Mozambique: Artisan Entrepreneur Takes Advantage of

UNCLAS SECTION 01 OF 02 MAPUTO 001610 SIPDIS SIPDIS AF/S FOR HTREGER AND JMALONEY JOHANNESBURG FSC FOR RDONOVAN JOHANNESBURG TDA FOR DSHUSTER USDOC FOR RTELCHIN MCC FOR SGAULL USAID FOR AFR/SA E.O. 12958: N/A TAGS: ECON EAID EINV ETRD MZ SUBJECT: Mozambique: Artisan Entrepreneur Takes Advantage of AGOA But Lacks Capital MAPUTO 00001610 001.2 OF 002 ¶1. Summary: One Mozambican handicrafts company, Artes Mondlane, has succeeded in exporting an increasing flow of product to the US under AGOA, but faces serious challenges due to lack of capital. Econoff spoke with the owner, Carlos Mondlane, on December 7 to learn more about his success and the constraints he encounters. We believe this case is emblematic of many other small businesses in Mozambique, some of them struggling to export to the U.S. End Summary. ¶2. On December 7 Econoff and LES visited the offices of Artes Mondlane, headquartered in Maputo, Mozambique. Carlos Mondlane, who runs the family business with his children, explained how his personal story led him to develop the only company currently exporting artisan Mozambican crafts to the U.S. Growing up an orphan, Mondlane learned the art of sculpture at a young age and peddled his handicrafts on the street. Hoping for a better way to support his family, in the early 1990s Mondlane decided to purchase handicrafts from fellow artisans and act as a wholesaler supplying handicrafts to purchasers regionally and internationally. He started his company, Artes Mondlane, in 1992. In 1998 he began exporting very small quantities of handicrafts, primarily to South Africa and Europe. ¶3. Artes Mondlane, with the support of Aid to Artisans, began exporting to the U.S. in 1999. (Note: Aid to Artisans is a nonprofit organization that offers practical assistance to artisan groups worldwide in product development, business skills training and development of new markets. In fiscal year 2005, Aid to Artisans benefited more than 21,000 artisans, of whom two-thirds were women. End Note.) Since then, the business has grown significantly, with Artes Mondlane now exporting to numerous destinations. The company now exports the equivalent of one container, or 12,000 pieces, a month. The products are packaged and sent by air. ¶4. According to Mondlane, there is international demand for at least two containers a month, and likely more, but he is unable to commit himself to such high quantities because of problems with his supply chain. Currently, Artes Mondlane purchases handicraft from individuals spread throughout Mozambique. Lack of capital means that there is a serious strain on production capacity - Artes Mondlane is only able to pay producers for 50% of the product and must then wait for payment from its purchasers to pay producers the rest. Consequently, artisans often have difficulty securing the wood and other inputs, putting further stress on production. ¶5. When asked what it would take to meet the current demand, Mondlane responded that if he had the capital, he would stockpile raw materials for his artisans. They could then create items to meet demand and would receive full payment upon delivery to Artes Mondlane. With sufficient capital, Mondlane felt confident that he could expand beyond two containers per month. ¶6. Citing a specific example, Mondlane mentioned that he had just received an order from the US for 1,900 sugar bowls made from sandalwood, but that he was not going to be able to meet the order because of supply problems. Current year exports to the U.S. included sugar bowls, vases, candle holders, wood boxes and statutes - all made out of sandalwood or pau preto. (Note: Pau preto wood, also known as African ebony, is from the Mpingo tree (Dalbergia Melanoxylon). End note.) In 2005 the company exported USD 173,000 worth of product, USD 97,000 to the U.S. alone. Mr. Mondlane feels that he could easily double that amount if the supply chain issue were resolved. He spoke highly of AGOA and the opportunity that it has created, and stated that he continues to look for solutions to the supply problem in the hopes of increasing his exports to the U.S. ¶7. Comment: Artes Mondlane's experience is a useful example of an opportunity for increased exports under AGOA stymied by lack of capital. Many Mozambican entrepreneurs - from artisan dealers to commercial farmers - feel the crunch of capital and cannot expand their business for this reason. Although Artes Mondlane was able to secure some loan finance early in its career, recently the combination of high MAPUTO 00001610 002.2 OF 002 interest rates and strict guarantee requirements makes borrowing unattractive. Dudley