Focus: Carving a brighter future in Mozambique

ISMAEL JOSE carves elephants from the wood of the Mozambican mafourera tree. It is a humble craft but ever since the earth movers rolled on to his ancestral land last year, Mr Jose, 24, has felt like a lottery winner. "I have moved my family from a reed hut to a brick house with glass in the windows and burglar bars,'' he said.

Mr Jose's life is just one of thousands that have been transformed since a consortium headed by the London-based Billiton mining company began cutting a gigantic square into the red earth 11 miles west of Mozambique's capital, Maputo. One of the biggest building sites in Africa, the aluminium smelter currently under construction at Matola is the result of a $1.3bn (pounds 812m) investment - equal to the entire southern African country's annual GDP. The project represents one of the biggest statements of faith by a big international company that investing on the ground in a poor, under- developed African country is worth the attendant risks.

The magic word is Mozal - an international joint venture in which Billiton holds 47 per cent of shares, with the rest divided between a South African development corporation and Mitsubishi of Japan. Mozal, which is expected to begin producing aluminium by the end of next year, has not only turned Mr Jose's life around, it is bringing First World industry to a swampy tract of subsistence farming land, and investor-confidence to a country that not long ago was seen as a scrapheap of Marxist dreams.

The plant is the first Mozambique operation for Billiton, the quoted company that was created in London in 1997 from the minerals assets of Royal Dutch/ Shell and the assets of South African mining company Gencor. Endemic malaria, swampy ground that needed more piling than expected, and worker unrest have all provided challenges. But the project, backed by World Bank finance, remains ahead of schedule and below budget.

Few people can fault the venture. On a flat piece of savannah, men in hard hats, at work on the plant, mingle with village women bearing firewood on their heads, and Mr Jose carves his splendid model elephants. "I used to stand by the road and sell them to tourists from South Africa. White people like elephants," he said. "Then the chief of the area presented one of my elephants to Mozal at the foundation-laying ceremony last year. Mozal wanted 300 replicas, as souvenirs for all the guests, and their orders have just kept coming. Now I have two assistant carvers and we have to buy our wood from far away because we have used up the mafourera trees which were felled by Mozal," he said.

The Mozal plant's distance from the trading floors of the City belies the boldness and profound impact of this venture, which is set to produce a minimum of 250,000 tons of aluminium a year, 1 per cent of worldwide production or the equivalent of five million car wheels. Since the end of its 17-year post-independence war, and the elections in 1994, this former Portuguese colony has transformed itself into the fastest-growing economy in Africa. It still needs $1bn a year in life support from international creditors, but it has made record progress mainly on the strength of cashew nuts and shrimps.

Rob Barbour, the chairman of Mozal, believes the smelter will prove to be only the first of many lucrative international projects in Mozambique. "The government has begun sending potential new investors to us so that they may hear first hand of our experience. We are very keen to see other projects get off the ground." Earlier this year, Enron Corp of the US announced a pounds 2.4bn hydrocarbon project.

Mr Barbour concedes that Mozal has been offered shortcuts by the government and has received privileged treatment in its dealings with notoriously recalcitrant Mozambican civil servants, but insists that the smelter project, which will use alumina from Australia, is thoroughly viable. This, he adds, was his belief even when the first spade was sunk into the ground at the height of the aluminium price slump in 1997-98.

He said: "We have muscle and get prompt attention from the government. Without a pretty free rein, we could not have built so fast. But if you compare it to other African countries, Mozambique is good in terms of corruption and crime. Primary aluminium prices are very cyclical. A smelter has a lifetime of up to 40 years and will see many commodity cycles in its time.

"What makes investors in the natural resource business go for a project like this is that it turns on the cost of production. The cost of power is the first consideration, followed by the price of alumina and tax. We are in Mozambique because of an oversupply of power in the region and because we are one of the first tenants of a new development zone giving us the right fiscal regime," said Mr Barbour. Total tax of 1 per cent of turnover has been fixed in perpetuity.

International economists argue that Mozambique displays all the signs of an economy which, despite some corruption and continuing serious north- south inequality, is moving in the right direction and is consolidating its political stability.

The second democratic elections in Mozambique, a Commonwealth member, are due in December, a month after a visit by the Queen. Apart from the Mozal plant, she will be shown the nascent "Maputo Corridor", an enterprise zone including Matola that aims to reclaim from Durban in neighbouring South Africa the Mozambican capital's position as the logical port for Johannesburg. The corridor's champions claim 180 separate investments, worth $7bn and with the potential to create 35,000 jobs, are in the pipeline.

Mozal is currently employing 8,000 people from all over the world, more than half of them Mozambican labourers. When it is completed, the smelter will be operated by about 750 people, most of them locally hired, says Mozal, which operates a similar plant at Richard's Bay in KwaZulu-Natal, South Africa.

Mr Barbour said: "We believe that the people we have trained, with the help of the World Bank, will be well placed to get other work or to tender for non-core maintenance aspects at the plant. There has been some criticism of our use of labour and equipment from outside Mozambique but it is simply a fact that local contractors were not capable of marshalling plant and mach-inery at sufficient speed."

Most observers agree that Mozal's record to date - on human resources, relocating 1,500 peasant farmers' plots and safeguarding the environment - has been good. The technology is state-of-the-art, and claimed to be as environmentally friendly as any in the developed world. Traditional leaders have been consulted all along the way; medical clinics have been built and schools improved. Workers receive Aids education from visiting theatre troupes and in messages on their payslips.

But one major hurdle remains in the port of Matola, due to be managed by another British company, Mersey Docks, but still in state hands and lagging behind in its modernisation programme. Without an efficient port, Mozal will be a white elephant, unable to take delivery of alumina and ship out its ingots. "We hope the port will be privatised and are somewhat frustrated that it is taking so long," said Mr Barbour. But he added that he was happy with the progress of the joint power transmission company, made up of electricity providers in South Africa, Swaziland and Mozambique, which will supply the smelter.

Mr Jose, meanwhile, carries on carving his elephants. "I have made about 500 of them for Mozal so far and I am using some of the money to help my brother to start a roadside drinks stall," he said. "I just hope the demand never dries up."