Mozambique’s newly found wealth could trigger social unrest, activist warns

Maputo – Former first lady-cum-human rights campaigner, Graça Machel, has warned that Mozambique’s newly found mineral wealth could potentially lead to conflict if it does not filter down to the majority of the poverty-stricken in the country.
The southern African state is fast rising from being one of the world's most impoverished nations to one of the fastest growing economies, thanks to the recently discovered vast quantities of natural gas and coal reserves.
“This is a source of political upheaval and can lead to tensions that will be extremely difficult to manage,” said Mozambique’s former first lady, Machel, who is now wife of South Africa's former President Nelson Mandela.
Machel was addressing delegates in Maputo at an African Development Bank meeting that was discussing ways to better manage hydrocarbon resources. Most of the 23.4 million Mozambicans still live on as little as $1 a day, according to the World Bank and the United Nations data.
Five years ago, Machel said Mozambique was considered “the poorest of the poor”.
“Suddenly we moved from the poorest of the poor to become potentially the third producer of gas in the world and the outlook of the country changed completely overnight.”
Mozambique has recently discovered a huge reserve of gas of as much as 100 trillion cubic feet, making it a major energy player and offering hope of prosperity.
Global mining giants, Brazil’s Vale and Anglo-Australian Rio Tinto are pouring in billions of dollars to tap the unexplored natural resources.
If the wealth is not fairly distributed, “we are sowing seeds not even of suspicion, we are already sowing the seeds of hate,” Machel warned.
The bulk of the natural gas deposits are found in the northern Rovuma basin, off the country's poorest Cabo Delgado province.
“You also see one province which is the poorest of the poor seeing itself as the richest,” she said.
Machel said she believed there was a high potential for social tension, especially among youths because they have been excluded from national debates on handling natural resources.
“It will not be long before we begin to see people marching on streets of Maputo. It is simple – they are hungry,” she warned.
In the port capital Maputo, glitzy offices, boutique hotels and fancy restaurants are popping up alongside crumbling colonial buildings, nourished by multi-billion-dollar investment in coal and gas deposits to the north.
Expectations run high as miners with a stronger financial muscle such as Brazil's Vale and Rio Tinto and oil majors US-listed Anadarko Petroleum and Italy's Eni compete for a share.
Vale has invested more than US$2 billion in its Moatize coal mine in northwest Tete province, and plans to plough another US$6.4b into a region wrecked by the 1977-1992 civil wars.
South African petrochemicals group Sasol and its partners have spent around US$1.5b to produce gas from their onshore Pande/Temane fields since 2004.
Large offshore gas finds in the last year have triggered forecasts of capital inflows of US$50b over the next decade – five times Mozambique's Gross Domestic Product and more is expected to be spent rebuilding railways, roads and ports.
Yet life for average Mozambicans, whose annual per capita income is just over US$400, has yet to improve and some fear that the growing disparity between the rich and the poor triggers social upheavals.
Mozambique's economy has been growing at an average 7 percent per year, inflation is at record lows and the local currency, metical, rose most against the dollar last year compared with other currencies.
Those running businesses in Maputo, around the coal fields and along the coast where gas has been found are reaping the benefits of new investment – but there are consequences.
Much of the country is a sprawl of villages connected by dirt roads and tracks, and output yields from farming, the livelihood of two thirds of the population, are stagnating.
World Bank officials fear the country may succumb to the “resource curse” that has blighted many African states, or the “Dutch disease” that hit the Netherlands in the 1960s, when the gas sector grew rapidly to the detriment of other industries.
One big problem is the lack of skills needed to develop the mining, gas and support industries. Curricula at universities and colleges are changing, but courses are in their infancy and it will be many years before a new generation of graduates with the right technical skills hits the job market.
In the meantime, an influx of migrants, both qualified and unqualified – from other African countries and financial crisis-hit Europe, especially Portugal, has made it harder for locals to find jobs.
Shantytowns are expanding and becoming overcrowded as locals flee Maputo's city centre, where they can no longer afford to pay rents that have more than doubled in the last two years, estate agents says.
Many car owners are forced to park their vehicles because fuel is too expensive, malnutrition is widespread and health services are as sporadic as supplies of water and electricity.
The government has since raised subsidies for essential items, but the risk of unrest persists, especially as the ruling Frelimo party moves towards elections in 2014, analysts said.
To lure investors following the end civil war, the government granted huge tax breaks to foreign firms, which means state revenues from the investment splurge are very low.
In 2009, revenues from the minerals sector accounted for only around $40 million, or just over 2 percent of total government receipts, according to the Extractive Industries Transparency Initiative, an anti-corruption watchdog.
The government has been under pressure to revisit the deals, but fears scaring investors, and even if it did, increases in revenue would be slow to materialise given that mining has yet to start at many coal projects and gas production from offshore fields is at least six years away.


March 2013
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