On the Cusp of Transformation – All the chips in place for a Moza Miracle
Recent discoveries of gas, coal and the potential for oil, combined with a burgeoning affluent urban class, are adding lustre to Mozambique’s dramatic economic transformation, economic analysts at Standard Bank Group say.
Mozambique’s economic growth has averaged eight percent year-on-year over the past decade, and between 2012 and 2017 growth is expected to be maintained at – on average – around 7.5 percent.
The Standard Bank report comes as Maputo has invited aviation operators to invest in the country’s liberalised air transport sector as Mozambique seeks to tap into the opportunities offered by the oil and gas discoveries.
Huge investor interest in the coal and gas sector is underpinning a structural improvement in Mozambique’s external sector, growing and diversifying export revenues, while attracting considerable amounts of FDI.
This is the view of Standard Bank analysts Yvette Babb and Simon Freemantle in a market insight and strategy paper titled, “Mozambique: On the cusp of a dramatic transformation.”
Mozambique’s GDP will improve marginally to 7.4 percent in 2012 from 7.3 percent in 2011, making it the tenth fastest growing economy in Africa and 18th in the world.
FDI inflows are expected to top US$2.5 billion in 2012 and could reach as much as US$4b by 2018. Capital expenditure by coal miners could reach US$1.5b in 2012 and US$600 million in the gas sector, though this may not necessarily translate into FDI.
Mozambique is expected to export 30 million tonnes of coal by 2016 and close to 60 million tonnes by 2019. In 2015, Standard Bank analysts estimate, Mozambique’s value of exported coal could reach US$750m.
Mozambique’s economy currently exports goods worth around US$3b annually.
A liquefied natural gas plant to be built between 2013 and 2018 is expected to significantly boost Mozambique’s investment profile; while new gas discoveries in the Rovuma Basin by Italy’s Eni and Anadarko, a US firm, will spur exploration and planned projects.
Domestic growth is buoyed by a growing and youthful population, currently at 23 million, which ushers in a viable and robust consumer base and a demographic dividend-implying growth in the country’s workforce.
By 2030, nearly 14 million Mozambicans are expected to be urbanites, and within the next 40 years nearly 18 million will either be born in or migrate to urban centres.
Babb and Freemantle say rapid urbanisation and swelling of cities and towns with young Mozambicans have the potential to be powerful enablers of economic transformation in the country.
“Principally, urbanisation provides the benefits of agglomeration and economies of scale, brings inhabitants closer to a range of services, inspires infrastructure investment, and urges for the development of more viable civil societies,” the analysts say.
“There is also a mutually-reinforcing relationship between urban and rural prosperity-urban centres, for instance, provide markets for agricultural goods from small scale farmers, and urban based family members remit money to rural families.”
Mozambique’s agricultural sector is also expected to provide profound support to the country’s economic growth with a variety of government and private sector initiatives currently underway expected to boost job creation and food security.
The aviation sector is not being neglected either.
Transport Minister Paulo Zucula recently said, “I have heard that we need to liberalise our airspace so that more foreign companies can operate, but you should know that the airspace is already free. Come and invest. Come and fly.
“I would like to take this opportunity to encourage all Mozambican air companies to participate actively in the development of the national economy, and of tourism in particular.”
At present, 13 air companies are certified by the national civil aviation authorities.
But apart from the flagship Mozambique Airlines (LAM), only Kaya Airlines, a subsidiary of British Airways, has operated regular domestic passenger flights on routes linking the capital Maputo with Beira, Vilanculo, Tete and Nampula.
Other carriers offer charter services, mainly for tourists and crop-spraying/dusting.
LAM has scheduled flights to Angola, South Africa, Tanzania and Zimbabwe. This means Mozambique’s national carrier does not have direct links to most of the SADC region.
Minister Zucula said he wanted new operators to service the entire Southern African region with at least one flight per week to each SADC member state.
“We also want to consolidate the routes to all (local) provincial capitals, as well as to districts of economic, political and social importance,” he added.
However, the private sector complains that there is too much red tape in acquiring an aviation license.
The Confederation of Mozambican Business Associations (CTA) has said the cumbersome licensing procedures make it prohibitive for new air companies to enter the frame.
Would-be air transport operators need clearance from both the Mozambique Civil Aviation Institute (IACM) and the Ministry of Defence.
In a document presented to government recently on the state of the aviation sector, the CTA says, “The current performance of the IACM remains below the expectations of national and international air companies.
“This is because the people in management positions are not fit to head the institution.”
· Reporting by Felix Njini in Windhoek and Charles Mangwiro in Maputo