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Nasdaq: A Glimmer of Hope For Mozambique

The hope of a bright economic future for the former Portuguese colony of Mozambique has been pinned on Finance Minister Adriano Maleiane, who took up his position in January 2015. Now a year later, it appears, according to Global Risks Insight, to have been the right choice by President Filipe Nyusi.

Mozambique received its independence from Portugal in 1975. Through the transition, all the professional Portuguese left, and the country was plunged into a series of civil wars that left it a total disaster. The socialist party FRELIMO, which had fought a guerilla war against the Portuguese, took power; but due to their social policies, which included nationalizing everything that wasn’t nailed down, the country remained mired in ineffectual management of the economy.

A counter insurgency group emerged. Funded by capitalist nations including the U.S., RENAMO fought a costly civil war against the government, and in 1992 signed a peace accord.  However, underlying tensions between the two parties remain, which occasionally erupt into violence. The most recent occurred after the elections in 2014, when RENAMO alleged that the voting had been fixed.

As stated by The Washington Post, “Afonso Dhlakama, the president of the rebel-group-turned-opposition-party Renamo, has vowed to seize control of six northern provinces. Dhlakama’s success in winning the majority of votes in five of these provinces and documented irregularities in the 2014 presidential elections have encouraged the Renamo leader to take what he thinks is his.”

Recently the Security General of RENAMO was shot and his bodyguard killed, so peace is precarious; but, the future does look bright under the leadership of the finance minister. When he was originally named to the job, there was a great deal of consternation because of his close ties to the socialist government.

However, as Global Risk Insight makes clear, these fears have proved to be groundless. In the year since he took control, Mr. Maleiane has successfully steered the economy away from the ill-advised policies of the previous government, which had caused the country to be downgraded by Standard & Poor’s.

Besides implementing tax reforms, Mr. Maleiane has been helped by the discovery off the coast of one of the largest deposits of natural gas in the world, reputed to be in excess of a trillion cubic feet. The discovery has attracted some major multinationals, such as Anadarko (APC), ENI (E), and Sasol (SSL). Recently an agreement was reached to construct a 2,600 kilometer pipeline to send natural gas to South Africa. The construction of the $6 million project is being led by Sacoil (SCL), together with a Chinese company and the state owned oil company.

Though the future appears to be bright for Mozambique, the current peace accord between all parties is fragile and the government must ensure that all parties have a seat at the table. In addition, the economy needs to be opened to both local and foreign entrepreneurs, because once that is done, the flow of foreign direct investment will surge.

Adriano Maleiane, minister of economy and finance, Mozambique
Adriano Maleiane, minister of economy and finance, Mozambique

2015 proved to be a difficult year economically for Mozambique, as with all commodity exporting nations. So it would be in the government’s interest to diversify its economy away from volatile oil and gas sectors to manufacturing. It is there that foreign investment and entrepreneurship can play a major role in transforming the country from one of the poorest in the world to a modern day economy. Having someone like Mr. Maleiane as finance minister can only help.

Source: Nasdaq

One comment

  1. I agree with the profile that you present of Minister Malaeine, in your article. He is a well rounded and very experienced Minister of Economy and Finance, but it would be remis not to point out that he derives his power and serves (as do all members of any cabinet) at the pleasure of his President. So it would stand to reason that, although one must clearly recognize his exceptional skills and steady hand (he has bags of both) at the helm of the Public Purse, the policies that he is championing, are the policies of and enjoy the support of President Nyusi’s Government.

    I also would like to point out that you have presented a slightly misleading chronology of Mozambique’s history.

    Mozambique’s independence and FRELIMO’s ascendency to power in 1975, came about as a result of an armed struggle, not a civil war. The civil war that you refer to, took place during the 1980’s, culminating in the Rome Peace Accords of 1992 and were followed by multi-party elections in 1994 that FRELIMO won and won again in 1999, 2004, 2009 and 2014. Mr Dhlakama participated in all of those elections and challenged every one of the outcomes, notwithstanding the International Communities observers pronouncing them free and fair.

    Lastly, the gas discovery in The South Rovoma Basin is much greater than 1 Trillion Cubic Feel that you report in your article, it is actually in excess of 160 Trillion Cubic Feet, if you add ANADARKO’s Area 1 and ENI’s Area 4 together.

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