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MOZAMBIQUE -BLOOD OR TREASURE?

October 15, 2022 | Expert Insights

In recent years, Sub-Saharan Africa has experienced a steady rise in terrorism, with many stable countries also falling prey to it. In Mozambique’s northern province of Cabo Delgado, an ISIS offshoot known as Al Shabab has carried out several attacks. The impact on the nation's mining and natural gas industries, which have drawn substantial investments from foreign companies, jeopardises the future of this emerging economy and has implications for the entire Southern Africa.

Mozambique is blessed with vast natural gas reserves, a resource that, if properly utilised, might transform the country's situation and benefit the globe. But the insurgency threatens Mozambique's economic prospects.

Background

Over twenty years, from 1993 to 2015, Mozambique's economy expanded quickly. The country's growth during that time averaged 7.9 per cent per year and was among the highest in Sub-Saharan Africa.

Uncovered debts, often known as "hidden debt," caused a severe decline in growth in 2016 and an economic governance crisis followed by a protracted economic slump. From 2016 to 2019, growth was just 3 per cent. The combined consequences of the natural disasters in 2019, the increasing conflict in Northern Mozambique since 2017, and the global pandemic since 2020 have worsened the growth slowdown.

Al Shabab, an extremist group, has recently conducted terrorist attacks in the region. Before carrying out its first act of terrorism in 2017, this organisation acquired attention as a highly radical religious organisation. In 2020, the U.S. designated the Islamic State of Iraq and Syria (ISIS)-Mozambique as a terrorist organisation.

ISIS demands the imposition of Sharia law and rejects authority and modern formal schooling and healthcare. The historical marginalisation of Cabo Delgado province is a significant issue, leading to high poverty rates, socioeconomic inequality, and youth unemployment. Tensions have also been fuelled by the state's relocation of some villagers and transfer of their ancestral lands to the Total gas project, and locals hold only a small portion of jobs in the gas sector.

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Analysis

ISIS-Mozambique poses a real threat to the Mozambican government, which has long been accused of underplaying the insurgency of squandering its economic future and the entire province of Cabo Delgado through misgovernance.

The ill-equipped and poorly trained Mozambican military and police are hard-pressed to deal with the insurgents. As a result, neighbouring foreign powers have now intervened, with the U.S. and the EU pitching in with training and financial support. However, the results remain patchy.

In sheer desperation, Maputo turned to private military contractors, first employing the infamous Wagner Group, a group of Russian mercenaries with ties to the Kremlin. Later, it hired the Dyke Advisory Group (DAG), a small mercenary group run by former Colonel Lionel Dyck of the Zimbabwean armed forces.

Expectedly, the rise in violence has scared away investors. Total Energies shut down the enormous Afungi gas development declaring force majeure (a situation where unanticipated circumstances prevent it from executing a contract).

The recent finding of some of the world's most incredible natural gas (LNG) reserves may offer Mozambique a unique chance for long-term, inclusive prosperity. A new, ambitious growth model that goes beyond extractives will be needed to make the most of the anticipated LNG resources and bring growth closer to the poor. Reigniting Growth for All, the most recent Mozambique Country Economic Memorandum (CEM), offers specific recommendations for such a growth model. These guidelines can be boiled down to two main points: maximising the revenue from non-renewable natural resource sources and encouraging growth in non-extractive sectors, such as increased agricultural productivity.

Assessment

  • Before enjoying the revenue boom from the LNG business, Mozambique needs to put in place a practical institutional and policy framework. Policies should initially be focused on maximising the advantages of resource-driven development.
  • The most pressing issue is Mozambique's own security forces' brittleness and, possibly, the political elites' complacent attitude.
  • The private sector has the potential to be a driving force for economic change and employment opportunities. Still, it is constrained by many factors, such as weak regulatory and governance frameworks.