150509Suppliers of construction materials into the building industry are taking strain because of the collapse of the residential housing market. Buildmax, which has been repositioned through two major acquisitions as an opencast coal mining contract and supplier of construction materials.photo Supplied

Mozambique did not plan to seek overly high state and local participation in mining, beyond current totals of 5 percent to 20 percent, to keep attracting vital investment, Antonio Manhica, the head of the state-owned mining company, said.

While some southern African politicians had campaigned to nationalise mines or demanded that 51 percent stakes in companies be given to local black people, as in Zimbabwe, Manhica said his government would seek to balance the interests of the country with those of investors.

“In each of the projects, we have 5 to 20 percent… we don’t expect to see much change in that,” the chief executive of the Empresa Moçambicana de Exploração Mineira (EMEM), said.

That percentage is divided between what is given to the state and what would be sold to local investors, possibly via a listing on the local bourse.

Manhica said the government was aware of the massive investment needed to develop the infrastructure to support a boom in the coal sector. Railways and ports were severely damaged during the civil war, which ended in 1992.

“We still feel that we have to create an environment to attract as much investment as possible,” he said.

But calls for greater benefits for ordinary Mozambicans could change that stance in the long term and stakes could be raised in the future.

The former Portuguese colony has seen a flood of foreign investment on the back of its coal boom and Manhica said coal – seen as a strategic mineral used in power generation – was the primary target for state participation.

Major foreign investors in the coal sector include Vale, Rio Tinto, Anglo American, ENRC and Jindal Steel and Power.

Coal output is forecast to reach 100 million tons per year within a decade from just more than 3 million tons now.

The EMEM was formed in 2009 to manage government and local interests in the mining industry by acquiring stakes in projects or applying for prospecting and exploration licences and possibly developing them through to the mining stage.

The level of the stakes is decided on a case-by-case basis during contractual negotiations with the mining companies. So far the companies have been receptive to the idea, he said.

Manhica said there was a large appetite for involvement in mining from local investors and from financiers wishing to support them. The state was concerned, however, that these investments might fall back into the hands of the politically-connected elite if not made sustainable.

Manhica said Mozambique was learning from the mistakes of neighbouring South Africa, where the policy to give greater ownership of the economy to black people who had been disenfranchised by apartheid benefited a small part of the population with political ties to the ruling party.

“We are still in the learning curve. It’s not an easy thing to do,” he said on Thursday.

When applying for licences, EMEM will target other niche minerals such as titanium, graphite and mineral sands. It eventually plans partnership with a private investor to develop some projects, while retaining majority ownership.

Mozambique has trod a fairly investor-friendly path so far, and Manhica said much effort was spent on convincing firms that there would be none of the U-turns encountered elsewhere.

“It’s something we have to do almost every day,” he said.

The minerals minister said separately that there were internal talks about possible tax changes that could affect the sector, but it was too early to say what the outcome would be. – Agnieszka Flak from Reuters