Internal strife threatens investment in Mozambique's economy

The vast Rovuma field off the country's coast has 100 trillion cubic feet of gas

Until recently, northern Mozambique was Africa's most valuable real estate, home to a nearly $100-billion pipeline of foreign investments. An extremist uprising now threatens the lives – and livelihoods – of Mozambicans unless it is quickly quelled.

Mozambique is bestowed with a large amount of natural resource wealth – almost $1 trillion, according to the US Geological Survey. Much of this is in the northern province of Cabo Delgado, which is home to the world’s biggest ruby mine and the largest graphite deposits outside China. Graphite is a crucial element in modern lithium-based batteries.

It also has gas – the vast Rovuma field off the coast holds an estimated 100 trillion cubic feet, making it one of the largest deposits in the world. Unfortunately, there is little sign so far that much of this is making its way to the communities living in the area.

“Some people in Cabo Delgado felt they were losing out so badly, they had to go to war to fight this,” says Joseph Hanlon, a Mozambique expert and professor of social sciences at the Open University in the UK. The unrest has been simmering for several years throughout rural areas of the province, but was largely ignored by the government and by companies operating in the area.

In March, militants launched a surprise attack on Palma, a town on the north-east coast near the border with Tanzania, killing dozens and forcing nearby engineering and construction work to a halt.

Quote
It’s a classic resource curse, where only the elite benefit and everyone else doesn’t
Joseph Hanlon, professor of social sciences, Open University

In April, French energy group TotalEnergies declared force majeure on its $20bn liquefied natural gas (LNG) project in Mozambique and confirmed it had withdrawn all staff from the construction site following the insurgent attacks.

The region, which is majority Muslim, had been ignored by the ruling Frelimo party since independence from their colonial power Portugal in 1975, Prof Hanlon says. The recent resource bonanza has only made the situation worse, as senior government officials in the far-removed capital of Maputo scramble to secure most of the spoils.

“It’s a classic resource curse, where only the elite benefit and everyone else doesn’t,” Prof Hanlon says.

Mozambique's military has been completely helpless in the face of the threat. Private military contractors have fared little better in the dense bush that served so well for former guerrillas fighting colonial powers in the region.

Fearful of the contagion spreading, other countries, including neighbouring South Africa, have agreed to help; by mid-July Pretoria will have sent a contingent of troops to battle the insurgents.

“South Africa has no choice,” says Ekos Akpokabayen, the Johannesburg-based chief investment officer of Ovid Capita. The country has learnt that unstable neighbours could lead to mass waves of refugees. “We’ve seen in the past what happened in Zimbabwe and the economic costs to South Africa.”

Already, more than 700,000 people have been displaced in Cabo Delgado. Should the insurgency spread to the rest of the country, and even over its borders, the humanitarian disaster it would cause could overwhelm South Africa’s ability to cope.

“It can spiral out of control. If it spreads to other provinces, it could lead to a flood of refugees to South Africa,” says Mr Akpokabayen. “So, it is up to South Africa to be the big brother and intervene.”

Solving the crisis is urgent, for the region and for Mozambique itself. The country is one of the poorest on earth. Around 60 per cent of its people live in extreme poverty, a number that is steadily increasing. It now sits 181st on the UN's development index of 187 countries.

Cabo Delgado and its wealth of resources were supposed to help bring the country forward. Just this week, Gemfields, majority owner of the world’s largest ruby mine at Montepuez in Cabo Delgado, said it experienced “robust sales” as it emerged from Covid-related shutdowns.

“The company expects revenue to be in the region of $95m for the six months ending 30 June 2021,” Gemfields said.

Meanwhile, some analysts warn of the “Iraqification” of the region, as foreign intervention gains momentum. Conflict analyst Justine Oppermann warns that already there are indications that French, US, Russian and Chinese operatives are on the ground in Mozambique.

“The same thing happened with Iraq,” she says. “There’s a lot at stake in Cabo Delgado and it’s drawing a lot of attention. But if we think all these players are here for our benefit, we are in for a big surprise.”

Updated: July 23rd 2021, 7:10 AM
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