africa commodities development FDI Gas Mozambique Natural Resources

Opinion: Is natural gas the answer to Mozambique’s crippled economy?

Approximate reading time: 2 minutes

In 1992, Mozambique embarked on new pathway following the troubles evoked by the civil war. At the time, the government diverted its attention to macroeconomic reforms in an attempt to combat poverty.

Between 1996 and 2003, the country’s fiscal policies solely focused on development, the economy looked promising, poverty went from 69 percent in 1996 to 54 percent in 2003.

Sadly, the economic success was short-lived, in 2016, it was discovered that Mozambique had borrowed a total of $2billion from banking giant, Credit Suisse and its partners to set up three state-owned companies. According to the IMF, the scandal forced them and other donors to suspend financial assistance which led to the crumbling of Mozambique’s economy. 

“The country’s economy has been adversely affected by the fall in commodity prices and adverse weather conditions, as well as by the issue of undisclosed loans in the spring of 2016 and the ensuing freeze in donor support.”

The discovery of natural gas within the Rovuma Basin area in 2010 has been met with optimism but also triggered concerns. One hopes that the discovery will certainly stimulate the country’s growth and, demand for workforce could possibly steer unemployment into the pit.

In addition, with such sizeable reserves, Mozambique has the potentially become a market leader within the sector, however this’ll only be possible with the implementation of strong institutions to oversee the development of LNG projects accompanied by nothing short of coherent policies.

On the other hand, as stated by SABC News, the growing notoriety of a paramilitary group, Ahlu Sunna Waljama, within the Cabo Delgado province pose a threat to the development of liquefied natural gas projects.

“U.S. petroleum company Anadarko had to place staff working on a liquefied natural gas (LNG) plant in northern Mozambique under “lock-down” due to the threat from suspected Islamist militants in the area.” – SABC News, June 2018

One thing is for sure, security issues need addressing to avoid delays in setting up LNG projects, and to reassure investors. Foreign companies such as ENI have begun developing liquefied natural gas (LNG) projects in the country, with more companies moving-in.   

As previously mentioned, Mozambique has the potential to strengthen its economy through natural gas. It is imperative however, that the government increases partnership with the private sector for prosperity within the sector.

Only the government can drive economic growth in Mozambique, one can only hope LNG projects can transform economic and social sectors in the country.

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