Local Economic Development in Mozambique - Responsible Tourism: Critical Issues for Conservation and Development - page 9

Software
Software assesses the inclusive nature of the strategy that aims to attract invest-
ment, advance the competitiveness of local firms, and development of human
capital (Vázquez Barquero, 1999). As highlighted previously, private investment
in tourism is increasing but has been deterred by hardware issues such as corrup-
tion, poor infrastructure and the laborious regulatory process. McEwan estimates
that tourism investments have involved foreign investment for 70 per cent of the
projects in Mozambique (2004, p7). Local borrowing from the banks is excep-
tionally costly (15 per cent interest in real terms) and makes it very difficult for a
local entrepreneur to raise loan capital for investment in a tourism enterprise
(McEwan, 2004, p7). Therefore the Mozambique tourism industry remains
highly dependent on foreign investment and international aid, and maintains high
barriers preventing local businesses from evolving.
Mozambique ranks low in terms of its competitiveness, placed 93rd out of
102 countries in the World Economic Forum's 2004 Competitiveness Index
(USAID, 2007, p2). Overall, Mozambique's business environment discourages
labour-intensive growth and the establishment of formal sector small and
medium-sized enterprises. This situation is worsened by disproportionately high
costs of entry and operation in the domestic market. The lack of available finance
for small formal business and the time involved in starting a business discourages
the majority of society from contributing to the formal sector. As an illustration,
according to the World Bank's 'Doing Business in 2004' report, it takes on average
153 days to open a business in Mozambique (World Bank, 2004).
Consequently the formal sector remains extremely small with one of the
lowest labour participation rates in the world, at 5 per cent it accounts for 500,000
out of a workforce of 10 million (USAID, 2007, p1). Clarke and Gaile argue that
a 'wealth-creating approach entails removing barriers to the creation and expan-
sion of smaller firms and increasing the rate of enterprise development within the
community' (1998, p53). Therefore, the development of small formal businesses
is both a valuable method of revenue generation for the government through
taxation and is a tool for promoting job creation and entrepreneurship in many
local economies.
In addition, the tourism trade in Mozambique is uncompetitive when
compared to its main competitor, South Africa. Air travel to Mozambique is
expensive and the limited number of hotels and lodges predominantly cater for
the wealthier clients, which are reflected in their prices. Air travel within
Mozambique is limited to the government-owned LAM and Air Corridor, based
in Nampula. South African Airways also flies regularly to Maputo. It provides
little incentive to price competitively and promote the growth of the airline indus-
try to attract tourists. The average cost of a flight from Maputo to Pemba is
US$203. 4 Consequently, this potentially reduces the scope for tourists and also
the number of tourists that communities are able to access.
Human capital is recommended by PARPA as a key sector for advancement.
However, genuinely local, poor people are still mainly employed in tourism in low