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Analysis: Burgeoning coal and gas deposits fail to enrich Mozambique’s poor

Agnieszka Flak and William Mapote Maputo

In Mozambique’s port capital Maputo, glitzy offices, boutique hotels and fancy restaurants are popping up alongside crumbling colonial buildings, nourished by multibillion-dollar investment in coal and gas deposits to the north.

A woman sells clams in the main market of Maputo in this February 1, 2011 file photo. Recent coal and gas discoveries could become a game-changer for the war-scarred economy where more than half of its 23 million people still live in poverty, but there are worrying signs that the mineral wealth is not trickling down. To match Feature MOZAMBIQUE-WEALTH/ REUTERS/Matthew Tostevin/Files (MOZAMBIQUE - Tags: BUSINESS SOCIETY ENERGY). Credit: Reuters

Luxury cars jam crowded streets and smart-suited businessmen strut the sidewalks.

But their proximity to children begging for food and clusters of tin-roofed shacks offers testimony that the benefits of the southern African nation’s incipient economic boom are out of reach for the vast majority of its 23 million people.

The former Portuguese colony, which emerged from civil war two decades ago, boasts some of the world’s largest untapped coal reserves and is discovering vast natural gas deposits along its white-sand Indian Ocean coast.

Expectations run high as mining firms such as Brazil’s Vale and Anglo-Australian Rio Tinto and oil majors including US-listed Anadarko Petroleum and Italy’s Eni compete for a share. Vale has invested $2 billion (R16.5bn) in its Moatize coal mine in northwest Tete province, and plans to plough another $6.4bn into a region wrecked by the 15-year civil war.

After hearing about the investment frenzy, 37-year-old Pedro Maculuve took a two-day bus journey to Tete, hoping to get a job and leave a crowded township where he lives in a straw hut.

He came back disappointed. “I used to work on the mines in South Africa and thought I could be useful in Tete but I was turned away,” he said in Maputo where he sells wooden masks and trinkets.

Mozambique’s gas deposits may be an even bigger game-changer for a country where more than half the people live below the national poverty line of about 65 US cents a day and 60 percent have no formal job.

South African petrochemicals group Sasol and its partners have spent about $1.5bn to produce gas and pipe it from their onshore Pande and Temane fields since 2004.

Large offshore gas finds in the past year have triggered forecasts of capital inflows of $50bn over the next decade – five times Mozambique’s gross domestic product – and more is expected to be spent rebuilding railways, roads and ports.

Yet life for average Mozambicans, whose annual per capita income is just more than $400, has yet to improve and some fear that the growing disparity between haves and have-nots could trigger protests from a population not shy of expressing frustration.

“I don’t expect much from these mining and gas projects,” Maculuve said. “I don’t trust the things they say anymore.”

On paper, the outlook could not be rosier: Mozambique’s economy has been growing at an average 7 percent a year, inflation is at record lows and the metical rose more than any other currency against the dollar last year.

Geology has delivered a jackpot in coal reserves estimated at more than 23 billion tons and gas deposits of up to 100 trillion cubic feet – enough to supply Germany, Britain, France and Italy for a decade.

Geography has also helped: sitting on Africa’s southeast coast, Mozambique is in prime position to ship energy to growing markets in Asia.

Those running businesses in Maputo, around the coal fields and along the coast where gas has been found are reaping the benefits of new investment – but there are consequences.

“The price of food and transport has doubled in just over a year. We see those projects as big opportunities in terms of jobs for local people but for now that is not happening,” said Celeste Makauze, a 42-year-old mother of five who sells vegetables at a market in the coastal town of Pemba.

Some fear the country may succumb to the “resource curse” that has blighted many African states, or the “Dutch disease” that hit the Netherlands in the 1960s, when the gas sector grew rapidly to the detriment of other industries.

“There can be massive growth or there can be a Dutch disease scenario of decay,” Ivo Imparato, a World Bank sustainable development expert, said in Maputo.

In recent years, people have protested across Mozambique against the rising cost of bread, electricity and fuel.

“The possibility of social unrest is an underlying latent threat that could re-erupt at any time,” said Anne Fruhauf, an Africa analyst at Eurasia Group. – Reuters

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