Cablegate: Mozambique: Artisan Entrepreneur Takes Advantage Of

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FM AMEMBASSY MAPUTO
TO RUEHC/SECSTATE WASHDC 6565
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEHLMC/MILLENNIUM CHALLENGE CORP 0138
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JOHANNESBURG FSC FOR RDONOVAN
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USDOC FOR RTELCHIN
MCC FOR SGAULL
USAID FOR AFR/SA

E.O. 12958: N/A
TAGS: ECON EAID EINV ETRD MZ
SUBJECT: Mozambique: Artisan Entrepreneur Takes Advantage of
AGOA But Lacks Capital

MAPUTO 00001610 001.2 OF 002

1. Summary: One Mozambican handicrafts company, Artes
Mondlane, has succeeded in exporting an increasing flow of
product to the US under AGOA, but faces serious challenges
due to lack of capital. Econoff spoke with the owner,
Carlos Mondlane, on December 7 to learn more about his
success and the constraints he encounters. We believe this
case is emblematic of many other small businesses in
Mozambique, some of them struggling to export to the U.S.
End Summary.

2. On December 7 Econoff and LES visited the offices of
Artes Mondlane, headquartered in Maputo, Mozambique. Carlos
Mondlane, who runs the family business with his children,
explained how his personal story led him to develop the only
company currently exporting artisan Mozambican crafts to the
U.S. Growing up an orphan, Mondlane learned the art of
sculpture at a young age and peddled his handicrafts on the
street. Hoping for a better way to support his family, in
the early 1990s Mondlane decided to purchase handicrafts
from fellow artisans and act as a wholesaler supplying
handicrafts to purchasers regionally and internationally.
He started his company, Artes Mondlane, in 1992. In 1998 he
began exporting very small quantities of handicrafts,
primarily to South Africa and Europe.

3. Artes Mondlane, with the support of Aid to Artisans,
began exporting to the U.S. in 1999. (Note: Aid to
Artisans is a nonprofit organization that offers practical
assistance to artisan groups worldwide in product
development, business skills training and development of new
markets. In fiscal year 2005, Aid to Artisans benefited
more than 21,000 artisans, of whom two-thirds were women.
End Note.) Since then, the business has grown
significantly, with Artes Mondlane now exporting to numerous
destinations. The company now exports the equivalent of one
container, or 12,000 pieces, a month. The products are
packaged and sent by air.

4. According to Mondlane, there is international demand for
at least two containers a month, and likely more, but he is
unable to commit himself to such high quantities because of
problems with his supply chain. Currently, Artes Mondlane
purchases handicraft from individuals spread throughout
Mozambique. Lack of capital means that there is a serious
strain on production capacity - Artes Mondlane is only able
to pay producers for 50% of the product and must then wait
for payment from its purchasers to pay producers the rest.
Consequently, artisans often have difficulty securing the
wood and other inputs, putting further stress on production.

5. When asked what it would take to meet the current
demand, Mondlane responded that if he had the capital, he
would stockpile raw materials for his artisans. They could
then create items to meet demand and would receive full
payment upon delivery to Artes Mondlane. With sufficient
capital, Mondlane felt confident that he could expand beyond
two containers per month.

6. Citing a specific example, Mondlane mentioned that he
had just received an order from the US for 1,900 sugar bowls
made from sandalwood, but that he was not going to be able
to meet the order because of supply problems. Current year
exports to the U.S. included sugar bowls, vases, candle
holders, wood boxes and statutes - all made out of
sandalwood or pau preto. (Note: Pau preto wood, also known
as African ebony, is from the Mpingo tree (Dalbergia
Melanoxylon). End note.) In 2005 the company exported USD
173,000 worth of product, USD 97,000 to the U.S. alone. Mr.
Mondlane feels that he could easily double that amount if
the supply chain issue were resolved. He spoke highly of
AGOA and the opportunity that it has created, and stated
that he continues to look for solutions to the supply
problem in the hopes of increasing his exports to the U.S.

7. Comment: Artes Mondlane's experience is a useful
example of an opportunity for increased exports under AGOA
stymied by lack of capital. Many Mozambican entrepreneurs -
from artisan dealers to commercial farmers - feel the crunch
of capital and cannot expand their business for this reason.
Although Artes Mondlane was able to secure some loan finance
early in its career, recently the combination of high

MAPUTO 00001610 002.2 OF 002

interest rates and strict guarantee requirements makes
borrowing unattractive.

Dudley

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