Is Mozambique the next victim of “resource curse”?

A few years ago, Mozambique was viewed as the hope of East Africa in 2010; with the offshore discovery of one of the largest natural gas fields in the world. Today, does the country already present symptoms of the “resource curse”, or will her many resources be an effective tool of social and economic development?

An economic model based on resource extraction

After the civil war (1976-1992), the main infrastructures were largely destroyed. Mozambique lost its historical role as a maritime window through the southern hinterland to South Africa. But after a decade of economic stagnation, the catch-up process is remarkable: 9.1% average annual growth between 1992 and 2005. Ironically, the majority of Mozambican people did not benefit from this economic recovery process. In 2014, almost half of the population is still living below the poverty line, and only 21% have access to electricity.

Why such inequalities? Because most investments were concentrated in the capital and its corridor towards South Africa, thus aggravating the disparities between the centre and the north of the country.

For instance, in addition to the east-west railway axes serving neighbouring states, the government has not built a north-south railway needed to foster national economic integration.

The neo-liberal turnaround in the 1980s focused on the extraction of raw materials, with low knock-on effects on the rest of the economy. This extractive specialisation makes the Mozambican economic model particularly vulnerable to external shocks.

Another problem is that this economic strategy puts Mozambique under the influence of foreign powers. Indeed, the country is ideally situated to supply Asian economies – the only ones capable of absorbing the huge gas volumes offered by Mozambique. As a consequence, the debt to China represents 39% of the external debt of Mozambique as at the end of 2018.

Coupled with this, institutional weakness in Mozambique increases the risk of corruption, tax evasion and mismanagement of fiscal resources. According to a study led by the Centro de Integridade Pública (CIP), over the period 2005-2015, corruption was estimated to have resulted in a direct loss equivalent to 30% of the 2014 GDP. The CIP is a tripartite alliance between the state, the Mozambican economic elite and international groups. So, in the regions most affected by extractive activities, the private sector is replacing the state in the conduct of social policies. Yet, Mozambique cannot prosper without strong democratic institutions that guarantee the interests of the people.

Benefiting from the legitimacy of arms at independence, Frelimo embodies the nation, and this idea of a party-nation that constraints democratic progress in Mozambique. It is clear that the economic organisation of the country serves the interests of the political elite to the detriment of the most basic needs of the local population.

The example of Cabo Delgado: from hope to chaos

History will perhaps remember that the end of the paradise started on the 4th October 2017. With its turquoise waters and its sandy beaches, the province of Cabo Delgado, in the extreme north of Mozambique, has everything of a tourist paradise. Before 2017, luxury resorts and illegal real estate speculation were booming. The cities of Pemba and Palma were the most attractive in the country.

But more importantly, since the discovery of gigantic gas reserves in 2010, Cabo Delgado also became an Eldorado for oil and gas companies. The American company Anadarko Petroleum Corporation and the Italian company Eni discovered reserves of 4,200 billion cubic metres of natural gas in the Rovuma Basin. Once developed, this could make Mozambique one of the largest producers of liquefied natural gas in the world. The two main projects, Mozambique LNG (led by Total), and Rovuma LNG (led by Exxon Mobil and ENI), are expected to generate respectively 25 and 30 billion dollars of investment. A great opportunity to replenish the coffers of the state, emptied by a long civil war and a very bad management.

Thus, this province is promising and is expected to become the economic lung of Mozambique. There is no better place with more job opportunities and business prospects.

Nonetheless, the dream has not come true. In 2017, a group of jihadists attacked the city of Mocimba da Praia. At the beginning, the Mozambican state refused to get involved, arguing that it was an internal conflict within the Muslim community. But as can be expected, terrorists have taken control of a large part of the region. The paradise became hell and chaos. At least 210 000 people were displaced and 1000 killed since the beginning of the conflict.

How can we explain this radicalisation? Well, the Muslim minorities of the North felt left behind by the Christian majority. In the face of no prospects for their future, young graduates created an Islamic group (the Shabab). Indeed, Government operations to combat illegal deforestation, elephant poaching or to chase illegals from ruby mines have left thousands of young people destitute. What is more? in addition to this religious dynamics there are ethnic conflicts between the Mwani and Macua populations, on the one hand, and the Makonde, on the other, fueled by financial and power issues.

What is known as the largest industrial programme ever undertaken on the African continent has had a huge impact on the people of Palma. Some have lost their land or have had to abandon their activities. On the contrary, an ExxonMobil employee, leader of the Rovuma LNG project, says that procedures have been put in place “to avoid conflict with the communities”: “jobs are being offered by drawing lots. People also see the gas projects as an opportunity to raise their standard of living,” he believes. However, the deteriorating security situation linked to the Islamist insurgency limits contact between the local population and the multinationals.

For the time being, all may be well with the project. In December 2019, the French company Total signed an investment agreement of 14 milliard euros to exploit the gas in the region. The goal is to produce 13,12 million tonnes of liquefied natural gas per year in 2025.

Yet Environmental considerations are important, if tourism is to be exploited fully. The oil companies argue that the construction of road, airport and hotel infrastructures will encourage the development of tourism. If these are not designed well, however, such activities will increase carbon gas emissions and alter the environment.

The city’s bishop, Luiz Fernando Lisboa, warns us: “The gas has created enormous expectations, but the population is mostly illiterate and without technical qualifications. Their expectations are likely to turn into frustration, and thus violence”.

Let’s curb the trend!

We can say that in time, Mozambique will become the world’s fourth-biggest exporter of gas but right now it is fast becoming the most unequal society in sub-Saharan Africa.

Indeed, gas exploitation is a very capital-intensive activity, but it creates very few jobs. The education sector is still largely deficient, with a literacy rate of 56% for men and 43% for women. With shortage of qualified local people, it will be difficult to assure immediate benefits for the local population, particularly in terms of jobs. The risks of conflict and misunderstanding would remain.

Little by little, the feeling is growing in Cabo Delgado that “nationals”, who come mainly from Maputo, are privileged over “locals”. This is a very dangerous trend that can only continue to fuel jihadists maneuverings.

Countries with a weak institutional framework and low human capital are more exposed to the paradox of plenty. But there is still time to curb the trend. The Mozambican state could encourage foreign oils companies to the employ local population, as well as ensure the development of ecotourism. It is the a good way to avoid the resource curse, and allow a sustainable development for all.

Bibliography

Akwagyiram, Alexis (Published on 4 April 2013) “Will Mozambique end up like Nigeria or Norway?”, BBC News

Al Jazeera, Al (Published on 12 September 2020) “What is behind rebel attacks in Mozambique’s gas-rich region?”

Augé, Benjamin (2013) « Pétrole et gaz en Afrique de l’Est, la nouvelle frontière » in De Montbrial, Thierry, Les jeunes : vers l’explosion, Institut français des relations internationales – Ramses, pages 224 à 229

Augé, Benjamin (2014) « Le Mozambique, un futur géant gazier aux pieds d’argile » in De Montbrial, Thierry, Le défi des émergents, Institut français des relations internationales – Ramses, pages 124 à 127

Bensimon, Cyril (2019) « Le Mozambique, entre gaz et djihad », Le Monde (Publié le 15 novembre 2019, consulté le 18 septembre 2020)

Frenoux, Delphine (2018) « Mozambique : une économie de concessions », Afrique contemporaine, N° 266, pages 115 à 129

Hanlon, Joseph (Published on 1 June 2018) “How Mozambique’s smuggling barons nurtured jihadists”, BBC News

Harding, Andrew (Published on 4 May 2020) “Mozambique: Is Cabo Delgado the latest Islamic State outpost?”, BBC News

Mabunda, Lazaro (2020) “Cabo Delgado, le paradis devenu un enfer”, Expresso – Lisbonne

Morier-Genoud, Éric (2017) « Proto-guerre et négociations, le Mozambique en crise », Éditions Karthala – Politique africaine, N° 145, pages 153 à 175

pauline.engelsen

My name is Pauline Engelsen and I am from France. I am studying International Relations at Sciences Po Paris, and currently undertaking an exchange year at the London School of Economics and Political Science. I followed a specialization on Latin America, in particular on the links between this region and African countries. I am mostly interested by Portuguese-speaking and Swahili-speaking countries as I am currently learning those languages. Aware that Africa has huge potential and will play a key role on the global stage in the next decades, I am willing to deepen my knowledge on African issues.

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