Minerals to drive 8% growth in Mozambique

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Naivasha, Kenya - Mozambique’s mineral-rich economy, one of Africa’s fastest growing, would expand by about 8 percent both this year and next, but could achieve higher growth rates if aging railways to export coal were improved, central bank governor Ernesto Gove said yesterday.

The country boasts some of the largest untapped coal reserves and is expected to become a key source of premium, hard coking coal used in steel making.

However, infrastructure bottlenecks have become a major headache for mining firms, with some projects delayed or put on hold due to the problems of getting coal to port.

Gove said Mozambique’s economy would achieve growth of 8.1 percent this year even without improving railways.

In December last year the government almost doubled to $5 billion (about R55.5bn) its initial forecast for the estimated cost of a railway and port project to boost coal exports.

Gove said annual inflation was likely to increase from last year’s 4.2 percent but would still be in line with the central bank’s target of 5.6 percent.

Mozambique has in recent years become a key country for exploration companies seeking to get a foothold in new hydrocarbon frontier markets, with giant gas finds off its coast.

This saw foreign direct investment (FDI) rise to $5.4bn last year and Gove forecast this year’s FDI inflows would be between $5bn and $5.5bn.

One downside of the investment pouring in has been the ballooning of the current account deficit. Gove expected it to reach 36 percent of gross domestic product this year. But he said the deficit was “not so high” if costs of building infrastructure for a nascent gas industry were excluded. “We think by 2018/2019 we can balance the current account because our expectation for [gas] exports is very high.” – Reuters

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