Mozambique's vast hydro-power project could create a regional energy hub
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Loading... - Addae Kwei
- 22 Aug 2022
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Mozambique is a scenic country in southeastern Africa and its capital, Maputo, is the commercial and cultural centre. The country is rich in natural resources, is biologically and culturally diverse, it has a tropical climate, and its beautiful beaches are an important attraction for its growing tourism industry.
Its extensive coastline offers some of Africa’s best natural harbours, which has enabled Mozambique to play an important role in the maritime economy. Furthermore, the Zambezi River and the country’s hydroelectric dam network including the Cahora Basa Dam and the Kariba dam provide ample water for irrigation and the basis for hydroelectric power.
Opportunities abound
Mozambique’s greatest opportunity lies in the exploitation of the country’s diverse resources, says Thera Dai, lawyer at CGA & Associados in Maputo, and a member of the LEX Africa legal alliance.
“This fact stimulates the appearance of new market segments not yet explored in the local market. There are great possibilities for business success in transport and logistics, energy, information and communication technologies (ICT), capital markets, agribusiness, banking, insurance and textiles,” she says.
With the exploration of these resources, the country can make a qualitative and quantitative leap forward towards development, says Dai. “Obviously, linked to this factor, is the correct management of resources, which necessarily implies a fierce fight against corruption, which has proven to be one of the biggest factors holding back development in African countries.”
Major challenges
Mozambique’s main challenges include maintaining macroeconomic stability, considering exposure to commodity price fluctuations and making further efforts to reestablish confidence through improved economic governance and increased transparency, says Dai. Moreover, structural reforms are needed to support the struggling private sector.
“That, and diversifying the economy away from its focus on capital-intensive projects and low-productivity subsistence agriculture, while strengthening the key drivers of inclusion, such as improved quality of education and health service delivery, could in turn improve social indicators,” she says.
“Another of the country’s greatest challenge is to stop the escalating conflict in the north of Mozambique, specifically in Cabo Delgado. This caused oil and gas exploration operations to come to a standstill.”
She says, in terms of monetary policy, the central bank is making an effort to contain the inflation rate, which is influenced by factors such as pressure on fuel prices, and reduction in the supply of cereals and fertiliser. “To that effect, measures have been taken to improve the internal production in order to minimise the external dependence.”
Economic outlook
The Mozambican economy is going through an economic recession, firstly because of weak public investment due to the withdrawal of approximately half of the state budget support. This and the discovery of undeclared debts pressured the domestic market, says Dai.
On the one hand the state is using all possible mechanisms to increase domestic revenue to meet public expenditure, leaving aside public investment, which is a great source of motivation and boost to the Mozambican economy.
On the other hand, the state, which is the biggest client of Mozambican companies, has ceased to pay its suppliers’ invoices, with delays of up to three years in some sectors.
To make matters worse, the COVID-19 pandemic left a large part of the Mozambican business sector in great difficulties, says Dai. “This in turn impacted families who have seen their incomes decrease by 75%, thus reducing the purchasing capacity of the population.”
She says Mozambique is a major exporter of electricity, “and the countries in the region are facing energy challenges, so the construction of new dams is clearly an option for economic growth.”
The Ministry of Mineral Resource and Energy (MIREME), through the Mphanda Nkuwa Hydroelectric Project Implementation Office, is developing a 1,500-megawatt hydro-power project and associated transmission facilities, says Dai.
Once completed, the project is expected to supply power to meet the growing domestic demand in Mozambique and transform the country into a regional energy hub.
“The rest of the project’s output is expected to be exported to neighbouring countries, including South Africa, where demand for clean energy is high. The project will also accelerate the transition to clean energy to combat climate change in Southern Africa,” says Dai.
The estimated US$4.5 billion project will comprise a dam, a power station, and a high voltage transmission infrastructure of 1,300 km from the project site in Tete Province to Maputo, Mozambique’s capital.
Mozambique is also an important logistic pole for the flow of goods from the countries of the hinterland. Read More...
