Arrested development

• Chapter summary

The construction and real estate sectors are generally said to be the barometer of the economy, since they are the direct reflection of the purchasing power of consumers and the government. It is unsurprising that, following the financial crisis that hit Mozambique after the hidden debt scandal in 2015, the sector suffered substantially. However, in the words of Joel Prista, founder of Ilulu, “any local company that can survive a crisis will emerge stronger.” The crisis acted as a filter, leading to the consolidation of the sector. Mozambican companies stepped up their game, working hard to abide by international standards and thus filling the gap left by the foreign companies that exited. This has allowed companies to build stronger foundations while awaiting the recovery of the wider economy.

At the beginning of the new decade, this economic recovery seemed to be in the past; all companies we interviewed testified to the excitement in the air and the positive expectations for 2020. Capital gains taxes on the LNG projects would lead to an unprecedented increase in state expenditures, and once gas works kick off, infrastructure construction is likely to be the first substantial government investment. COVID-19 has, however, put the breaks on all of this, pushing real estate and construction to the bottom of the priority list. The sector’s focus is now whether, at the end of the crisis, things will be able to pick up where they left off; many fear another crisis, especially given the delays in gas projects. At the same time, according to Armindo José Munguambe, CEO of the Fund for Housing Development, the construction sector can play an important role as a catalyst for growth, rather than a mere reflection of it. Investing in infrastructure and housing would enable the Mozambican government to develop the local industry for materials—currently largely dominated by South African imports—and create jobs as no other sector can. Waiting has been the sector’s dominant theme for too long; many have begun advocating for action and entrepreneurship.

Our interviews from the private sector highlighted a few common traits among all companies that managed to survive the crisis. Most companies have learned to diversify their portfolio and offer a wide variety of services, including real estate, property management and transaction, asset management, and consultancy. This has granted companies a degree of flexibility to follow opportunities across the market, even geographically. Just like Fenix Construction Services, many companies have been wandering to all corners of Mozambique, following opportunities, facing the challenges of a difficult market and frequent disappointments, and constantly reinventing themselves. The sector is vibrant and resilient; now, all it needs is an opportunity to develop maturely. ✖