Expansion of mining in Mozambique bringing benefits and concerns – by Keith Campbell (MiningWeekly.com – April 12, 2013)

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Mineral production in Mozambique should generate revenues of nearly 20.8-billion meticais (some $680-million, or R6.24-billion) during this year, a technical team from the International Monetary Fund (IMF) has forecast.

Mozambique’s income from mineral production last year was nearly 14.3-billion meticais (about $470-million, or R4.3-billion), while, in 2011, it was just under 5.1-billion meticais (some $170-million, or R1.5-billion).

In gross domestic product (GDP) terms, the minerals sector accounted for 1.4% of the country’s GDP in 2011, rising to 3.4% in 2012 and predicted by the IMF to reach 4.3% this year. The ramping up of coal exports this year, the execution of major infrastructure projects and the elimination of transport bottlenecks – particularly an increase in the capacity of the railways linking the inland coal-producing Tete region to the coast – should increase the country’s economic growth rate to 8.4% for this year.

International ratings agency Fitch Ratings has noted Mozambique as one of the primary commodity-producing African countries that has gained in importance in recent years (others being Angola, Uganda and Zambia). The country is one of 20 African States whose sovereign debt is now rated by the inter- national agencies (in 1994, South Africa was the only African country to have its debt rated). Being rated encourages foreign investment.

Mozambique is now the second-biggest recipient of foreign direct investment (FDI) in new businesses in Southern Africa, after South Africa, reported Fitch. Recently, Fitch Ratings upgraded its outlook on Mozambique sovereign debt from ‘stable’ to ‘positive’ as a result of prudent fiscal and monetary policies followed over the past ten years. The agency expects the country to grow even more rapidly in future owing to the exploration for and exploitation of its natural resources. Fitch’s rating of long-term Mozambique debt is B+ with a stable outlook, while short-term debt is rated at B.

The director of Mozambique’s Investment Promotion Centre, Lourenço Sambo, recently told Radio Mozambique that 43 countries had invested in the African state, with the biggest concentration being in the minerals and hydrocarbons sectors. “As is well known and in the public domain, Mozambique is in the world statistics in terms of gas and coal,” he said. “Now, our concern is not to talk about gas or coal, [but] how we can do the logistics of the resources which have been discovered and increase their value. At this moment, we are decentralising activities to the provinces because that is where the riches are located.” He also affirmed that FDI was continuing to grow significantly.

Radio Mozambique also cited an unnamed source as saying that the country had experienced significant growth in investment during the first quarter of this year, compared with corresponding periods of previous years. “We had much investment, with the major emphasis on the hydrocarbons sector,” affirmed the source.

In his interview, Sambo revealed that his main concern was the lack of growth in domestic Mozambique investment. This was currently insignificant. “National investment is, for us, the great challenge,” he asserted. “We have to find ways of creating genuinely Mozambican companies.”

The development of the Mozambique private sector is one of the concerns of the International Finance Corporation (IFC), which is part of the World Bank group. The IFC is the world’s biggest development agency, focused entirely on the private sector in developing countries.

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