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30. Mozal program supports small and medium enterprises in Mozambique
Mozal 2 is the expansion of the primary Mozal aluminium smelter located on the outskirts of Maputo, the capital of Mozambique. During the original Mozal project, the use of local Mozambican contractors and particularly small and medium enterprises (SMEs) was limited and only partially successful. To improve our performance in enabling successful local participation, the Small and Medium Enterprise Empowerment and Linkages Program (SMEELP) was developed. The program has achieved significantly increased participation during the construction of Mozal 2 and is now recognised as a model for the development and sustainability of SMEs in developing countries.
Following a review of the Mozal 1 (first potline) experience, it was clear that, if the expansion project was to succeed in involving local SMEs, a new methodology would have to be developed. This imperative was reflected in the broader Mozal Empowerment Policy, which states that ‘the management of the Mozal Expansion Project is committed to maximising sustainable benefits to the local community using a combined strategy of development and use of local goods, services and personnel, without compromising project objectives’.
A commitment was made to:
- maximise the use of local labour (greater than 65 per cent Mozambican)
- provide skills training for local labour (train more than 3800 workers in construction skills)
- actively encourage the use of local contractors
- actively encourage the establishment of joint ventures between international and local contractors
- allocate selected work packages solely for execution by local SMEs
- promote SME training programs to enable local SMEs to be competitive and successful
- establish systems for monitoring and reporting of the project's empowerment progress.
The target for the total local spend, including SMEELP and all other forms of local expenditure, was set at US$80 million. Specific objectives were then established for the SMEELP, to facilitate the successful delivery of at least 25 SME contracts and the establishment of a sustainable SME training program.
To improve the likelihood of success of the Program, the SMEELP was established as a collaborative joint venture between Mozal, the Africa Project Development Facility (APDF) of the International Finance Corporation (IFC) and the Centre for Promotion of Investment (CPI) of the Mozambique Government. It was also planned that, after completion of the Mozal expansion project, the CPI would take over management of the Program to ensure its sustainability. The methodology was designed to be suitable for any company wanting to successfully utilise local SMEs.
The key steps in developing an effective SMEELP were deemed to be as follows:
1. Creation of SME packages
- Packages solely allocated to SMEs
- Ensure realistic scope in terms of size and complexity
- Sufficient back-up time in case of failure
- SMEs also included for standard packages, whenever possible.
2. Pre-assessment of SME capabilities
- SMEs financial/technical capabilities pre-assessed
- Capable SMEs recommended to the project by CPI
- SME database established and periodically updated.
3. Training
- Tender training (pre-tender): how to tender
- Induction training (post-award): how to execute contracts
- On-demand training: Quality Assurance(QA)/Quality Control/(QC), Business Management, etc.
- Training modules written and presented in local language, periodically updated.
4. Mentorship
- Custom-made mentorship plan for each SME
- Business mentorship: financial/commercial assistance
- Technical mentorship: on/off-site technical assistance, including Safety, QA/QC and Industrial Relations.
To help overcome the challenge of language differences and to facilitate the upgrading of SME infrastructures and technical standards, a dedicated bi-lingual Empowerment Coordinator was assigned to the SMEELP. The appointment also helped ensure that the project's engineering, procurement and construction management (EPCM) contractor embraced the concept of SME participation. This was a major factor in the success of the SMEELP, with the EPCM contractor's team playing a key role in driving the project.
The specific objective of awarding more than 25 contract packages has been achieved. As well, the transfer of know-how to SMEs through the training and mentorship program means a pool of trained SMEs is available for Mozal operations, future projects and other local requirements.
The program is sustainable and has been transferred successfully to our Hillside 3 expansion project in Richards Bay, South Africa. The proven methodology is also being adapted by the CPI and APDF for further implementation in Mozambique.
Internationally, in a field of endeavour that is typically littered with failures, the SMEELP is recognised as a successful SME development program and has been adopted as a model by the IFC and the World Bank.
SMEELP results to date include:
- 27 SME contract packages created
- 36 SMEs attended training
- 28 contract packages (including one standard package) awarded to 14 SMEs
- 12 contract packages successfully delivered
- No contract package cancelled
- In excess of US$5 million allocated to SMEs.
