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Look to local consumers for investment opportunities, says Mozambican developer

Mozambique’s recent discoveries in natural resources have caught the attention of international investors and real estate developers.

José Carlos Pinheiro, CEO of Mozambique operations at Pylos

José Carlos Pinheiro, CEO of Mozambique operations at Pylos

However, José Carlos Pinheiro, CEO of the Mozambique operations of international real estate development firm Pylos, said that while there is a need to develop around the discoveries of oil and gas in Mozambique, the real opportunity exists within the local population.

“Yes, there are proven reserves, they are there, but you won’t have any production within the next seven years, or let’s say five years,” Pinheiro explained to How we made it in Africa at last month’s Africa Property Investment Summit in Johannesburg. “For the next five years nothing will happen.”

He added that catering development solely for the needs of the investors – that these natural resource discoveries will bring in – can be problematic.

Pinheiro used the example of a company he previously worked for which built a hotel in Tete to cater to the assumed influx of international business people who would come with the development in the mining sector.

“We ordered a market study to build a hotel in Tete,” said Pinheiro. “At the time the only hotel that you had in Tete was something like those hotels that you see in London… so we had a market study done by a professional team, with international consultants in the hotel industry.”

The research showed that with the discoveries of coal in Tete, there was a huge opportunity for hospitality and the area would soon start “pumping”. They were advised to move quickly with building their hotel.

So they built a four-star hotel of over 100 rooms. However, Pinheiro explained that infrastructural and logistical problems in the coal mining endeavours meant that a lot of the projects were frozen.

“From August last year to middle this year, we had times without any guests at the hotel… Now it’s getting better since June. But when you develop just based on what is going to happen [and] because these investments are coming, it will go wrong.”

Address the local consumer population

Pinheiro stressed that Mozambique’s local consumers are enough of an opportunity for real estate developers.

“The consumers are there. You just need to address them. The problem that you have in Tete, in Pemba, in Nacala, in Nampula, in Beira, it’s not that the investors need to go there, they don’t. What you need to do is address a demand that exists for retail space, for housing, for so many other things, and that are not addressed at all. Yes, it is important to address investments in the oil [and gas] sector, the mining – they drive a beat – but you cannot rely on them. You need to do it for the existing people, which means that probably you are not going to build the US$200,000 houses or apartments. You are going to build $30,000 to $40,000 houses or apartments.”

Pinheiro rates the demand and opportunity for investment in formal retail infrastructure that caters for the existing population as very strong.

“Right now Mozambique is in the consumption phase so everybody wants to consume. It’s clothing, it’s nails, it’s hair – they want to consume. So now the huge demand is on the retail [industry] to provide people with the opportunities to buy.”

He added that there are people in Mozambique who make their living by buying shirts in South Africa for R100 [$10] and selling them for $100 in Mozambique because that consumer demand exists.

“You are not going to build Sandton City (a large mall in Johannesburg, South Africa) in Tete or a Sandton City in Pemba. You are going to build a mall that is tailored for that market with retailers that serve that market; retailers that do not exist because there aren’t formal structures of retail. And there you have a huge demand. I think that in maybe three to five years you are going to start having a huge demand outside Maputo, because in Maputo you already have it. [And] for residential, for low-medium income families, those houses/apartments of $30,000/$40,000.”

The need for refrigerated warehouses

According to Pinheiro, there is a huge need for refrigerated warehouses in Mozambique, which he told How we made it in Africa is an opportunity for investors.

Pinheiro’s opinion is that, in Beira, which is about 1,200kms from Maputo, some people prefer not to buy chicken, meat and fresh products from grocery stores because there are no refrigerated warehouses from Maputo to Beira.

“So it’s a problem for Shoprite and Pick n Pay, or Spar, or whoever, to be able to give them products that are refrigerated.”

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