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Cablegate: Economic Activitiy Increases in a Remote Province: Cabo

This record is a partial extract of the original cable. The full text of the original cable is not available.


E.O. 12958: N/A


1. (U) SUMMARY. More foreign operators are moving in to take
advantage of resource-rich opportunities in the poor province of
Cabo Delgado. Operators of Middle-Eastern, South Asian, and
European descent, are bringing employment and increased
production to the community, although the lack of infrastructure
and extremely high operating costs are still problematic for
businesses. Cabo Delgado's hope lies in the development of
tourism, which both the GRM and the USG have made a top priority.

2. (U) Characterized by a majority Muslim population,
considerably low living standards, and a shared border with
Tanzania, the northern-most province of Mozambique, Cabo Delgado,
is home to significant natural resources and generally untapped
economic potential. The mining, forestry, agriculture, fishing,
and tourism sectors have recently attracted several new investors
in Cabo Delgado, giving the province a European, Asian, and
Middle Eastern economic flair.

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3. (SBU) On up-country travel, econ/poloff and political
assistant met with the Director of Operations of the port of
Pemba, the provincial capital. A recently rehabilitated facility
(1994), the port is small and only receives six to seven ships
per month. With a depth of twelve meters, the port does not need
to provide dredging or piloting for incoming traffic. Regular
traffic hails from Mombasa, Kenya, and Maputo, bringing household
goods and electrical equipment every fifteen days to be sold on
the local market. Cotton and timber are the province's primary
exports, with most goods being shipped to Asia (predominately
China). Timberworld and Southgate, two UK-based timber firms, and
Komatiland Forestry, a South African-based firm, have operations
in Cabo Delgado. Of real concern is illegal Chinese logging in
the Cabo Delgado Province. According to port authorities, Chinese
operators manage the majority of timber that transits Pemba Port,
subject to tax exemptions. More often than not, these operators
are illegally logging throughout the northern and central
provinces of Mozambique, thus destroying precious natural wetland
forest reserves. The GRM seems to turn a blind eye to such
activity, possibly due to the high profile aid the Chinese
provide to the GRM and Mozambican military forces (for example,
the Chinese have recently constructed an international trade
center and new Ministry of Foreign Affairs building).
Additionally, China and Mozambique have been long time trade and
investment partners (REF A). Due to the rising cost of
electricity across the country, the graphite and marble factories
located in Ancuabe and Montepuez, respectively, have slowed
operations, reducing exports. The port expects to be shipping
large amounts of prawn in the near future, as Indian Ocean
Aquaculture, a majority British-owned shrimp aquaculture firm,
has shown intentions of exporting their product to Japan and the
US by July 2004. Indian Ocean is still in the process of
refurbishing their packing plant, but has projected plans to move
forward with exports as soon as the facility infrastructure is

4. (U) Despite excellent economic opportunities, Cabo Delgado's
population remains one of the poorest in the country. The
population suffers from an infant mortality rate of 187/1000, a
life expectancy below 40 years, and an illiteracy rate of 75
percent (general population) and 93 percent (women) (data from
Aga Khan Foundation). Cabo Delgado is far removed from the
capital of Maputo and somewhat isolated from GRM activities and
programs. The Muslim-based Aga Khan Foundation surveyed the
province and found the coastal areas to be among the most poor.
In 2001, Aga Khan began a program in Cabo Delgado focused on
social organization, rural development, health care, and
education to increase communities' living standards. The Coastal
Rural Support Program's (CRSP) goal is to reduce poverty and
improve the welfare of poor families living in seven districts,
and gradually ten districts, by 2008. The program seeks to
mobilize communities and their resources by initiating Village
Development Organizations. The Foundation started a micro-credit
program for fishing and farming associations, allowing the
purchase of seeds, goats, boats, and nets. Additionally, the
program supports increasing opportunities and skills for women by
offering credit schemes and training in various professional
skills, including accounting and marketing. On health, the
program trains and develops health personnel and provides AIDS
awareness education through village and women's organizations.
The fourth and final program component, education, is enhanced
through improved school management (training teachers and
committees) and support for improved literacy, especially for
girls. The integrated Aga Khan program has achieved marked
success by evidence of increasing development in target
communities and Aga Khan will continue to work as the most active
economic and social aid organization in Cabo Delgado.

5. (U) Tourism in Cabo Delgado is one of the most lucrative areas
for investment, given the unspoilt beaches, remote islands, and
preserved coral reefs. The 2003 National Tourism Policy
identifies Pemba and the Quirimbas (an adjacent island chain) as
a focus region for the GRM's current tourism investment strategy.
The largest and most luxurious hotel in Pemba, the Pemba Beach
Hotel, built with Saudi investment, attracts an increasing number
of business travelers and vacationers. The hotel has proved a big
employment generator for the local community; so much so, that
the Catholic University in Pemba has developed and geared a
Tourism Management and Hospitality curriculum that sends
graduates to jobs at the Pemba Beach Hotel and approximately 187
other tourism affiliated businesses in the province. The
University's program is impressive and greatly benefits the
community by linking students with businesses and providing
targeted training. Studying at the University, forty-five
percents of students hail from Cabo Delgado, twenty percent from
Nampula, Maputo, and other provinces respectively. The USG
provides support to the Catholic University by donating English
language material (audiotapes and books) and Microsoft software.
The University is expanding rapidly and will build a conference
center, temporary quarters for lecturing professors, and increase
classroom space in the near future. As USAID prepares to focus on
tourism development in the northern provinces of Niassa, Nampula,
and Cabo Delgado in the next six years, greater focus will be
given to developing tourism infrastructure and capacity in this

6. (SBU) Day-to-day business operations in Pemba are dominated by
a Mozambican of Middle Eastern descent, Osman Yacob. Osman is one
of the province's high profile characters and maintains excellent
relations with the Governor of Cabo Delgado Province. Yacob and
his family, including his son, Mahomed Assif Osman, import and
sell a majority of Pemba's household goods and equipment. A visit
to one of Osman's many stores makes clear a variety of goods for
sale on the local market, including anything from hoses and
bicycles to detergent and tires. Assif, who is at the heart of
the operation, spoke openly about increasing development and
continuing problems in Pemba. According to Assif, the Pemba Beach
Hotel and Indian Ocean Aquaculture have created significant
employment in the capital, increasing economic activity and
raising the province's profile. Due to poor infrastructure, the
biggest hassles businesses face are stiff transportation costs on
goods, bureaucracy (obtaining licenses, claiming incentives), and
corruption, specifically at the port of Nacala (the closest large
port). The Osman operation receives 60-70 containers of goods a
month into the port; most goods are produced in Brazil, China,
and Dubai. An interesting trend that has developed in the
northern provinces of Mozambique is the operation of Middle
Eastern and South Asian (mainly Indian and Pakistani) businessmen
working to distribute and sell on the local market. It is
speculated that several of these businessmen pay bribes and cut
corners in order to do business.

7. (U)An interesting new development in Cabo Delgado, the Indian
Ocean Shrimp Aquaculture farm is setting up operations at a rapid
pace. On a visit with Patrick Wood, Managing Director of Indian
Ocean Aquaculture (IOA), he showcased the firm's corporate
headquarters, packing plant (formerly TexManta, the province's
now defunct major textile factory), shrimp farms (consisting of
14 ponds), and hatchery. IOA boasts a plethora of international
investors (predominately British), with a minority share of
American investment. Biologists and experts from Fiji, Great
Britain, the Philippines, Australia, and other countries are
living and working on IOA's several properties. Currently, IOA is
designing product packages and completing construction on the
packaging plant. The firm's export targets are Japan and the US.
Wood expects the first prawn exports to hit the US by July 2004.

8. (U) COMMENT: It is clear that economic activity in Cabo
Delgado is heating up, employment is being created, and the
development agenda is heavily reliant on increasing tourism. An
interesting mix of investors is afoot, trying to get ahead in a
region that is increasingly becoming a relative hotspot in the
generally lukewarm Mozambican investment environment. Activity
and access to Cabo Delgado will intensify as Pemba International
Airport opens up more international flights. Of significant
interest in the upcoming decade will be the results of how this
development affects the poor, Muslim community of Cabo Delgado.
With USG private sector interest in the North (privatization of
Nacala Port and Railway and IOA) and significant USG support in
demining and tourism development, the USG will have a hand in
economic and social developments that transpire. END COMMENT.

© Scoop Media

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