Mozambique’s 40th anniversary is a watershed. By the time the country celebrates its 50th, it should be a major liquefied natural gas (LNG) exporter – possibly the seventh-largest in the world. Having lived in Mozambique in the mid-1980s as its civil war reached the capital, Maputo, I am amazed at some of the progress I’ve witnessed. In 1985 there were food rations, hardly any traffic on the streets of Maputo and plenty of unfinished buildings, left by the Portuguese at independence in 1975. Today, parts of Maputo are a building site, the streets are full of traffic and, if you have money, there is plenty of food.
Moving forward though, Mozambique’s leaders will need to think deeply about how to ensure more inclusive growth. There are populated provinces in the centre and the north of the country such as Sofala, Zambézia and Nampula that remain dirt poor – and I suspect that new poverty indicators will confirm they are not improving. Mozambique’s new president, Filipe Nyusi, will need to find strategies to iron out such extreme wealth disparities − it is not by coincidence that it is in these provinces that the main opposition RENAMO (the former rebels) and the smaller Democratic Movement of Mozambique (MDM) are particularly strong. Inequality grows opposition and Nyusi’s FRELIMO party has governed Mozambique since independence.
Inequality and a sense that FRELIMO only rewards its own have contributed to the polarization of national politics over the last decade. The discovery of world class gas reserves in northern Mozambique has also made opposition politicians increasingly anxious to ensure that they are not cut out of the action. The return to targeted armed conflict between RENAMO and the government in April 2013 (after over 20 years of peace) was partly about this. Sadly, despite a new peace agreement in September 2014, several armed clashes have occurred this year, including one in Tete province in June, resulting in dead and injured.
RENAMO does not have the capacity to return Mozambique to national conflict, but it has proven its ability to disrupt and also worry international investors. After the 40th anniversary celebrations are over, Nyusi will need to meet Afonso Dhlakama, the RENAMO leader, for a tete-a-tete. This should not be rushed but prepared for, with tangible, measurable outcomes. Demands from RENAMO and MDM for greater political decentralization have some merit, and in part build upon decade-old government proposals. A serious inclusive cross-party process could help reduce political tension and address some of the inequalities that have fuelled this crisis.
Underpinning all of this is trust. FRELIMO has over the last decade lost significant swathes of support as the 2014 legislative elections and the 2013 municipal elections showed. A lesson is that credible institutions and checks and balances to executive power are needed. The detail of some really poor executive decisions that occurred under former president Armando Guebuza is beginning to show. When I was in Maputo last week I watched the debate in the Assembly of the Republic, Mozambique’s parliament, over the Mozambican Tuna Company (EMATUM). This was set up in 2013 through two sales of bonds worth in total $850 million (repayable over seven years at LIBOR plus 6.5 per cent with a two-year grace period) – initially via Credit Suisse and BNP Paribas and then a second bond issue managed by Russian Bank VBL Capital, both fully guaranteed by the Mozambican government. In return Mozambique would purchase 30 vessels from France (some for commercial fishing and some for coastal security and fisheries protection).
The problem is that EMATUM is running a heavy loss and the government has found itself in a credit crunch. The 2014 EMATUM accounts showed a loss of some $24 million and the minister of finance on 18 June confirmed to parliament that he was seeking to restructure the loans for a longer repayment period and at a lower interest rate.
This was Mozambique’s first foray into the international bond market. International banks and lenders have now raised their risk ratings for Mozambique and have no appetite to be further involved with these bonds. Some would have preferred that the new government cancel the project and start again because of suspected impropriety. Cleaning up EMATUM is vital for Mozambique to regain confidence in the international finance markets and also to show nationally that the Nyusi administration is professional and amenable to learn from past mistakes.
EMATUM is a warning for Mozambique. Much bigger decisions are due in 2015 about Mozambique’s future LNG industry. Clear, transparent and accountable processes are needed to show that these decisions are in the national interest. Currently there is suspicion that a handful of key FRELIMO politicians are positioning themselves to carve out contracts. Since his presidential inauguration in January 2015, Nyusi has signalled an interest in new, more inclusive politics, initially by appointing a credible technocratic government and then through a new budget attempting to get a grip on costs, especially extra-budgetary expenditures. As he becomes more experienced, he will need to show leadership through inclusive politics.
Mozambique’s policy-makers have to select and undertake an unambiguous set of measures that balance the short-term needs of commercially competitive industries – which can provide a strong return for the government – with the social needs, the constitutional rights and expectations of the country’s citizens. Expectations of resource rents run high − managing such expectations while shifting authority to the provinces is new political territory for FRELIMO and will require inclusive politics. Big decisions need to be made over the next five years and experience shows that – in general – good things happen slowly, while bad things can happen very fast.
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