Energy and Trans-African railway brighten up Mozambique’s post-crisis prospects

16 November 2009

Maputo, Mozambique, 16 Nov – Energy projects and a Trans-African rail link centered on the Port of Nacala enhance prospects for Mozambique to emerge from the current crisis, which has halved the pace of its economic growth.

Paulo Zucula, Maputo’s minister for transport and communications, said recently that the Cairo-Cape Town railway project, inspired by the New Partnership for African Development (NEPAD), envisages that one strategic hub will be the port of Nacala in Mozambique’s northern province of Nampula.

Under initial routing plans for the railway, Nacala will be connected to Malawi, Tanzania, Zambia, the Democratic Republic of Congo and the rest of the continent.

The minister, speaking to daily newspaper Correio da Manha, said Mozambique has already made its contribution in terms of infrastructures. “Some sections of track operated by Caminhos de Ferro de Moçambique across the country just need to be rebuilt.”

The Trans-African railway also involves the African Union (AU) and Southern African Development Community (SADC) and is valued at US$ 1.2 billion. International financial institutions have already pledged funding, said Zucula.

The Trans-African rail link will allow the Mozambican authorities to counteract the trend for falling foreign investment in the country, which is set to continue until at least the end of 2009, according to a recent report from the International Bank for Reconstruction and Development (IBRD) – part of the World Bank group.

Despite the cutting of investment due to the effects of crisis in neighboring South Africa and European Union states, the minister said his country “has easy access to external financing that will ensure sustainability of its debt in the current international climate characterized by lack of liquidity.”

“Mozambique is considered as one of the most successful examples of post-conflict transition, attracting sustained donor support” and, thanks to stability achieved, more countries are interested in joining the present group of 19 cooperation countries and organizations.

International consultancy Frost & Sullivan identifies another important source of investment as revenues from export of energy over the coming years. Mozambique’s energy earnings will increase from about US$ 202 million in 2008 to nearly US$ 455.5 million in 2015, the consultancy said in a report.

Continuing consumption increases in neighboring states, particularly South Africa, could mean Mozambique comes to sell more than 9,000 MW. National energy demand is on the rise too with large-scale industrial projects in the pipeline, development of agro-industry and the government’s program of rural electrification.

Mozambique’s energy demand will grow nearly 11 percent in the coming six years and the authorities are working in earnest to attract investments for projects like the new Cahora Bassa power station and the new Mpanda Nkua hydroelectric dam, the minister noted.

Following a period with economic growth of around 8 percent, Mozambique’s economy is forecast to expand this year by 4.5 percent. GDP will grow by 5.5 percent in 2010 and 6 percent in the medium term, according to the International Monetary Fund.

“Softening of monetary policy created space for strong growth of credit in the private sector permitting national firms to replace rarified foreign investment with more recourse to the domestic banking system,” said the IMF report released at the end of September after an evaluation mission visited Mozambique.

“Mozambique’s strong foundations and conjugation of prudent macroeconomic polices in the past decade ensure the necessary flexibility to respond to the global economic crisis,” added the IMF. (macauhub)