The natural resource T-junction in Mozambique

By Antonio Macheve Junior

Since the beginning of the current decade, Mozambique has and continues to be a key destination for foreign direct investment. The government and international companies involved in the prospection of hydrocarbons have made several announcements of significant discoveries of natural gas in the Rovuma Basin. A South African Institute of International Affairs article informs that the country possesses more than 100 trillion cubic feet of natural gas. In addition to natural gas discoveries, the Moatize Coal Reserve in Mozambique’s northern province of Tete is believed to be the largest reserve of unexplored coal in the world.

These discoveries position Mozambique as a resource-rich country. In the broader African context, resource wealth has been proven to be a source of fortune or great misfortune for national economies and the population at large. Two examples of resource-cursed countries are The Congo (Brazzaville) and Sierra Leone where oil and diamonds respectively were used to purchase arms and fund wars leading to the decimation of ordinary individuals.

In contrast, it is widely known that Botswana is considered a success story in what regards the usage of export revenues from the diamond industry to foster rural development, urbanise and improve the national economy. A noteworthy programme in Botswana is the Accelerated Rural Development Programme where the state invests monies coming from the extractive industry into schools, clinics, credit extension, roads and water facilities.

Where is Mozambique standing today?

The country is currently at a T-junction. It can either turn left or do the right thing. It is reasonable to say that in spite of its infant stage, Mozambique’s extractive industry can be weighed in terms of positives and negatives. Some of the following factors can help one make an interpretation of whether Mozambique is turning left or doing the right thing.

Mozambique is presently one of the top destinations of foreign direct investment (FDI) in the world. This is mainly attributed to its developing extractive industry, which attracts international investors and other fortune-seekers. An administrator from the Central Bank has recently affirmed that FDI grew by 40% this year. Furthermore, Mozambique’s GDP is currently growing at 7.2% annually. In the mining district of Moatize, investments in the Coal Mining Project are creating jobs for local communities. In fact, a part of the local population in Moatize works in construction projects and other low-skilled laboured jobs linked with mining operations in the district. In addition, the presence of Vale and Rio Tinto in Moatize offers a great opportunity for the involvement of local small and medium enterprises in the provision of goods and services to the multinationals. This can create jobs and support local entrepreneurs. The 2009 Industrial Development Report highlights that a resource-based economy should generate large revenues giving governments the ability to invest in its development programmes and in the enhancement of the country’s public services. Therefore, this shows that if well-managed, the extractive industry can improve the lives of ordinary Mozambicans. A report titled “Mining Versus the Communities by the Southern African Resource Watch”, which focuses on the two relocated communities surrounding the extractive projects, points out that if the companies are properly taxed and the state uses revenues to invest in the surrounding communities and the country at large, then Mozambique can escape the aid trap.

Although the extractive industry and macroeconomic growth numbers look promising, Carlos Nuno Castel-Branco, a well-known academic in Mozambique asserts that the mega-projects, large-scale capital-intensive projects such as the coal mining projects by Vale and Rio Tinto, will not benefit the Mozambican economy. Castel-Branco defends this claim by asserting that Mozambique does not have ownership or control over the projects. What’s more, a paper on this issue by Rogerio Ossemane reports that official data for two companies that are already exporting show that out of every $1000 of exports, $946 remains with the companies and only $54 was paid to the state by these companies.

At the communal level, Cateme community members, a rural community relocated by Vale to make room for mining operations, complain that they were taken away from an area near the Revobué River, where crops were irrigated naturally given the proximity to the river. Additional complaints from the resettled community in the new location include infertile land, poor housing conditions and a lack of water to bathe, wash clothes and to farm, their primary source of food and income. The population has blocked the Sena railway to protest against their poor living conditions created by the relocation by the multinationals. Many of the protesters were brutally battered by the Mozambican equivalent of Swat teams.

The country is growing and it is being administered several vaccines of investments in many forms. Some believe that these investments will not benefit the economy in the long term and others believe it will. Current events and reports show that the projects in Moatize are employing the population in the surrounding communities, but there is also evidence that the resettled communities may have lived better lives before the extractive projects.

I invite you all to consider the points I have presented and perhaps dig a little deeper in the vast, already existing literature on the extractive industry in Mozambique to make your own judgment on the turn the country is taking in this T-Junction, left or right?

Antonio Macheve Junior is from Maputo, Mozambique. He is a 2013 Mandela Rhodes Scholar and is currently pursuing a master’s of philosophy in development studies at the University of Cape Town.