Mozambique

Geography

Mozambique is in south-eastern Africa, located primarily between South Africa, Zimbabwe and Malawi to the west, Tanzania to the north and bordering the Mozambique Channel on the eastern coast. Its other western neighbours include Swaziland and Zambia. The country is 801,590km² and has the longest coast line of any country in Africa with a sea boundary of 2,470km along the Indian Ocean.

Political backdrop

Mozambique won its independence on 25 June 1975 and the Front for the Liberation of Mozambique (‘‘Frelimo’’) established a one-party Marxist state. The first decade of Mozambican independence was marked by civil unrest and economic instability. An estimated 1 million Mozambicans perished during the civil war between an armed rebel movement in central Mozambique called the Mozambican National Resistance (‘‘Renamo’’) and Frelimo. In 1983, President Samora Machel conceded the failure of socialism and the need for major political and economic reforms.

President Samora Machel died in 1986 and his successor, Joaquim Chissano, continued the reforms of his predecessor and began peace talks with Renamo. The new constitution enacted in 1990 provided for a multi-party political system, market-based economy and free elections. The civil war ended in 1992. In 1994 the country held its first democratic elections and Chissano was elected President. In 1995 Mozambique became the first country which had never had any constitutional link to the British Empire to join the Commonwealth. Chissano was re-elected in the elections in 1999. Following presidential elections in December 2004, Armando Guebuza was inaugurated as President on 2 February 2005.

While the country still faces residual tension between Frelimo and Renamo, it has sustained over 10 years of relative political stability with an increasing government focus on promoting economic strength and foreign investment.

Climate

Climate varies from tropical and subtropical conditions in the north and central parts of Mozambique to dry semi-arid steppe and dry arid desert climate in the south. The rainy season extends from November to April, with the peak rainfall from December to February. The country has experienced a number of droughts, the most recent of which occurred in 1974-1984, 1991-92 and 1994-95. The country also experiences cyclone storms moving down the Mozambique channel. The Marropino-Morrua-Mutala region is covered by eastern Miombo woodlands, which are characterised by deciduous tropical dry woodland interspersed with broad grassy, seasonally waterlogged areas.

Regional infrastructure

Mozambique’s infrastructure varies substantially throughout the regions of the country. The civil war left much of the original infrastructure established by the Portuguese and British in disrepair. The government in partnership with international business and aid groups has gradually attempted the construction and reconstruction of its infrastructure, predominantly focusing on Maputo and other key business areas.

Transport infrastructure remains fairly basic and at times difficult to negotiate with a vast majority of the roads simply made of dirt or sand especially in rural regions.

Telecommunications and internet access remain very limited with almost no fixed line access, although limited cellular coverage and remote coverage via satellite is available. Information technology infrastructure remains at a very basic level although the government has made an effort to push forward a programme to computerise all government records and management systems as well as land registry and electoral registers.

The distribution of electricity throughout Mozambique is limited due to the lack of power line infrastructure. The regional power network is due to be extended to the Marropino-Morrua area by late 2007 courtesy of a development grant from India.

The provincial capitals of Quelimane and Nampula can be reached by commercial flights from Johannesburg via Maputo. A dirt strip runway maintained by the Group is located at Morrua some 40km north of Marropino. A new 1400m long gravel runway is also being constructed at Marropino.

Port facilities capable of handling containers are available at Nacala some 200km east of the town of Nampula and at Quelimane. A tarred road links Quelimane and Nampula, but is badly pot-holed in places. This road is currently being completely rebuilt with Chinese aid funds. Marropino and Morrua are connected by accessible secondary gravel roads.

Economy

Mozambique has experienced one of the world’s most rapidly growing economies over the past five years. Its real GDP growth averaged 8.1 per cent over the past decade with decreasing inflation and sustained political stability. Growth has been driven primarily by foreign-financed ‘‘mega-projects’’ in mining, energy and infrastructure, supplemented by large donor aid inflows. Agriculture is also increasingly contributing to economic growth with greater production of cash crops such as cashew nuts, cotton, sugar and tobacco despite a severe drought in the past year in the southern part of the country. Strong GDP growth is expected to continue through 2006 and 2007 at 7.9 per cent. and 7.3 per cent. respectively. Mozambique’s foreign debt has been reduced through cancellation and rescheduling under the Heavily Indebted Poor Countries initiatives. The World Bank announced in July 2006 that it would write off US$2.4billion of external debt under the Multilateral Debt Relief Initiative.

Fiscal policy

Over the past five years, substantial progress has been made in macroeconomic stability in Mozambique through a number of agreements with the International Monetary Fund. Expenditure on priority sectors such as education, health, agriculture and good governance increased from 63.0 per cent. of total expenditure in 2004 to 66.9 per cent. in 2005. The government plans to increase fiscal spending substantially in 2006 to support public sector wage increases and priority social sectors.

Monetary policy

Since 2004, the Bank of Mozambique has undertaken reform of its major policy initiatives to strengthen monetary management through daily liquidity forecasting and the use of foreign exchange and Treasury Bill sales. Its main focus is on controlling reserve money supply growth in order to maintain its 2005 rate of 7 per cent. by the end of 2006 and hopefully decelerate to 5.6 per cent. by the end of 2007.

Examples of key foreign investment projects

Foreign investment in Mozambique continues at a notable pace with investors from all over the world taking interest in its industrial, mineral, agricultural resources and tourism opportunities.

Investment in industry within Mozambique has contributed significantly to the country’s growth over the past several years. One of the largest investments to date has been made by BHP Billiton, Mitsubishi, the Industrial Development Corporation and the government of Mozambique who committed US$2.1billion to build the Mozal aluminium smelter project. Mozal is the largest industrial project ever created in Mozambique accounting for half of Mozambique’s manufacturing output and making the country one of the world’s leading exporters of aluminium.

The mining industry grew by another 40 per cent. in 2005 as foreign investors accelerated exploration activities in base and industrial minerals. Kenmare Resources of Ireland is the lead investor in a US$450 million heavy sands titanium mine and smelter in Moma which is expected to begin operations by late 2006.

Mining in Mozambique

The mining industry grew by 40 per cent. in 2005 as foreign investors increased exploration activities in base and industrial minerals. Kenmare Resources of Ireland is the lead investor in a US$450 million heavy mineral sands titanium mine and smelter in Moma. Australian and South African companies are also initiating the US$500 million Corridor Sands Titanium Project in the Gaza province which has the world’s largest deposit of titanium bearing sands.

Mozambique has substantial energy resources in the form of coal, hydro and natural gas. In 2004, Sasol initiated a joint venture with the Mozambican and South African governments to build a new gas pipeline to South Africa. The recently completed project involves the extraction of natural gas from the gas fields of Temane and Pande and a gas processing facility to clean and dry the gas in Mozambique before it is transported along an 865km pipeline to join Sasol’s South African gas distribution network. Once the project is fully operational, it is expected to contribute up to 20 per cent. of Mozambique’s gross domestic product.

Moatize is considered the largest unexplored coal province in the world. It is a world-class deposit estimated to have 2.4 billion tons of coking and thermal coal. The Moatize Coal Deposit was awarded in December 2004 to the Brazilian company, Companhia Vale do Rio Doce (‘‘CVRD’’), the world’s largest iron ore producer. CVRD is currently undertaking feasibility studies to develop mine related infrastructure and 1,500MW coal-fired power plant.

The mineralised pegmatites in the Alto Ligonha Pegmatite Field were probably first exploited by the local populace for semi-precious stones - beryl, tourmaline and aquamarine. Exploitation of tantalite was sporadic through the 1950s and 1960s. The tantalum price collapse in 1962-63 forced the closure of many of the mines. The three principal mines (Morrua, Muiane and Marropino) were taken into Mozambique government control in 1979 and only Marropino is currently operating.

Past open pit mining operations, mainly by the Portuguese and former Eastern Bloc countries, have significantly altered the topography over many of the pegmatite deposits. Mining took place in the weathered soporific zone (as at Morrua, Marropino and Mutala), which was more easily worked often using hydraulic monitoring.

There are a number of small scale operations in the area, where pegmatites are also mined for gemstones, semi-precious stones, rose quartz and tantalum.