Agriculture, Hotels and Restaurants, Transportation, and Industry are the sectors that recorded the largest declines in the Business Strength Index in first quarter 2021.
In the Agriculture sector, the Business Robustness Index registered a reduction between Q4 2020 and Q1 2021, from 0.33 to 0.32. This reduction is justified, in part, by the seasonal characteristic of the I quarter of the year, which is marked by cooling agricultural activity. At the level of the family and semi-commercial sector, this cooling is due essentially to the end of the marketing campaign for vegetables and preparation for the beginning of the marketing of cereals, which cause in the first quarter there is low economic flow and consequently the level of income is lower.
At the level of the export sector, this cooling is essentially due to the fact that the I quarter of the year is also characterized by a low volume of agricultural exports, since most cash crops such as cotton, cashew nuts, among others, start the export season in the month of May or June, causing in the I quarter of the year the exports of these crops are incipient and, consequently, the revenue flow is lower when compared with the IV quarter.
Still in the export sector, the fisheries sub-sector will have been the main determinant of this fall in business performance of the agriculture sector in the I quarter of 2021, resulting from the seasonal effect due to the fact that the shrimp fishing season starts in April which causes no exports of this fish in the I quarter of the year.
In the case of some varieties (ex: deep-sea crustaceans) whose campaign starts, normally in the month of January, there was a delay in the beginning of the campaign due to some factors, such as (i) the cost of licensing – due to the impacts of the economic crisis ravaging the world and the country in particular, companies in the fishing sector had difficulties in supporting the licensing costs for the beginning of the campaign, which caused it to be delayed; (ii) entry of foreign crew members – another factor that contributed to the delay in the beginning of the fishing season were the constraints caused by the requirement of a work contract for foreign crew members, contrary to previous practice that allowed them to enter the country in a more flexible way, without necessarily needing a work contract since their services are temporary; (iii) impact of natural disasters – cyclones Chalane and Eloise caused the temporary paralysis of production and destruction of fishing vessels in the central region.
Hotels and Restaurants
In the Hotel and Restaurant sector, the Business Robustness Index fell from 0.30 to 0.27 between Q4 2020 and Q1 2021, corresponding to a change of 3pp. This downward trend in business performance in this sector was largely due to the effect of the restrictive measures to curb the COVID-19 spread adopted by the government from February onwards.
In the case of the hotel sub-sector, due to these restrictions which included the closure of beaches and swimming pools, much of the leisure tourism bookings were cancelled, resulting in the hotels’ occupancy rate falling below 5%. In the case of tourist resorts, located in tourist hubs such as Bilene, Ponta do Ouro, among others, these measures resulted in a drop in billing by about 95%.
At the level of business tourism, in addition to the effect of the restrictive measures, the impact was exacerbated by the postponement of the final investment decision (FDI) of Exxon Mobil and the suspension of TOTAL’s activities, which led to the departure of 50% of foreign tourists with links to these projects, which certainly resulted in the significant drop in the level of expected revenues of hotels. In the case of restaurants, performance was also affected by the restrictive measures that, on the one hand, stipulated the limitation of restaurant opening hours.
In the case of Maputo Province, the impact was more significant due to the imposition of curfews, which were later extended to the other provinces, and the limitation of the number of people present in the hotel establishments. These factors contributed greatly to the reduction in revenue in this sub-sector, although there has been an effort by companies to reinvent themselves and minimize the impact of these constraints.
The performance of the transport sector shrank between Q4 2020 and Q1 2021, with the Business Strength Index for this sector falling from 0.48 to 0.46. This reduction in the performance of this sector was associated, essentially, with the contraction of activity in the road transport subsectors, namely, passengers and freight.
In the case of freight transport, the drop in business performance in Q1 2021 was due, on the one hand, to seasonal affects and, on the other hand, to deterioration in the business environment. As for seasonal effects, it stands out that the I quarter of the year is characterized by weak agricultural marketing, which causes demand for transport in this sector to reduce substantially when compared to the IV quarter which is the peak marketing period for vegetables (pigeon peas, sesame, etc.).
As for distortions in the business environment, we highlight the introduction of new municipal taxes that affect the competitiveness of freight carriers. In addition to the fees that had already been creating constraints in the activity of operators in this subsector, in January 2021 a new access fee to the Port of Nacala, introduced by the municipal government in December 2020, came into effect. This is yet another charge that had the immediate impact of increasing the operators’ operating costs and adding another procedure to the activity cycle of this subsector.
Due to this new charge, carriers tend to divert cargo from the port, betting more on the transport of goods that do not need to be subject to this charge, with the implication that the performance of this subsector will fall in this period compared to the 4th quarter of 2020.
Looking at the subsector of passenger transport, the main factor that justifies the low performance in the I quarter of 2021 compared to the IV quarter of 2020, is associated with the restrictive measures to contain the spread of COVID-19 that implied the reduction of passenger flow in a general way that, coupled with the limitation of the capacity of vehicles, contributed to the substantial reduction in the level of revenue of operators in this sector, in a context in which operating costs remained the same, namely the price of fuel and parts and spares.
These impacts were exacerbated by the curfew measure that implied a reduction in the time of activity of the carriers, many of which registered a considerable flow of passengers after the time established for curfew.
Industry
The industrial sector also recorded a slight slowdown in its level of performance in Q1 2021 compared to Q4 2020, with the Business Robustness Index reducing by 1pp, from 0.49 to 0.48. The main factor explaining the reduced performance of this sector is associated with the restrictive measures to contain the spread of the COVID-19 pandemic which, although they did not considerably affect industrial production itself, impacted negatively on the flow of activity in the commercial segment. That is, due to the restrictions on the operation of commercial establishments coupled with the reduction in the income of economic agents, the volume of sales and revenue in the industrial sector reduced slightly in Q1 2021, when compared to Q4 2020.
The case of the alcoholic beverages sub-sector was the most dramatic, since with the closure of stalls and the limitation of the hours of operation of Bottle Stores, the commercial segment of this sector was considerably affected, which had chain implications, starting with the commercial establishments themselves and extending to the factories as well as to small farmers integrated in this value chain.
