Recovery Based on Solid Foundations: Mozambique's Economic Recovery Continues Apace. Substantial Investments in Infrastructure, Including Power and Transport, Indicate That the Recovery Will Continue for a Considerable Time to Come. Neil Ford Reports

By Ford, Neil | African Business, November 2004 | Go to article overview

Recovery Based on Solid Foundations: Mozambique's Economic Recovery Continues Apace. Substantial Investments in Infrastructure, Including Power and Transport, Indicate That the Recovery Will Continue for a Considerable Time to Come. Neil Ford Reports


Ford, Neil, African Business


Mozambique's economic recovery over the past decade can be attributed to a number of factors. Its proximity to a South Africa that is keen to promote growth and build ties with its near neighbours is undoubtedly near the top of the list.

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The resumption of agricultural production and trade that had been suspended during the long years of civil war certainly also accounted for much of the growth. Yet there is little doubt that the government has made the most of its few advantages and is investing in the kind of infrastructure that can help to take the economy on to the next level.

One area in particularly robust health, which both contributes to GDP and constitutes national infrastructure, is the power sector. Greatly increased generating capacity could stimulate sizeable export revenues and provide the growing domestic industrial sector with plentiful supplies of electricity.

While the construction of the gas pipeline from Mozambique's Pande and Temane natural gasfields to South Africa has been well publicised, plans for domestic consumption of gas are also well advanced.

The Elgas consortium will shortly publish its plan for a major gas-fired power plant in southern Mozambique. It is envisaged that the plant will have generating capacity of between 600MW and 1,500MW; a full feasibility study into the proposed plant will be carried out in 2005. Although such a massive addition to national capacity may seem ambitious for the Mozambican market alone, the continued development of the Southern African Power Pool (SAPP) provides a huge opportunity for power producers in the region.

It is likely that gas from both the Pande and Temane fields would be used to supply the plant, while electricity will be supplied to EDM and Eskom. However, the development of the SAPP's Short Term Energy Market (Stem) could change everything. Although Stem was introduced in 2001, the existence of long-term power supply contracts in the region has retarded its development--but the amount of electricity traded on shorter term contracts is now on the increase.

Instead of agreeing to purchase a fixed amount of electricity from a supplier over a fixed number of years, power companies in southern Africa can now purchase electricity in hourly blocks as and when required, in the fashion of sophisticated power pools operating in the UK or Australia for example.

This promotes competition, reduces tariffs and encourages independent power producers (IPPs) to set up in one country, safe in the knowledge that excess production can always be exported. Although the position of IPPs within the SAPP has yet to be determined, it is likely that Mozambique will be a prime site for new power plants that aim to supply the entire region.

Two South African firms, power utility Eskom and black empowerment firm African Legend, own a 35% stake in Elgas but most of the equity in the venture is held by Mozambican interests. Electricidade de Mocambique (EDM), Empresa Nacional de Hidrocarbonetos (ENH) and Consultinvest are the other shareholders in the company. Elgas is also at various stages of development of eight hydroelectric plants within Mozambique: Lurio Falls (177MW), Mavuzi III (56MW), Massingir Dam (50MW), Alto Malema (50MW), Tsate (50MW), Mutala (27MW), Muenezi (21MW) and Mavuzi II (8MW).

POWER SECTOR, A SUCCESS STORY

Two larger hydroelectric schemes are also at the planning stage. The 1,300MW Mphanda Nkuwa plant would be built 65km upstream of the existing Cahora Bassa plant. A 2002 feasibility study concluded that the new plant would be more economically viable than Cahora Bassa and Eskom has expressed an interest in purchasing power from the plant but the final go-ahead has not yet been given. If and when construction work begins, a feasibility study on the 500MW Cahora Bassa North project is likely. The former would require investment of $2. …

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Recovery Based on Solid Foundations: Mozambique's Economic Recovery Continues Apace. Substantial Investments in Infrastructure, Including Power and Transport, Indicate That the Recovery Will Continue for a Considerable Time to Come. Neil Ford Reports
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