NorWatch report on Grupo Madal in Mozambique: Development or exploitation?

By Morten Rønning
Norwatch

Zamb‚zia Province, where Madal runs the main part of its operations, is the poorest province in one of the world's poorest countries. To what extent do Norwegian investors succeed in transferring Western thinking on working conditions and development to a company that is a legacy of the colonial period?

Cheap labour
Since the arrival of the Portuguese in this region, nearly 500 years ago, the local population has had to cope with being last in line where land and resources are concerned. They have made their living from a dwindling form of subsistence farming, combined with work for the large plantation companies.

The foreign companies have a near-monopoly on paid work, and wage levels are set accordingly. Despite the fact that, in practice, it is impossible to exist on the country's statutory minimum wage, many have to accept getting paid even less. Furthermore, only about 500 of the company's 6-7,000 employees are permanently employed, and hired hands doing seasonal work are not covered by the minimum wage statute.

A shepherd at the company's cattle ranch is paid less than USD 0.7 per day, for a working day that lasts from sunrise to sunset. He is allowed to hire a relief man two Sundays a month, on his own expence. A coconut cutter gets USD 0.88 for a quota of 500 nuts in the busy season, before he goes home to farm his own little lot.

When the dried coconut kernels (copra) are to be loaded on ships for export to Germany, plantation workers are hired to help loading. During the five days of loading, they work in a single stretch, with only three hours off per 24-hour day.

Old-fashioned solutions
Neither copra production nor cattle ranching has been mechanised in any way. Both activities take place with no use of electricity. The few tractors available, have to be push-started in the morning, for lack of batteries. The coconuts are dried in kilns fired with coconut husks, a dark, warm, and smoke-filled workplace.

The logging that the company started in 1997, however, is mechanised, and the company's sawmill is equipped with modern, Western machinery. Nevertheless, protective equipment is still nearly unheard of. In the concession area, local people are hired to seek out the best trees, for USD 0.35 apiece.

Madal takes part in a sharp increase in logging in Zamb‚zia, which may in a few years' time endanger some of the most sought-after species. In this process, the authorities have been sidelined, lacking resources to control either the extraction or the exports of timber.

Development?
Madal is the largest private holder of land in Mozambique. These lands are rented from the government for 50 years at a time. At the same time, the local population is experiencing increasing pressure on their lands. Population growth and increased migration from other parts of the country over the past decades have left the coastal zone unable to feed the population, whether by subsistence farming or wage labour for the plantation companies.

NorWatch interviewed a number of organisations during our visit to Zamb‚zia, to get their views on what kind of part Madal can play with regard to local development. In NorWatch's view, neither the locals, the government, nor the company itself are getting much out of the use of the huge land areas.

Mozambique is in the process of implementing new legislation on land, which is to pay more respect to the local population's land rights. At the same time, the government is seeking foreign investments, and has to strike a balance between these two concerns.

Madal itself expressed a wish for the government to help an eastwards migration to areas with less population pressure. We talked to organisations working precisely with land issues, who envisaged other solutions.

The aim must be to give the local people access to larger areas and/or increased economic benefits from today's land use. The latter aim could be achieved if the companies, among them Madal, reorganise their operations into a co-operation between the company and the local people, where the company can participate with know-how and lands, while the locals take over responsibility for running the plantations.

Norfund
If the Letter of intent signed by Madal and Norfund were to lead to an investment, this would leave the Norwegian government as a co-owner of the company. So far, Norfund has been less than talkative about these negotiations.

The way Madal currently is operating, an investment in the company would mean a violation of Norfund's guidelines, which inter alia state that the companies they invest in should abide by both national and central international guidelines. Time would show whether Norfund might be able to change these conditions.

As an investment fund, Norfund will of course expect a long-term return on its investment. As NorWatch sees it, taking money out of  Grupo Madal cannot be justified for years to come.

Norwatch Newsletter 11/00