Bet on the futureMay 25, 2020
Jacinto Mutemba, chairman and CEO of Belutécnica, talks to The Energy Year about how client behaviours have changed since the start of the pandemic and how Mozambique’s SMEs are likely to fare in the wake of the crisis. Belutécnica is a Mozambican engineering company dedicated to steelworks.
Is there a silver lining for Mozambique’s economy in the Covid-19 crisis?
I have no doubt that the country will emerge stronger from the dual shock of the pandemic and depressed oil prices. This period gives us an opportunity to see what we can produce locally. The government is trying to diversify into agriculture and see how we can sustain ourselves instead of depending on importation. We all need to look at products that we can produce ourselves instead of bringing them in from South Africa or China. We must look at this crisis as an opportunity to build a local supply chain.
How have client behaviours changed since the start of the pandemic?
Many of our clients are facing significant difficulties, with global supply chain routes having been shut down. Even a company like Mozal that, since its inception, has always had a strategy and targets for localisation – including the building of a network of local suppliers – are, surely, still forced to source goods and services from overseas, because localisation is a gradual process that requires the uplifting of competitive local capacity.
Now, because of the obvious disruptions of international logistics due to the pandemic and lockdowns, they are coming to the realisation that this might be an opportunity to, perhaps, speed up the process of localisation a bit more. But the speed at which this process will occur depends a lot on the will and commitment of local suppliers to grow for the occasion and fill those gaps, with quality and competitiveness. That I call an opportunity.
The path to establishment of projects in the oil and gas sector is long and not necessarily straightforward due to the dynamics of the market. So, we may not see maintenance services contracts being awarded for the LNG plants before 2022. When it comes to greenfield projects, it takes quite a bit of time to get the plants running and start the LNG production.
We are in a very strategic position with regards to labour services if we can acquire the knowledge through training, certification and partnerships, since Mozambique’s LNG undertakings are dependent on expatriate labour from foreign countries. That can change. After this pandemic, the cost of getting expats into the country will be skyrocketing because air travel and insurance will become a lot more expensive in the coming years, with fewer options out there. This will prompt international companies to hire locals. But locals must understand and get ready for such opportunities.
How can Mozambican SMEs rebuild themselves after Covid-19?
SMEs don’t have mature relationships with the banking sector and these relationships are much needed in a crisis. It takes time to develop this trust with the financial sector and to create financial collateral assets. The pool of SMEs that were on the frontline to supply oil and gas services three months ago will be completely changed and a new mix of companies may emerge from the crisis to serve the sector going forward.
In Mozambique, the government does not have the funds to offer massive stimulus packages but certain companies will still be getting stronger coming out of the crisis.
There will undoubtedly be consolidation in the local services sector, as many SMEs will have a lack of bargaining power in the post-crisis world. The SME sector is about to take a major financial hit and I think we will be seeing more and more mergers and acquisitions. We have also been discussing strategic partnerships with international companies to see how we can get things rolling in the area of collaboration.
How has Covid-19 affected Belutécnica’s business productivity?
In terms of protection of our workforce, we have been implementing and promoting the guidelines with regards to washing and sanitising of hands and our buses, avoiding touching the face, as well as temperature and social distancing, under the state of emergency decree. People having to work from home has led to lost but sustained productivity. We have been coping well with the challenges stemming from the pandemic and we have yet to feel the real heat and impact on our business.
Many countries around Mozambique have gone into full lockdown. However, this has not been the case in Mozambique. With restrictions having impacted the demand for metals, including aluminium, Alcoa, for example, has announced the shutdown of some plants in the USA. So, we are aware of the enormous challenges we are facing on a global scale. This will impact the demand for our services and goods here.
So, we bet on the future by pushing for diversification and investing in the strengthening of our market position after the crisis. We aim to catch the wave of opportunities surely coming. While we do expect the demand for aluminium to take a dive amid the restrictions on air travel, we believe the auto industry may emerge stronger, as social distancing becomes a way of life and people tend to use their cars more than public transport. This may generate new opportunities for aluminium. It’s just about positioning ourselves and adding value into that puzzle emerging from this crisis.
What steps has Belutécnica taken to promote sustainable cost optimisation and efficiency gains?
We have started to outsource some of our activities, such as cleaning and security, to third parties. This is in line with the process of our optimisation and also to reduce the risk of having our employees infected with the coronavirus. We are also looking at deploying new technologies such as UV-C lights for disinfection and robotics for the aluminium smelter. These are still in the early stages of development.
We are also branching out into offering our work to more clients in the mining industry and have been shifting our focus towards the construction sector. This move can hopefully help us to be less dependent on the energy industry and more resilient in the face of shifting dynamics of the different commodities and value chains we are serving.