Mozambique’s energy and agricultural potential fought over by new emerging economic powers

25 April 2011

Macau, China, 25 April – Mozambique’s potential for production of coal, biofuel and agricultural products is being fought over by the new emerging economic powers in search of natural resources on a global scale, such as China, India and Brazil, says researcher Loro Horta.

“The expansion of the mining industries and crescendo of foreign investments has the potential to bring significant benefits, but also new challenges to the country,” said Horta in a recent article in Yale Global magazine.

Traditionally dependent on traditional agriculture and, mainly, exports of cashews, sugar, cotton and tea, Mozambique’s economy has benefitted from growth of the mining sector, and increasing contributions from natural gas, coal and aluminium, are expected.

The energy sector has benefitted most from foreign investment and the African Development Bank (ADB) expects that in 2020 Mozambique will be Africa’s second-largest coal exporter, with annual sales of close to 110 million tons.

The coal reserves are estimated at 10 billion tons, “feeding the interest of China, India and Brazil, all anxious to secure new energy resources to drive their rapid economic growth.”

The biggest individual investment by China in Mozambique is a US$1 billion coal mining project by Wuhan Iron and Steel, which is also close to the amount that India has pledged to invest in the sector and that Brazil’s Vale has invested in mines in the provinces of Tete and Zambézia.

Other resources that are plentiful in Mozambique include titanium, natural gas and tantalum, as well as precious gems such as emeralds, rubies and sapphires in the provinces of Niassa and Cabo Delgado.

The land is also fertile and whilst Brazilian companies are interested in biofuel production, China is interested in agricultural production.

According to the Shanghai Chamber of Commerce, the government of Maputo has offered land for rental to Chinese companies at US$8 per hectare.

“With ports and security driving trade, China has become Mozambique’s second-largest trading partner,” noted Horta, who was born in Mozambique and is a graduate of the University of the People’s National Army and the Central School of China’s Trade Ministry.

Trade between the two countries more than tripled between 2007 and 2010, from US$208 million to US$690 million.

The Export-Import Bank of China has provided the Mozambican government with over US$2 billion for construction of a large dam and Chinese companies have been building road, bridges, military facilities, hospitals and other facilities across the country.

The government sponsored the modernisation of the main airport, construction of the National Stadium, which was inaugurated last Saturday, as well as Mozambique’s largest convention centre.

However, interest in the country is also strategic as the Mozambican Channel is an important alternative route to the Suez Canal.

The country also offers the closest sea link to Zambia and Zimbabwe, which are home to two of the five Chinese special economic areas in Africa.

In January of this year, the Mozambican press reported that Chinese shipping companies were negotiating with the Mozambican government for the modernisation and expansion of the port of Beira, which “could become another ‘pearl’ in China’s ‘necklace'” of a group of important ports on the Indian Ocean.

According to Horta, the Mozambican government has been doing, “a sophisticated balancing act,” in relation to the different national interests at play.

“However, with the country’s growing mining sector, its biofuel potential and discoveries of oil, this balancing act will probably become more complex,” the researcher said. (macauhub)