Mozambique (122)

Mozambique: Challenges and Opportunities

Following on from our previous post, Country Focus Seminar: Mozambique, we take a look at some of the challenges and opportunities cited by Miguel Alvim, Advisory Managing Partner at KPMG Mozambique.

The seven biggest challenges for investing in Mozambique

The following challenges were noted as the most significant during the Country Focus Seminar:

  1. The lack of infrastructure across the country – this prevents the development of Mozambique with regard to its extraction of natural resources
  2. Corruption and red tape
  3. Multiple stakeholders in large projects e.g. government, owners, contractors and workforce. This challenges places an even greater focus on governance and results in risks that should be carefully managed, for example local content rules, taxation regimes, cost allocations, legal compliance, developing/changing legislation.
  4. Higher financing costs as a result of sovereign ratings not at investment grade levels
  5. The underdeveloped private sector – this creates a shortage of well-established and reliable suppliers for companies entering Mozambique
  6. Local skill shortage due to a large, largely uneducated population
  7. Increasing political pressure to ensure that the country’s population benefits from the rich resources e.g. coal, gas and hydropower.

Rich Mineral Resources

While challenges were acknowledged during the Country Focus Seminar, opportunities were at the heart of the discussion. Alvim made mention of the country’s rich mineral resources:

  • 100 trillion cubic feet of recoverable off shore gas estimated to be in Mozambique’s Rovuma basin. This could make Mozambique one of the world’s biggest exporters of natural gas and potentially one of the richest countries in Africa.
  • The 100 million tones of coal which the US Geological Survey expects to be exported per year by 2015.
  • An estimated 13 billion tones of coal reserves

Key investment areas

The key investment areas identified as part of the Country Focus Seminar included:

  • Roads/corridors across the country
  • Airports in the major cities
  • Ports
  • Coal
  • Gas

The transportation infrastructure is required in order to effectively transport and manage the mining and gas projects. Without better infrastructure, the challenge of delivering and capitalizing on the wealth of natural resources remains.

Mozambique: A growing success

In addition to the wealth of natural resource, the development and progress of Mozambique was also mentioned. It was noted that things are picking up in the country some twenty years after the end of the “civil unrest”. The region’s GDP has been growing with an average annual rate of 7.7 percent for the last 10 years. The substantial coal and gas find have played a driving role in the growth of the country with these projects acting as the cornerstone for further progress.

David Okwara

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