By Kestér Kenn Klomegâh
Mozambique risks destabilizing its economy and further losing western development finance if it goes ahead to purchase sanctioned oil from Russia.
With the return of western development finance institutions such International Monetary Fund (IMF), World Bank and the USAID, and currently showing tremendous support for sustainable development projects and programmes, Mozambique would have to stay focused and stay clear of the complexities and contradictions of the Russia-Ukraine crisis.
Mozambique needs to seriously concentrate on and pursue its plans of exporting liquefied natural gas (LNG), extracted from the Coral South field, off the coast of Palma district, in the northern province of Cabo Delgado, possibly starting this October. It marks an economic turning point and opens a new chapter for its revenue sources.
According to our research, Mozambique will become the first country in East Africa to export LNG. It will be produced on a floating platform, belonging to a consortium led by the Italian energy company, Eni. The platform, built in a Korean shipyard, arrived in Mozambican waters in January and is now anchored in Area Four of the Rovuma Basin, some 40 kilometres from the mainland.
This is the first deep-water platform in the world to operate at a water depth of about two thousand meters. The Coral South project is expected to produce 3.4 million tons of LNG per year over its estimated 25-year lifespan.
A second project is planned for Area One of the Rovuma Basin, where the operator is the French company TotalEnergies. The planned LNG plants for this project, are onshore, in the Afungi Peninsula of the Palma district. The jihadists seized Palma town in March 2021, and TotalEnergies withdrew all of its staff from the district. Subsequently, the Mozambican defence and security forces and their Rwandan allies drove the terrorists out of both Palma and the neighbouring district of Mocimboa da Praia.
The current global economic situation is changing, and competition and rivalry for markets are also at their height. During the past months, Russia has cut its export of gas as a reciprocal action against European Union members and has redirected its search for new clients in the Asian region. It has already offered discounted prices to China and India, and now looking beyond Africa.
United States Special Envoy to the United Nations, Thomas-Greenfield, has made one point clear in her speeches with African leaders that “African nations are free to buy grain from Russia but could face consequences if they trade in U.S.-sanctioned commodities such as oil from Russia.”
“Countries can buy Russian agricultural products, including fertilizer and wheat,” Linda Thomas-Greenfield said. But she added that “if a country decides to engage with Russia, where there are sanctions, then they are breaking those sanctions. We caution countries not to break those sanctions because then … they stand the chance of having actions taken against them.”
Russian Ambassador to Mozambique, Alexander Surikov, after a meeting with the Confederation of Economic Associations of Mozambique (CTA), had proposed that the Mozambican authorities could buy Russian oil in roubles after Moscow presented the option to Maputo. Ambassador Surikov further expressed Russian companies’ continuing interest in investing in Mozambique. Likewise, the possibility was raised of Russia opening a bank in Mozambique focused on supporting bilateral trade and investment.
Russia previously had a VTB bank in Maputo, later involved in opaque deals. It was a financial scandal involving three fraudulent security-linked companies, and two banks – Credit Suisse and VTB of Russia, relating to illicit loan guarantees issued by the government under former President Armando Guebuza. Until today, it is popularly referred to as the “Hidden Debts” scandal involving US$2.7 billion (€2.3 million), the financial scandal that happened in 2013.
In the aftermath, financial institutions exited, projects were abandoned and this southern African country has struggled to rebound economically. Now they are returning with new financial assistance programmes that would promote sustainable and inclusive growth and long-term macroeconomic stability.
In the context of the current cereal crisis, one other issue that the ambassador raised was how Mozambican companies could have direct access to Russian wheat suppliers. In this regard, it was not clear how Russian wheat would enter the market and how it would be paid for because Mozambique uses principally the US dollar in its foreign transactions, and Russia cannot conduct transactions using the US currency due to the sanctions imposed following the invasion of Ukraine.
“The rouble and the medical are worthy currencies that do not need the benevolence of some other countries that control the international system,” the Russian diplomat explained, adding that Moscow wanted to strengthen cooperation with Maputo.
Nonetheless, Minister of Mineral Resources and Energy of Mozambique, Carlos Zacarias, admittedly the possibility of buying Russian oil in roubles. “I am sure that we will study and verify the feasibility of this offer from Russia. If it is viable, for sure Russian oil will be acquired in roubles,” Carlos Zacarias said.
Mozambique’s receptivity to the Russian proposal stems from the fact that the world is experiencing a peculiar moment, characterized by great volatility in oil prices on the international market as a result of the Russia-Ukraine war.
Mozambique was among the countries that abstained on two resolutions that were voted on by the General Assembly of the United Nations, one condemning Russia for the humanitarian crisis in Ukraine as a consequence of the war and the other suspending Moscow from the Human Rights Council.
The Mozambican Liberation Front (Frelimo, the ruling party) was an ally of Moscow during the time of the former USSR and received military support during the struggle against Portuguese colonialism and economic aid after independence in 1975.
Mozambique and Russia have admirable political relations. Mozambique has to focus on trade and economic development with external partners. According to data provided by CTA, the annual volume of economic transactions between Mozambique and Russia is estimated to be, at least, US$100 million (€98.5 million at current exchange rates).
Experts aptly point to the fact that there is a tremendous opportunity window for Mozambique. With partners including ExxonMobil Corp., China National Petroleum Corp. and Mozambican state-owned Empresa Nacional de Hidrocarbonetos, Mozambique has to move towards its own energy development. These past few years, experts have also reiterated adopting a suitable mechanism, mapping out strategies and utilizing financial support for sustainable development.
Mozambique has considerable gas resources and the right decision is to move toward both an onshore concept and an offshore concept. The ultimate goal has to establish connectivity between its resource exploration and national development. The idea is to foster economic relations based on its domestic development priorities. And consequently, it has to determine influential external investment partners ready to invest funds and, in practical terms, committed to supporting sustainable development in the country.
The Mozambique LNG offshore project, valued at around $20 billion, aims to extract about 13.12 million tonnes of recoverable gas over 25 years and generate profits of US$60.8 billion, half of which will go to the Mozambican state.
The process to achieve this task has started and would generate 14,000 possible jobs in phases – first creating 5,000 jobs for Mozambicans in the construction phase and 1,200 in the operational phase, with a plan to train 2,500 technicians and so forth. These projects also have a great capacity to create indirect jobs, with foreign labour decreasing throughout the project and Mozambican labour increasing. Most of these jobs are expected to be provided by contractors and subcontractors.
Several corporate projects came to a halt due to armed insurgency in 2017 in Cabo Delgado province. The entry of foreign troops to support Mozambican forces in mid-2021 has improved the security situation. Since July 2021, an offensive by government troops was fixed, with the support of Rwandans and later by the Standby Joint Force consisting of forces from members of the Southern African Development Community (SADC).
Cabo Delgado province, located in northern Mozambique, is rich in natural gas. Although the gas from the three projects approved so far has a destination, Mozambique has proven reserves of over 180 trillion cubic feet, according to data from the Ministry of Mineral Resources and Energy. With an approximate population of 30 million, Mozambique is endowed with natural resources. It is a member of the Southern Africa Development Community (SADC) and the African Union.
Mozambique Readies for Developing Mphanda Nkuwa Hydroelectric Project
By Kestér Kenn Klomegâh
Mozambique is ramping up efforts toward establishing a sustainable energy supply to drive its economy, especially the industrialization programme.
As it seeks reliable foreign partnerships, it has already shortlisted a few energy groups for the new $4.5 billion Mphanda Nkuwa hydroelectric dam on the Zambezi River, located in Tete province that is estimated to generate 2,070 megawatts for Mozambique. It will be 700 metres long and rise 86 metres above its foundations, with 13 floodgates.
The tender for the “Selection of the Strategic Partner or Investor for the Development of the Mphanda Nkuwa Hydroelectric Project” finally in December received the results of the market survey carried out in September involving the critical aspects of structuring the project, alignment with potential buyers and shareholder participation. The structure of the energy transmission line, the methodology for selecting the strategic partner, and the implementation schedule, among other relevant issues related to the project transaction.
According to the Malaysian newspaper, The Star, the process of selecting the seven potential investors was made at the end of an investor conference held in Maputo. It further wrote that two individual companies and five large consortiums previously visited the site to understand the area’s natural conditions and assess the fundamental data to prepare proposals from a technical, economic and financial point of view.
The newspaper estimated the infrastructure cost between $4.5 and $5 billion and have the capacity to produce 1,500 megawatts, making Mphanda Nkuwa the second-largest hydroelectric dam in the country, after Cahora Bassa Hydroelectric (HCB), which generates 2,070 megawatts. With the two infrastructures in fully operational energy production, Mozambique hopes to achieve the goal of universal access to energy and respond to the growing energy deficit that plagues southern Africa.
General Director of the Mphanda Nkuwa development office, Carlos Yum, envisaged that during the construction phase, more than 7,000 jobs would be created, and 50 per cent of the energy generated would be exported, contributing to the country’s economy and thus making a regional energy hub in Mozambique.
The Mphanda Nkuwa project will be a lower-cost power generation option which will position Mozambique as a regional energy hub and contribute to universal access, industrialization, job creation and technical training while generating tax and concession fee revenue. The project is fundamental for the energy transition and decarbonization of the southern region of Africa.
Carlos Yum has laid out the status of the Mphanda Nkuwa hydroelectric dam construction project. According to Yun, the project is budgeted at around $5 billion, and work will start in 2024, the year in which financing is expected to be definitively concluded.
The project will take a total of six to seven years to complete. Of the approximately $5 billion price tag, 60% is for the construction of the dam and 40 per cent for the power transmission line. At this moment, the development office is preparing the launch of public tenders for the updating of the project’s feasibility studies.
By December 2022, the office will launch a tender for the identification of the strategic investment partner, whose financial closing a 2024 deadline has been set. In terms of shareholding, the Mphanda Nkuwa project will have the participation of the Mozambican state, through Electricidade de Moçambique (EDM) and Cahora Bassa Hydroelectric [(HCB), with between 30% and 35 per cent of shares. The remaining 65 per cent will be secured from private investors.
Carta de Moçambique also informed that there would be consultants involved – from Brazil, the United States, Sweden and South Africa – to assess possible problems associated with the project according to the best international practices, avoiding pitfalls that have marred previous projects implemented in the province and in Mozambique generally.
It reported that experts and strategic investors, including the World Bank (WB) and the African Development Bank (ADB), have discussed some significant aspects concerning the implementation of the Mphanda Nkuwa hydroelectric project.
“Overall, we think this project is very important to the government’s goal of universal access by 2030,” said Zayra Romo, World Bank Mozambique Lead Energy Specialist and Infrastructure Practice Leader. As for the current stage of the project, which consists of the search for a strategic partner for the development of Mphanda Nkuwa, Romo said that the World Bank’s support would consist of ensuring the greatest possible competitiveness for the project, with a view to selecting the best contractor or investors that have experience to effectively manage Mphanda Nkuwa.
A press release from the Mphanda Nkuwa Implementation Office said that these companies and consortia had replied to the tender launched in December 2021, and delivered their pre-qualification documents before the deadline, first fixed on 28 February but, at the request of several of the bidders, it was extended to 18 April. It is hoped that construction of the new dam (which has been on the drawing board for decades) will finally begin in 2024. Construction will last for at least seven years.
According to the media release by the Mphanda Nkuwa Hydroelectric Project Implementation Office, the main objective is to ensure the coordination of actions for the implementation of the Mphanda Nkuwa project.
Location: The Mphanda Nkuwa Dam will be located in Tete Province, Centro region, on the Zambezi River, 61km downstream of the Cahora Bassa Hydroelectric Power Plant.
Project description: The Hydroelectric Power Plant will have a capacity of up to 1,500 Megawatts and an Electric Power Transmission Line from Tete to Maputo with 1,300 kilometres.
Budget: $4.5 to $5 billion, 60 per cent for the construction of the dam and 40 per cent for the power transmission line.
Strategic importance: The project will position Mozambique as an energy hub in southern Africa. It will provide lower-cost energy in the country and region, contribute to universal access to energy in the country by 2030 and support rapid industrialization with job creation, skills development and business opportunities (local content). Social and economic benefits, in the form of royalties and income on concession fees for the Mozambican state.
Environmental approach: The project will be implemented in strict compliance with national standards and internationally accepted best practices for the development of projects of this nature to mitigate negative impacts and maximize positive aspects. In this context, the Mphanda Nkuwa Hydroelectric Project Implementation Office recently signed an agreement with the International Hydroelectricity Association for the assessment of the project’s sustainability, including training and capacity building.
Mozambique News Agency reported, citing government sources, that there were eight international consortiums interested in becoming strategic partners of Mozambique in building the Mphanda Nkuwa dam, with electricity production: ETC Holdings Mauritius, Longyuan Power Overseas Investment (Chinese), PowerChina Resources, WeBuild Group, Scatec (Norway), Sumitomo Corporation, EDF and Kansai Electric Power (Japan).
With an approximate population of 30 million, Mozambique is endowed with rich and extensive natural resources but remains one of the poorest and most underdeveloped countries in the world. It is one of the 16 countries with a collective responsibility to promote socio-economic, political and security cooperation within the Southern African Development Community.
UNGA 77 Aftermath: AfDB Priorities Climate Finance, Jobs, Food Insecurity
By Adedapo Adesanya
The African Development Bank (AfDB) had several productive engagements around its strategic priorities at the just concluded 77th United Nations General Assembly (UNGA) meetings in New York.
Meeting highlights included an urgent call for increased financing to mitigate the effects of climate change and food insecurity.
The Group President, Mr Akinwumi Adesina, led the bank’s delegation to the meetings and played an active part in discussions leading to an international declaration to end malnutrition and stunting.
The bank’s engagements reflect its strategic priorities as African countries, which it supports, struggle with the lingering impacts of the Covid-19 pandemic, as well as food and fuel price spikes arising from Russia’s war in Ukraine and climate change.
Climate change was a recurring theme in many of the bank’s UNGA discussions, especially the need for urgent financing for the countries most at risk from climate change.
Climate change has assumed greater urgency, with the next UN Climate Change Conference (COP27) due to be held in Sharm El-Sheik, Egypt, in less than two months. COP 27, or “the African COP,” as it is being called, presents an unprecedented opportunity for a unified African voice to demand that the global community move beyond talk to concrete action on climate adaptation and mitigation financing.
Speaking at the 2nd ministerial meeting on climate and development, Mr Adesina joined US Special Presidential Envoy for Climate John Kerry and other participants in urging developed countries to deliver on the pledges they made at COP26 in Glasgow last year and under the 2015 Paris Agreement.
The bank also joined the Global Leadership Council in a new initiative to scale up clean, reliable energy and address global warming.
The Global Leadership Council comprises global leaders, including the African Development Bank head, the Executive Secretary of the United Nations Framework Convention on Climate Change, Patricia Espinosa; United Nations Development ProgrammeAdministrator Achim Steiner; European Investment Bank. President Werner Hoyer; Norwegian Prime Minister Jonas Gahr; and the president of the Rockefeller Foundation, Dr Rajiv J. Shah, co-chair of the council.
As a first step, the Council will focus on efforts to break down barriers to just energy transitions in developing countries.
While developing countries are currently responsible for only 25 per cent of global CO2 emissions, this share could grow to 75 per cent by 2050, according to an analysis published by the Alliance. Developing countries currently receive only a fraction of financing to develop clean energy, despite representing nearly half of the world’s population.
The General Assembly allowed the African Development Bank Group to demonstrate particular leadership in efforts to end hunger, nutrition, and stunting across Africa.
Under the Presidential Dialogue Group on Nutrition, inspired by the African Union’s designation of 2022 as the “Year of Nutrition,” the AfDB head joined African presidents to sign a landmark commitment to stop childhood stunting.
According to the Global Nutrition Report— considered the most comprehensive accounting of the state of nutrition worldwide—more than 30 per cent of children in Africa are stunted.
The Dialogue Group is an initiative of the African Development Bank’s African Leaders for Nutrition platform, the Ethiopian government, and Big Win, a philanthropic organization. In addition to Ethiopia, the platform counts the leaders of the Democratic Republic of the Congo, Madagascar, Malawi, Mozambique, Niger, Senegal, Tanzania, and Uganda among its members.
The bank’s African Emergency Food Production Facility featured prominently at the Global Food Security Summit. Senegal’s President Macky Sall, chair of the African Union, commended the bank for its swift launch of the $1.5 billion facility to avert a looming food crisis. The program is facilitating the production of 38 million tons of food. This represents a $12 billion increase in output in just two years.
In furtherance of the AfDB Jobs for Youth in Africa program to create 25 million jobs by 2025 and related initiatives, the Bank president participated in a high-level session to discuss the Global Accelerator on Jobs and Social Protection for Just Transitions initiative.
Various leaders also addressed the session from around the world, including Mr Adesina, Malawi’s President Lazarus Chakwera, Uganda’s Vice President Jessica Alupo, and Egypt’s Minister for Planning and Economic Development, Mr Hala El-Said.
Mr Adesina said: “We have to restructure our economies to be productive with education, infrastructure, energy and making sure we have productive sectors that can use people’s skills and absorb that into the economy.”
On the general assembly’s side, Mr Adesina also led a bank delegation to the World Health Organization (WHO) for meetings. The two organizations agreed to work on quality health care infrastructure, vaccines, essential medicines, nutrition, and the African Pharmaceutical Technology Foundation.
Mr Adesina also held bilateral meetings with Kenya’s new president, William Ruto; American billionaire and philanthropist Michael Bloomberg; former US President Bill Clinton and former US Senator Hillary Clinton.
The President also met with Anne Beathe Tvinnereim, Norway’s minister for international development and the African Development Bank’s governor. Ahead of the Global Citizen Festival, they discussed efforts to end hunger, and the country will be supporting the African Emergency Food Production Facility.
UNGA 77 brought together world leaders, civil society activists, private sector players, and young people from around the world for two weeks of in-person dialogue in New York City under the theme “A watershed moment: transformative solutions to interlocking challenges.”
UK’s Royal Mint Releases King Charles III Coins
By Adedapo Adesanya
On Friday, Britain’s Royal Mint unveiled King Charles III’s official effigy that will appear on coins following his accession to the throne.
The effigy is the work of British sculptor, Mr Martin Jennings, and was personally approved by the new king.
The first coins bearing the king’s portrait will be a special £5 coin and a 50 pence coin commemorating the life of Queen Elizabeth II.
Mr Jennings said his portrait was sculpted from a photograph of King Charles, in which he is facing left on the coin, in keeping with a tradition that sees each successive monarch switch profile.
In line with royal tradition, King Charles’ portrait faces to the left, the opposite direction to his late mother.
He is not wearing a crown, which previous kings also did not, though Queen Elizabeth II did in the five coins produced during her reign.
“It is the smallest work I have created, but it is humbling to know it will be seen and held by people around the world for centuries to come,” he said.
The text on the new coin says “CHARLES III • D • G • REX • F • D • 5 POUNDS • 2022,” a shortening of the Latin “King Charles III, by the Grace of God, Defender of the Faith.”
The existing 29 billion coins featuring the queen in circulation in the UK, as well as in Commonwealth countries, including Australia, New Zealand and Canada, will remain legal tender and be phased out naturally and over time with use.
The image of King Charles will begin to appear on coins in circulation and on commemorative pieces in the coming months, the Royal Mint said in a statement.
Two new portraits of Elizabeth will feature on the reverse of the commemorative five pound coin.
The Royal Mint has been responsible for depicting monarchs on coins for over 1,100 years since Alfred the Great.
Queen Elizabeth II died on September 8 following a record-breaking 70 years on the throne.
Mr Kevin Clancy, director of the Royal Mint Museum, said the late queen had appeared on more coins than any other British monarch.
“Over the coming years, it will become common for people to find coins bearing His Majesty and Queen Elizabeth II’s effigy in their change,” he said.
The Royal Mint said historically, it had been commonplace for coins featuring the effigies of different monarchs to co-circulate.
“This ensures a smooth transition, with minimal environmental impact and cost.”
There are currently around 27 billion coins circulating in the UK bearing the effigy of Queen Elizabeth II.
“These will be replaced over time as they become damaged or worn and to meet demand for additional coins,” the Royal Mint added.
The Royal Mint, which has made coins featuring the monarch for over 1,100 years and is Britain’s oldest company, said it would be available to collectors next week and in general use before the end of the year.
King Charles ascended to the throne following the death of Queen Elizabeth II, his mother and earlier this week, the palace said the cause of death recorded on her birth certificate was “old age.”
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