities at half the price.

By investing in infrastructure, real estate and properties, even if the metical devalues, this in fact becomes an extra advantage, since it means we are able to build at a much lower cost right now, and the value of what international investors contribute is much greater. In the medium to long term, inflation should reward with extra revenue those who decided to invest. Yes, there is some small risk. Personally, I don’t see any major investment risk in the medium to long term. There may be some very local incidents, in certain areas, which the Government is dealing with.

Given the amount of investment that Mozambique has already attracted and with the willingness of Mozambican people that everything must move forward in peace, I don’t foresee any big impacts or situations where returns on investment are really subject to any risk in the medium to long term.