Mozambique: Change is in the air
The extension of a cease-fire and progress made to secure investments in natural gas reserves in the country’s north give Mozambicans reason to hope
The extension of the cease-fire announced in January between the Mozambican armed forces and opposition guerrillas is holding — and a peace process appears imminent.
At the same time, progress on exploiting Mozambique’s gas reserves has helped dispel some of the gloom over the country’s debt crisis.
The change of mood has been embraced as a signal that Mozambique could return to high growth.
Despite the country ranking 180 out of 188 on the UN’s human development index, its economy was growing at 7%-8% of GDP by the mid-2010s through liberalisation.
In September 2015 Mozambique was declared free of land mines.
Meanwhile, the discovery in 2010 of offshore gas reserves — at 2.8 trillion-5 trillion m³, the biggest find in the world in a decade — promised the country an influx of US$100bn in investment. This, the International Monetary Fund (IMF) estimated, would make Mozambique the third-largest liquid natural gas (LNG) exporter within a decade.
But then it all exploded: a disputed election result in 2014 led to the Mozambique National Resistance (Renamo) taking up arms in the hinterland, despite occupying almost one-third of the seats in the national legislature. And three companies — Ematum, ProIndicus and MAM — defaulted on loans illicitly guaranteed by the Armando Guebuza government over 2013-2014. This added 20% to the country’s foreign debt and resulted in the IMF, World Bank and all Western donors and funding agencies suspending aid.
Mozambicans are concerned about the future. So even though conflict between Renamo and the ruling Mozambique Liberation Front (Frelimo) is not fuelled by gas fields bidding, relief greeted the extension of the cease-fire, which was negotiated in two phone calls between President Filipe Nyusi and Renamo leader Afonso Dhlakama.
The calls bypassed an international team of mediators led by EU representative Mario Raffaelli. Raffaelli said the team would return once invited by a joint commission set up by Frelimo and Renamo to iron out a peace deal.
Though that commission stopped work in December, on February 3 a working group was appointed to resolve the military impasse, and another to draft constitutional amendments and legislation on the decentralisation of power.
Maputo journalist Paul Fauvet says: "Everyone — Frelimo, Renamo and the second opposition party, the MDM — agrees the constitution should be amended. But neither Frelimo nor the MDM will accept Dhlakama simply appointing provincial governors in the provinces that he claims Renamo won in the 2014 general elections."
The silver lining is that the gas fields investment is steaming ahead
A constitutional amendment requires a two-thirds majority in parliament. Without Renamo, Frelimo and the MDM don’t
have the support to push through such an amendment.
"The simplest solution would be for the elected provincial assemblies to appoint the provincial governors," Fauvet says. That would mean Renamo would appoint governors in Sofala, Zambezia, Tete and, possibly, Nampula provinces, while Frelimo would appoint the governors of six other provinces.
Mozambique is scheduled to hold municipal elections next year and general elections in 2019, so there is pressure to amend the constitution before then.
Last year, Frelimo intellectual and former security minister Sérgio Vieira warned that the ruling party was in danger of losing the coming polls as it was "degenerating" while "a crowd of new crooks" looted the state.
The silver lining is that the gas fields investment is steaming ahead, with an $8.5bn refinery announced in December and production of about 3.4Mt/year over 25 years expected to start flowing from the Area 4 gas field in 2022.
According to Natural Gas World, South Korea’s Kogas last month green-lighted investment of $513m in a floating LNG rig over 2017-2022 and a guarantee of up to $640m of the facility’s debt.
Area 4 rights are divided at 10% each between Kogas, Portugal’s Galp, and Mozambique’s ENH, with 70% held by Eni East Africa, consisting of Italian operator Eni and China National Petroleum Corp.
Meanwhile, a second consortium led by US-based Anadarko is expected to announce its investment in Area 1 shortly.
The latest gas fields tenders, awarded to Royal Dutch Shell, Norway’s Yara International and London-registered GL Energy Africa, have been hailed for boldly excluding Frelimo old-guard bidders close to Nyusi.
Fauvet says he does not expect gas to distort the Mozambican economy as oil did in Angola: "Nyusi is well aware of the dangers of excessive reliance on hydrocarbons, and repeatedly stresses the need for further investment in areas such as agriculture and tourism. So I remain optimistic."