Investment in coal industry leads to economic boom in Tete province, Mozambique

11 April 2011

London, United Kingdom, 11 April – Investment in the coal industry in Tete province, northwest Mozambique, is leading to other investments in the region, particularly in transport and infrastructure, resulting in an economic boom, according to the Economist Intelligence Unit (EIU).

“Investment in transport and other infrastructure in Tete is simultaneously the cause and effect of an economic boom in the region, which is the result of millions of dollars of investment in Mozambique’s emerging coal mining industry,” the EIU said in a recent report on the Mozambican economy.

Amongst the companies investing in coal in the region, particularly in the Moatize basin, is Brazil’s Vale, but also Australia’s Riversdale Mining and, more recently, Beacon Hill Resources.

The Tete corridor is an important logistics point for Mozambique and for the region, involving traffic destined for Malawi, Zimbabwe and Zambia, and investments underway are boosting its role as a platform.

“The air transport links in Tete are also improving, and since last year the area has had a direct service to South Africa,” the EIU noted.

In January, South Africa’s flagship airline increased the frequency of its flights to Tete by one flight a week.

Alongside this, the Ministry for Public Works and Housing announced construction of a new bridge on the Zambezi river in the city of Tete, which is due to begin being built this year.

With a cost of US$95 million, provided by the government and donors, the new bridge will be concluded within four years, reducing traffic on the only current bridge, which was built in colonial times.

It is mainly expected to be used by heavy goods vehicles, around 800 of which cross the existing bridge every day.

Also according to the EIU, the Beira-Tete railway line is due to see alterations, as it is used to transport goods from the regional hinterland to the port of Beira.

Port and rail management company, Companhia de Portos e Caminhos de Ferro de Moçambique (CFM) notified Indian concession-holder Ricon that it intended to cancel the concession contract if performance objectives were not met.

Engineering work to repair the line have been delayed by a year in relation to the initial schedule and, “the authorities are evidently preparing to rescind the contract as soon as possible,” said the EIU.

This is not the only contract that CFM is unhappy about, and it is interested in “regaining control of its assets,” by allowing other concessions granted to foreign companies to expire.

Investments and expansion plans for coal production in the region mean that coal exports are expected to total 85 million tons per year until the end of the decade, which is far above the line’s current capacity, leading the government and the companies to study alternative forms of transport.

Investment in the mining industry and in “mega infrastructure projects” is behind Mozambique’s strong economic growth, which is expected to reach 7.4 percent, on average, in 2011 and 2012, according to the EIU’s calculations.

“Output from industry is expected to rise briskly on the back of strong inflows from foreign investment into the minerals sector, particularly to develop coal reserves,” said the report.

An important contribution is also expected from the agricultural sector thanks to a rise in food and cash crop production, and the government’s national plan for the sector. (macauhub)