Maputo, Mozambique, May 15, 2006
—The International Finance Corporation, the private sector arm of the World Bank Group, signed the second Mozambique SME Initiative (MSI) integrated investment and technical assistance agreement with Swissta Mozambique, a local water purification and bottling company. The MSI investment will support the establishment of a local water bottling factory that provides water products from 500ml bottles to 5 gallons, 500ml flavored water and ice to the Maputo and Matola regions. The financing consists of a $300,000 combined quasi-equity investment and technical assistance loan.
Launched in 2006, Swissta is a start-up venture that aims to provide affordable, high-quality water products to local businesses and communities. The company is owned and operated by two entrepreneurs, Mr. Michael Strehler, a Swiss engineer and Mr. Mhamud Charania, CEO of Africom, a Mozambique distribution company that has been in business for eight years.
As Dimitris Tsitsiragos, IFC director for Global Manufacturing and Services, noted, “[IFC’s support to Swissta demonstrates IFC’s continued commitment to providing access to finance to small businesses, in particular, those serving the local market with quality products.”]”
Managed from IFC’s Maputo office, MSI is an IFC pilot program aimed at building a portfolio of viable client companies, whose improved operational and financial results over the next four years would in turn stimulate interest from new investors in the country’s small business sector. To date, over 16 companies have received investment advice and technical assistance; one loan has been disbursed to a woman-run print company, Spectrum Graphics Limited, and a second commitment to Swissta was made this month.
MSI is one of the latest in a long series of small business partnerships between donor agencies and IFC, an organization whose strong implementation capacity derives from more than 600 full-time small business development specialists in the field worldwide and a Washington-based headquarters staff with expertise in business and finance as well as development. IFC and the Swiss and Finnish governments are contributing resources to the initiative, with others expected to join in the near future.
Despite an improving investment climate, local companies in Mozambique find it difficult to attract capital from private investors. Although several effective programs already serve microenterprises, small and medium businesses can do many things that microenterprises cannot do, such as generate new tax revenues, export their products, or form competitive local industries. They also offer workers more secure and better-paying jobs, as well as opportunities for training, potential for career advancement, health and safety protection in the workplace, and pension and insurance benefits. In almost every country that has substantially reduced poverty and created a sound middle class, the local small business sector has played a critical role. But small and medium enterprises face enormous unmet needs.
The MSI investments, which range between $100,000 and $1 million, are made on a fully commercial basis in existing businesses with strong growth potential. Technical assistance is an integral part of the investment program and provides customized, hands-on, financing to selected small businesses to prepare them to qualify for direct financing from the investment program and to develop successful, sustainable practices postinvestment. These businesses also benefit from the environmental and safety review and the IFC Against AIDs program, which supports the implementation of HIV/AIDs strategies in the workplace. Once a portfolio of sustainable small businesses has been successfully developed, the longer-term goal is to develop the initiative into a self-supporting and viable investment vehicle owned by the private sector.
The direct beneficiaries are the Mozambican small businesses thatcan benefit from an integrated package of financing and technical assistance to expand their firms. In the longer run, additional small businesses will benefit from the project as there will be a new financial institution that can provide financial services to them and serve as a model elsewhere. Local providers of consultancy services will also benefit from the initiative as it also aims at improving local resources for technical assistance . For more information, visit www.ifc.org/ifcext/gms.nsf/Content/Mozambique+Initiative.
Richard Ranken, IFC director for Sub-Saharan Africa, noted, “[MSI’s second investment reflects IFC’s combined commitment to providing financial and technical assistance services to Africa`s small and medium businesses.”]
The International Finance Corporation, the private sector arm of the World Bank Group, promotes sustainable private sector investment in developing and transition countries, helping to reduce poverty and improve people’s lives. IFC finances private sector investments, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. Its 178 member countries provide its share capital and collectively determine its policies.
From its founding in 1956 through FY05, IFC has committed more than $49 billion of its own funds and arranged $24 billion in syndications for 3,319 companies in 140 developing countries. IFC’s worldwide committed portfolio as of FY05 was $19.3 billion for its own account and $5.3 billion held for participants in loan syndications. For more information, visit
www.ifc.org
.
