Mozambique: Economy On Upward Trajectory

Armando Guebuza Mozambique President
Armando Guebuza President of Mozambique

AFRICANGLOBE – There is now a clear opportunity to use Mozambique’s massive gas and coal wealth to fund a yawning infrastructure gap. This in turn will help bring development to the furthest reaches of the country. The government has created a new development bank and is taking a tougher line with multinational companies in order to reach its goals.

For all Mozambique’s explosive growth and impressive hydro-carbon discoveries, inequality remains stubborn.

“No Mozambican can feel proud to open their car door and see a hungry person looking for something to eat in the rubbish.”

The phrase carries all the weight of a former president of Brazil who successfully reduced poverty.

Luiz Inácio ‘Lula’ da Silva spoke to businesspeople on a tour of the country in late November organised by Graça Machel, the former wife of Mozambique’s liberation-era president, Samora Machel, himself a great friend of o povo (the people).

For writer Joseph Hanlon, this was a clear attack on President Armando Guebuza.

Graça Machel is part of a political camp within the ruling Frente de Libertação de Moçambique (Frelimo) party that has been pushing for more inclusive growth.

President Guebuza is unmoved. Speaking in Xai-Xai in November 2012, he said “only the lazy believe we cannot end poverty”, arguing that farmers and fisher- men need to work harder.

He will not be troubled by the voices of disgruntled insiders or hectoring outsiders, especially now that he has launched a development bank, the remodelled Banco Nacional de Investimento, eight years after donors stopped a previous incarnation.

A rise in popularity of the Movimento Democrático de Moçambique (MDM) may worry Guebuza more, especially if the Beira mayor and newly confirmed MDM flag bearer David Simango can articulate the inequality message beyond his Sofala power base.

The new development bank, based on Brazil’s Banco Nacional de Desenvolvimento Econômico e Social, is headed by former Bank of Mozambique governor Adriano Maleiane.

It goes hand in hand with other ‘strong government’ measures of recent times, from the unusual forcing of Anadarko and Eni to share infrastructure in January 2013, to the renegotiation of old ‘megaproject’ contracts like the Mozal aluminium smelter and Vale and Rio Tinto’s initial mining deals.

Mozambique’s Sustained Economic Boom

And foreigners seem to be putting their faith in Mozambique.

It may be apocryphal that Portuguese taxi drivers are plying routes in Mozambique’s capital to escape recession and poverty back home, but other more structured Portuguese economic interests certainly are in town, from Visabeira, a communications conglomerate, to Millennium BCP, which owns the largest bank.

The attractions are obvious. Mozambique is undergoing a sustained boom.

The International Monetary Fund (IMF) revised growth estimates for 2012 up- wards to 7.4 percent and agreed with the government’s predictions of 8.4 percent growth in 2013.

The country groans with coal, gas and agricultural potential, all situated across the Indian Ocean from resource-hungry Asian markets.

The energy revolution is most promising.

The government will auction off 12 new blocks in the first months of 2013 that are adjacent to the world-class finds uncovered in the Rovuma Basin by Italy’s Eni and US firm Anadarko.

Given the bruising fight to buy Cove Energy, which owned a small stake in a proven block, the government expects a lively and lucrative bidding round.

Companies estimate that a total of 130 trillion cubic feet (tcf) of gas reserves can be found beneath the waves, another figure that could be revised upwards.

Qatar’s reserves, by comparison, are around 900tcf.

Oil majors appear confident that reserves will be found elsewhere too. In a farm-in agreement with Malaysia’s Petronas in September 2012, France’s Total acquired shares in two blocks in the south of the Rovuma Basin.

Jacques Marraud des Grottes, Total’s senior vice-president for Africa, believes they “might equal the gas potential of the northern part”.

Meanwhile, the first shipments of coal from Vale’s mines in Tete Province left the new minerals terminal at Beira port bound for Asian markets in February 2012.

India’s Jindal Steel & Power expects its first coal exports of 1.3m tn to leave in January 2013 and plans to ramp up its exports to 10m tn per year by 2017.

The resource boom is attracting money into infrastructure, with countries from the BRICS grouping – Brazil, Russia, India, China and South Africa – doing the heavy lifting.

China-Mozambique trade in 2012 was more than $1.1bn.

There is scepticism, however, about how fast the infrastructure outlay can match export aspirations, something which contributed to the downfall of Rio Tinto CEO Tom Albanese.

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