Cablegate: Last Agoa Garment Exporter in Mozambique to Close

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

UNCLAS MAPUTO 001059

SIPDIS
SENSITIVE
STATE FOR AF/S - HTREGER
DOC FOR RTELCHIN
NSC FOR CCOURVILLE
E.O. 12958: N/A
TAGS: ECON ETRD EAID EINV MZ AGOA
SUBJECT: LAST AGOA GARMENT EXPORTER IN MOZAMBIQUE TO CLOSE

REF: A. 04 MAPUTO 01211
B. 03 MAPUTO 001697
Sensitive but unclassified. Please treat accordingly. Not
for internet distribution.

1. (U) Belita, the only remaining garment factory in
Mozambique exporting to the U.S. under AGOA, has announced it
will close its operations on September 17. The closure will
result in the loss of nearly 600 jobs in the city of Beira,
Sofala province. Palmar Group, Belita's parent company
located in Mauritius, has also abandoned plans to open an
all-but-ready jeans production plant, an investment valued at
USD 3 million, that would have employed another 550 employees
(ref A). Palmar is now actively seeking buyers for its two
Mozambican projects.

2. (SBU) According to Palmar Group Project Manager Steve
Wilson, the closure is a result of several factors, not the
least of which was Belita's inability to secure orders from
U.S-based buyers. Wilson told econ/poloff that U.S.
customers seem to have lost faith in Africa, noting that even
African textile powerhouse Mauritius was suffering from a
drop in orders from the U.S. Other factors leading to the
closure included increasingly expensive logistical issues
with the ports of Beira and Durban and rising costs charged
by its shipping agent, Maersk. Wilson added that Belita
faced significant difficulties adjusting to the realities of
a post-quota China trade environment. Mozambique's lack of a
well-trained work force translated into lower labor
productivity and quality control, both of which have made it
difficult to compete with low-cost Asian producers like
China. Belita's General Director Joao Nogueira stated that
Palmar Group, which invested over USD 7 million in the Belita
project, had struggled to make a profit in Mozambique.

3. (SBU) Comment: Mozambique's last large-scale apparel
exporter has fallen victim to many factors that have limited
the African garment sector's competitiveness as a whole. Low
labor productivity, inflexible labor laws, bureaucracy, and
poor infrastructure are debilitating factors in the
competitive post-quota world. The closure of Belita is
particularly disappointing given earlier optimism about
Mozambique's potential in the garment sector and USG efforts
to enhance Mozambique's exports under AGOA. Moreover, the
closure marks the virtual end of Mozambique's garment export
industry and will result in the loss of hundreds of jobs in a
country where unemployment is a major problem.
La Lime

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