The road to recovery in Mozambique

May 26, 2020

The Energy Year talks to Vickey Puncheon, CEO of Quinta Essência, about incentives for SMEs in Mozambique to weather the Covid-19 storm and how the company has adapted to the new circumstances brought about by the crisis. Quinta Essência is an indigenous company that provides logistics, transport and workforce services for oil and gas operations.

This interview is featured in The Energy Year Mozambique 2020

How has the company adapted to the new circumstances brought about by Covid-19?
The impact of the dual shock has been significant and there is no doubt that we have entered a phase of crisis. For companies like ours, active in the transport and manpower sector, not a single part of the business has been unaffected. LNG projects in the north are our target, but now Exxon is delaying its FID for Rovuma LNG and Total is closing its camp for up to three months in Area 1. These all compound what is already happening due to the coronavirus.
In order to continue and develop our traditional business, which is transport and manpower, we have had to search for ways to reengineer our company with things like offering consulting services to companies that need their manpower transport division overhauled as opposed to outsourced. Since travel has been a central part of our business, you can imagine how hard this situation has hit our sector. We are currently in discussion with our franchise partner on how to weather the storm and we have come up with a number of options.
It looks like it will take at least 12 months to see any volume from an international standpoint and six months domestically, being realistic. Can we weather that storm? I don’t know of any company that can just sit and wait for six months with a significant reduction in cashflow.
We have identified a niche market in the transport segment, which is Covid-19 transport. We can clean our vehicles properly; we have the right procedures and protocols. The vehicles are large enough to allow for social distancing when transporting staff. We have successfully serviced a client with this in Pemba, in northern Mozambique. We also helped people do their day-to-day shopping as they are prohibited from leaving home.
All in all, we have taken an approach of reengineering our place in the market as well as looking internally to understand how to streamline to weather the storm. It is both an internal and an external focus. It has taken everybody’s energy for the last four weeks. There have been many discussions with banking partners, trying to understand what Bank of Mozambique is going to do for SMEs.

 

What incentives are available for Mozambique’s SMEs to weather the Covid-19 storm?
The SME sector has a crucial role in the economy. The big projects have significant local content, so they just can’t afford to let the good SMEs disappear from the market. What are IOCs going to do in a couple of months? They can restart, but the local content has eroded and has not been supported by the government.
There have not been too many lifebelts dropped for SMEs as of yet. The CTA, which is the association for SMEs in Mozambique, has been charged with managing USD 500 million which needs to be dispersed, but details are unclear on how it will be distributed amongst domestic industry players. I understand that there has been support allocated to companies that are involved in the export business.
The Bank of Mozambique has not released an overall package, unlike many of the First World countries’ central banks. Internationally, many governments will provide some sort of assistance for your workforce so you can keep as many people as you can active. There has been nothing like that to our knowledge available domestically; we are left to independently go to our banking partners and ask what their relief packages are for loyal businesses. The private sector cannot wait for too much longer; we are already seeing some good businesses closing down.

Do you think the crisis can trigger a wave of consolidation amongst SMEs?
This is one of the things that we are looking into in the travel part of our business. Do we hand over some clients to another partner and allow them to have volumes and at least one viable business, so that not everyone falls? We believe there is strength in unity. Last year we created a company with other SMEs, so that we can come together and pitch to a larger chunk of the market and utilise our collective expertise. We are all about consolidating and we rely on our partners now. We share the pain and hopefully we can mitigate some of the risks together.

Will Mozambique emerge from this crisis stronger than its peers?
Absolutely, I think if we get a glimmer of hope people will continue to fight on. It is very hard to plan if you don’t have that light at the end of the tunnel. Diversity-wise, it is hard to know how the landscape will look. I think it is a crossroads for what we do. Our focus in terms of diversifying is how we utilise our assets and personnel.
I would like to think our future will be to provide a wide variety of assets because of the partnerships we have built globally. And this will give us some strength in terms of asset management as opposed to just looking at more fleet-based services. By virtue of our clients’ requirements, we find ourselves dipping our toes more and more into widening markets as we morph to meet their needs.
So, there will be some natural diversification driven by clients. Other than that, Quinta Essência will be risk averse; we are going to utilise what we have, be creative and consolidate in the short term.

Do you think companies in Mozambique have the right digital infrastructure to survive?
That infrastructure is definitely a game changer for how companies are going to navigate through this period. If you have been averse to embracing digital technology, I think it is going to be a real struggle. One of the challenges we had here was to educate a workforce that were typically not used to working from home. There is zero remote-work culture in Mozambique in the mainstream workforce.
To be able to do this successfully, you need to have digital networking. The travel part of our market is all IT based. We log into networks to book a flight for individuals. For those people we still have emergency services. If we did not have a digital platform, we simply would not be able to operate.

Read our latest insights on:

• Mozambique