President Mbeki and Chisano to Meet

Minister of Foreign Affairs, Dr. Nkosazana Dlamini Zuma announced today, Thursday 27 March 2003, the hosting of President Joachim Chissano by President Thabo Mbeki for the SA-Mozambique Heads of State Economic Bilateral Forum on Friday, 28th March 2003 in Cape Town.

The Heads of State Economic Bilateral Forum, created in 1997, has ensured the successful implementation of a number of strategic projects between the two countries. Meetings are held quarterly under the chairpersonship of the two Presidents. Minister of Trade and Industry Alec Erwin and his Mozambican counterpart Carlos Morgado will attend the meeting.

Extensive contacts between the respective SA and Mozambique Government Departments, which constitute the Working Groups of the Commission, have since taken place.

More than 25 Agreements, covering various spheres of co-operation, inter alia, Fisheries; the Maputo Harbour; Agricultural development; Natural Gas Trade; Demining; the Maputo Development Corridor; a Joint Water Commission, Promotion and Reciprocal Protection of Investments and Customs Administration, have been entered into.

Mozambique is one of the strongest proponents of the NEPAD (New Partnership for Africa's Development) and is one of the most reliable supporters of the South African Government's policy positions in regional, continental and international multilateral fora.

For further information contact
· Ronnie Mamoepa 082 990 4853
· David Hlabane 082 561 9428
· Manusha Pillai 082-858-2048

Issued by the Department of Foreign Affairs
Private Bag X152
Pretoria
0001
27 March 2003

BACKGROUND TO BILATERAL RELATIONS

The close bilateral relations between South Africa and Mozambique are characterised by a constant high level of interaction on Presidential, Ministerial, Directors-General, officials, as well as Parliamentary level, in all the spheres of co-operation. In addition, the RSA/Mozambique Joint Permanent Commission for Co-operation (JPCC) successfully held it's second meeting on 4 and 5 December 2001 in Pretoria. Since 1994, South Africa and Mozambique have entered into more than 20 Agreements; Protocols, as well as Memoranda of Understanding.

The Joint Permanent Commission for Co-operation (JPCC)

The JPCC deliberates at senior official's level on progress made with the implementation of the technical component of the various bilateral co-operation initiatives existing between the two countries and to report the details of such progress to the Heads of State Economic Bilateral meetings.
The Second Joint Permanent Commission for Co-operation meeting, comprised the following sub-committees:
· Defence, Security, Migration, Labour, Education, Health and Civil Aviation;
· Foreign Affairs, Justice, Public Administration, Fisheries and Social Action;
· Trade, Industry, Banking, Finance, Investment, Agriculture/Rural development, Technical Co-operation;
· Transport and Communications, Public Works and Tourism, Environment, Meteorology, Water Affairs and Forestry matters.
The next JPCC is due to take place during the third quarter of 2003.

TRADE RELATIONS
South Africa is Mozambique's largest trading partner and second largest investor in the world. An estimated 250 South African companies are currently operational in Mozambique.
The South African Phone Company Vodacom, won a bid in 2002 to become the second mobile phone operator in Mozambique. Issues such as interconnector charges are still being negotiated.

DEVELOPMENT PROJECTS
The promotion of Mozambique's reconstruction and development initiatives, as a manifestation of the African Renaissance process, is currently being addressed through massive South African public, as well as private sector investment and involvement in mega-projects in Mozambique, as well as various other smaller development assistance projects.

Working with the NEPAD as its development mandate for the continent, the IDC (Industrial Development Corporation) has extended its geographical reach beyond the SADC region with an estimated rollout of R 55 billion worth of projects on the continent. However, Mozambique remains the largest beneficiary of the IDC's funding/investments in projects in Africa with the corporation agreeing to again partner BHP Biliton and Mitsubishi in the USD890 million expansion of the Mozal Aluminium smelter near Maputo. The IDC is spending an estimated R 20 billion in the Zambezi valley in northern Mozambique where the corporation is helping to revamp the rail system and the Beira port.

It is expected that the Maputo Development Corridor project and its related initiatives, following their completion, will substantially boost trade between South Africa and Mozambique and at the same time result in a substantial increase in foreign investment to both countries, given the improved logistical and infra-structural developments.

Natural Gas Pipeline Project

The South African Natural Gas Pipeline Project is progressing well. Procurement of equipment and construction materials is nearly completed. The total employment figures in Mozambique have risen to 2059 people, of which only 375 or 18% are foreigners.

SASOL and the Natural Gas Project have received excellent, positive publicity on an ongoing basis for the community projects that have been implemented by them to date. The projects have been handed over at special ceremonies, usually attended by the Governor personally. During one such project, big ovens being built for the rural women to bake bread for income purposes were handed over.

Another project is an irrigation system covering 130 hectares in Macarretane. The system, which is giving hope to this drought stricken region, was formally handed over to the Macarretane Agricultural Association. It was built with funds granted by the Social Development Fund of SASOL and forms part of the company's commitment to spend five million dollars on social welfare in the areas affected by the gas pipeline.

At a cost of sixty four thousand US Dollars, SASOL assisted families in ploughing their fields, acquiring water pumps, irrigation tubes and supplied them with fuel, seeds, fertiliser and pesticides. The project that counts on the assistance of SASOL and government agricultural technicians was launched late last year and the beneficiaries are expected to manage it themselves after this first stage.

The cashew production in the Inhambane province is also benefiting from SASOL's development programme. The cashew trees are treated chemically against a fungal disease, which is the main cause of the trees' poor productivity. Trees that had for years not produced any nuts at all were now recovering and are producing again. The SASOL project may be expanded into the neighbouring district of Inhassoro, which would be very beneficial for the local population. Alongside the treatment of old trees goes the planting of new ones. The production of cashew saplings should reach the figure of 1,84 million this year.

SASOL also financed the drilling of boreholes for drinking water in the semi-arid Inhambane province. In the dry season many women villagers have to walk long distances to fetch water for their families basic requirements.

SASOL has announced that it is searching for more natural gas in Mozambique. Exploratory drilling is to start in two weeks' time in the existing gas fields at Pande and Temane. It has been estimated that the two current fields hold 85 billion cubic metres of natural gas. The gas field at Temane would be tapped first, and it is planned to bring the field at Pande on line three years later when the pressures of the Temane reservoir drops to the same level of the Pande field. It is estimated that the Mozambican government would earn USD 2 billion in taxes and royalties, whilst the South African government would receive USD 3.2 billion in taxes during the 25 years of its expected life. Economists have calculated that the project would eventually contribute more than 20% towards Mozambique's GDP.

The World Bank's Multilateral Investment Guarantee Agency (MIGA) has announced that it is providing investment guarantees worth $72 million for the development of the natural gas fields in Inhambane, including the construction of a central processing facility and the 865 km gas pipeline from Inhambane to Secunda in South Africa. According to an MIGA press release the guarantee coverage is being extended to SASOL for its equity investments in Mozambique. This coverage protects the Mozambican part of the transaction against the non-commercial risks of transfer restriction, expropriation, war and civil disturbance and breach of contract.

Great Limpopo Transfrontier Park

Concrete measures to implement the Great Limpopo Transfrontier Park will only be visible as from the second half of 2003 according to officials from the Mozambican Ministry of Tourism. The Ministry is now drawing up a plan for the management of what were once hunting areas 16 and 17 in Gaza province and which now forms the core of the Limpopo Transfrontier Park. Several sub-committees have been set up dealing with among other matters, finance, wildlife management and staff training. Forty wardens are currently undergoing training.

The Mozambican side lacks the developed tourist infrastructure that can be found in the South African and Zimbabwean components of the park. The management plan has amongst its objectives the creation of a pilot wildlife monitoring area. The government has imported over a thousand animals of various species from South Africa in an attempt to restore the Gaza wildlife, after the devastation the area suffered during the war of destabilisation.

Investment

Over the past five years, the Mozambican government's Investment Promotion Centre (CPI) approved investment projects budgeted at over USD 7 billion. According to CPI, between 1998 and 2002, eight hundred and eighty one investment projects were approved amounting to a total of USD 7,4 billion. The figures for investment approved year by year are as follows;
1998 - more than USD 900 million
1999 - more than USD 600 million,
2000 - more than USD 800 million,
2001. - more than USD 3.4 billion) and
2002. - USD1.5 billion

Mega-projects such as the MOZAL aluminium smelter and the exploitation of titanium bearing mineral sands at Chibuto, in Gaza province, account for much of the investment, but the figure also includes smaller projects approved in such areas as agriculture, agro-industry, tourism and construction.
Mozambique has risen to number 10 in the list of African countries attracting foreign direct investment (ahead of Mozambique on this list are South Africa, Morocco, Algeria, Angola, Nigeria, Sudan, Egypt, Tunisia and Ivory Coast).