Why Mozambique Remains A Good Business Opportunity

14 May 2021
South Africa is Mozambique’s largest trading partner and largest foreign direct investor.

ADC Projects is a proud part of that investment and from that perspective, we would like to offer our opinion on Mozambique’s current political climate.

Before we delve into particulars, let’s start with a brief overview of Mozambique including its geography, history, and geopolitics:

As can be seen from the map, Mozambique lies in south-eastern Africa on the Indian Ocean coast and is bordered by Tanzania, Malawi, Zambia, Zimbabwe, Eswatini (Swaziland), and South Africa. Madagascar lies offshore across the Mozambique Channel.

The country is home to just over 30 million people and boasts numerous natural resources.

The economy remains primarily agricultural but food and beverages, chemical manufacturing, and aluminum and petroleum production are growing industries.

As reported by the IMF (2019), Mozambique’s per capita GDP is $493 although the World Bank has measured the Gini coefficient (a measure of wealth inequality) at a moderate 45.7 (2015).

Mozambique was ruled by Portugal for four centuries until 1975. However, the country descended into a 1977 – 1992 civil war very shortly after independence.

Then elections began in 1994, and Mozambique has remained a presidential republic since that time despite a pair of low-intensity insurgencies.

The first of those insurgencies was in the central and northern regions and lasted from 2013 – 2019. Militant members of opposition political party RENAMO took up arms over charges of state corruption while also disputing the validity of the 2014 elections. The insurgency ended with a signed peace agreement following another election in 2019.

A more recent insurgency began in 2015 and is ongoing to this day.

The Current Crisis in Mozambique

Various Islamist groups, including local extremist faction Ansar al-Sunna as well as the Islamic State of Iraq and the Levant (ISIL), have been attempting to establish an Islamic state in the Cabo Delgado region. Ansar al-Sunna is known as al-Shabaab within Mozambique but is a separate organization from the better-known group in Somalia.

Most attacks have occurred in Cabo Delgado province, the northeastern portion of the country, as civilians in this area have been more sympathetic to the cause within a wider context of social, economic and political issues.

The total militant strength is estimated to be between 3,000-3,500 fighters. They are opposed by 11,000+ Mozambican security forces as well as private security firms and special forces advisors from South Africa, the UK, Portugal, and the USA.

Attacks have typically consisted of raids on police stations, isolated villages and security forces and have been widely condemned as terrorist attacks.

The level of violence stepped up in 2020 with ISIL’s participation. At least 3,593 people have been killed with an estimated 700,000 displaced to date.

Reliable media reports are lacking, but it is known that the insurgents have committed extensive war crimes while targeting and murdering civilians on many occasions. Government forces in turn have been accused of mistreating suspected militants and prisoners.

March 2021 headlines have highlighted the plight of 20,000 people trapped near a $20 billion natural gas project run by French energy giant Total. The company evacuated their staff immediately after attacks on the nearby town of Palma and declared a “force majeure” while suspending operations.

This high-profile attack has focused a great deal of attention on a previously little-known conflict. Having said that, the US government has provided more than $82 million in aid beginning in 2020 once ISIL’s involvement in the conflict was confirmed.

The EU is also currently considering funding a military training mission to the country to help government security forces.

Furthermore, the 16-nation Southern African Development Community is looking to provide aid in the form of a 2,500 regional troop deployment to Mozambique to help battle the insurgency.

So where does ADC Projects fit into this rapidly developing picture?

ADC Projects and Mozambique

ADC Projects have long and extensive experience in Mozambique including several key infrastructure projects.

We have been active in Mozambique since 2012 with fulltime power plant operations experience since 2017.

  • We co-developed a 40MW Natural Gas Project for Kuvaninga Energia over four years with the facility reaching Deemed Commercial operation in December 2015. During this period, we provided engineering support, project management and construction site supervision for the Power Plant ADC also managed the commissioning from where we were appointed as the Kuvaninga facility’s Operations and Maintenance contractor for a period of 14 years.
  • We provided engineering, project management and construction site supervision and commissioning of the High-Pressure Customer Metering Station (HPCMS) in Chokwe. The plant was successfully commissioned in March 2017.
  • ADC also project managed the EDM/Kuvaninga network integration project that included a 110/11kV substation and double circuit 110kV transmission line. This was completed towards the end of 2016.
  • ADC Projects is currently involved with multiple renewable energy projects at various stages of development in Mozambique.
In short, ADC has a significant presence in the country.

And while there is much uncertainty with the ISIL presence in the north of the nation -- especially with Total removing their staff -- we continue to look for new business within the country.

The situation is serious but not as dire as certain media reports suggest.

That’s because there is one key point most reports overlook: the violence in Cabo Delgado is at the opposite end of the country to the capital city of Maputo.

There is therefore little or no danger of the insurgents overthrowing the government, especially when the difficulties of traveling from Pemba (the main north-eastern port city) to Maputo are factored in.

What’s more, the international community has much to lose if the north of Mozambique is overrun by Ansar al-Sunna and ISIL.

Hundreds of millions of dollars have already been invested in natural gas field developments over the last decade. And billions of dollars of future profits are at risk.

That means the Mozambican government and interested observers with business interests in Mozambique -- including South Africa, the EU and the USA -- have every incentive to help defeat the insurgency. Mozambique will not be abandoned by its friends.

And that’s why we feel many opportunities remain in Mozambique despite current challenges.

We remain confident and optimistic due to our well-developed network of key players in the government and the private sector. This affords us a high level of understanding of the situation and the risks.

After all, we have been successfully operating in Mozambique for almost 10 years. We know the people, the players, and the country. A big part of our job as project managers and facility operators is maintaining the most accurate and up to date picture of local developments at all times.

Are you considering a project in Mozambique or elsewhere in the region?

How ADC Projects Can Help

We sell energy market expertise to commerce and industry, including both big and small hybrid solutions. We provide Project Development, Project Management Operations and Maintenance, Engineering and consulting services to develop and install a variety of power projects including gas engine operations.

We operate in numerous countries besides Mozambique, such as Kenya, the DRC, Lesotho, Namibia and of course our home country of South Africa.

Managing risk is a key part of our expertise.

To learn more about assessing project liabilities and hazards, becoming less dependent on utility power, saving time and money and gaining a real advantage over your competition, please contact us today.
Andries van Tonder