Mozambique is a country
blessed with vast natural resources and abundant fertile lands – some of the
key elements to ignite economic growth and social development that promises to
change the good faith of the country.
Nevertheless, and despite the
massive approved foreign investment related to natural gas rivalling its GDP,
Mozambique will face strong challenges in order to secure a better future. FurtherAfrica
spoke to H.E. Adriano Maleiane, Mozambique’s Minister of Economy and Finance to
better understand how the country intends to tackle these challenges using
long-term strategies to ensure economic sustainability and a better future for
its people. Mr. Maleiane is no stranger to challenges, having served as
Governor of Mozambique’s central bank for some 15 years and later overlooking
the founding of the country’s national investment and development bank, an
institution he served for nearly 5 years as chairman before he was appointed
Minister of Economy and Finances in 2015.
Fabio Scala:
Mr. Maleiane, it is always a
great pleasure to talk to you. Thank you very much for taking the time to share
your insights with us. I want to begin our conversation asking for an
assessment of your time in office to date. You inherited quite an unexpected
sovereign debt situation in 2015, followed by a global commodity crisis in 2016
and presided over the country’s finances through a number of severe natural
disasters. When it comes to challenges, this is quite a handful to cope with.
What can you tell us in retrospect?
Mr.Maleiane:
First of all, allow me to take this opportunity to congratulate you and
FurtherAfrica for the pivotal role you have undertaken over the past few years,
which is to bring to light the huge transformations that Africa has been going
through and that, in many cases, simply go unnoticed by the international
financial market.
And yes, indeed the last
governing cycle has been very demanding as you have referred, since it required
– out of all of us in the Government – a great deal of strategic communication
and flawless coordination, in efforts to mobilise the Mozambican society into a
better understanding about the issues the country was facing. This approach
enabled us to find more appropriate, sustainable solutions which would then
mitigate the impact of the crisis we were up against at that time, while
guaranteeing that all the State institutions would be able to function
perfectly and unimpeded.
The natural disasters, the
commodities crisis particularly affecting the current accounts and trade
balance of African nations and – more specifically in Mozambique – we faced a
severe exchange rate depreciation, which consequently compromised the
sustainability of our external public debt, which represents 80% of the public
debt total. These were the initial predicaments that were not only jeopardising
the fulfilment of our Government’s 5-year plan, but also undermining the
confidence of investors.
It became crucial that we
took measures to achieve fiscal consolidation, namely an increase in the
effectiveness of tax collection, a more austere and efficient execution of
public expenditure, better management of all State companies, stricter rules
regarding the allocation and assignment of the public debt, as well as a
prudent fiscal risks management.
It is my opinion that all
this effort is now a main factor contributing to the current reestablishment of
Mozambique’s macroeconomic stability, as demonstrated by the 2.8% average
annual inflation rate in 2019, versus 26% in 2016, as well as a 2.2% GDP growth
in 2019, followed by a confidence boost perceived in both investors and
cooperation partners alike. One good example of that was the conclusion of
restructuring of eurobond 2023.
It has been a long journey,
and it is important to value and appreciate the patience and collaboration the
investors displayed, so that today we are able to ascertain that we have a
Government security bond listed in the international financial market, fully
insured and provided with all the legal guarantees. The recent financing
success of Mozambique LNG project in Area 1, totalling US$14.9B serves to
confirm this renewed confidence that investors have in the social and economic
future of Mozambique.
Naturally, the geographical
position of Mozambique carries additional and permanent challenges, as we
provide services that are strategic to landlocked countries, particularly roads
infrastructure and here I can draw attention to the development corridors in
the North, Centre and South, and the National Highway linking the country from
North to South. The generation and transportation of electricity for massive
projects and the export of energy to neighbouring countries constitutes yet
another major challenge, as it will gradually require additional efforts in the
mobilisation of resources for the financing of regional and national projects.
Fabio Scala:
Thank you for your
assessment, certainly not an easy ride. Picking up on your comment about the
current state with foreign direct investments, a number of specialists see
hydrocarbons as a long-term proposition for the country, which is often quite a
different view from the public perception. Could you tell us how you see the
2035 national strategy of economic development and the gas-related investments
transforming and shaping the future of country’s economy?
Mr.Maleiane:
The National Development Strategy 2015-2035 (ENDE) is a long-term vision, made
feasible through the Government’s 5-year program. It proposes, essentially,
that we utilise the available resources in a rational manner, so that we can
transform Mozambique into a competitive, middle-income country, economic and
socially inclusive, by implementing integrated policies geared towards the
generation of income for families and corporates, thus bringing about an
organic improvement both in the welfare of the entire population and also an
equitable distribution of income.
The strategy also aims for
the structural transformation of the economy and the expansion and
diversification of our society’s productive base, among which it is possible to
highlight a few select sectors such as agriculture, energy, tourism, economic
and social infrastructure. In this new light, we are treating the extractive
industry as a crucial agent of transformation, from where we can source the
necessary funding for the innovation and diversification of the economic and
social infrastructures in our country.
Fabio Scala:
I see, along those lines and given the importance of the proceeds from the
extractive industry, I wanted to ask you about ideas and experiences from other
natural resources rich nations, such as the creation of a sovereign wealth fund
and additional development roles for institutions such as the BNI bank. In
other words, how do you “dream” of Mozambique and how do we get there?
Mr.Maleiane:
Well, as I said before, our development plan relies on a structural
transformation of the economy, and as such we expect that agricultural activity
will be a fundamental contributor to Mozambique’s industrialisation plans, as
well as the creation of employment for the majority of the Mozambican
population. Commercial banks, in principle, are not structured to finance the
entire agricultural and industrial value chains. Given that, the Government, in
2012, decided to aggregate the developmental role to the Banco Nacional de Investimento
(BNI), making it an effective official Development Bank of the State and
important financial instrument for the implementation of the aforementioned
structural transformation of agriculture and industrialisation, consequently
bridging the existing gap in financing the economy.
In line with our conviction
that the extractive industry must be seen as an important finance source to
foment the structural changes that ENDE advocates for, the Government intends
to create a Sovereign Wealth Fund, having assigned the Central Bank to such a
role, by which it organised, in March 2019, a workshop titled “Preparing
Mozambique for the age of natural gas”, with a clear focus on learning from
other countries’ experiences, essentially to determine what, how and how much
to finance, the annual budget and how much to save for the future. I believe
that between the Sovereign Fund, BNI now empowered with its developmental role
and other national financial institutions, we will meet the requirements necessary
to fund the structural transformation of our economy.
Fabio Scala:
That’s a interesting perspective we can look forward to, thank you for
sharing. I could not wrap up our conversation without asking for your message
to prospect and current foreign investors looking into investing in Mozambique.
Mr.Maleiane:
Allow me to finish just as I started: thanking for this opportunity to share my
thoughts and reaffirm that the perspectives for development in Mozambique are
good, because we have been creating the necessary conditions to turn the
country into a preferred investment destination. The recent financing of
Mozambique LNG attests to that fact.
It is important to stress
that the production of natural gas predicted to start in 2022 in Area 4 and
2024 in Area 1, will catapult the country to the top of the global LNG market,
and this will positively influence our economic growth, and on the fiscal side,
the gas industry will become a strategic contributor. The use of gas in the
industry and other sectors, combined with other alternative energy resources
already existing in the country, will reduce, in the long-term, Mozambique’s
dependence to all imported petroleum derivatives. One of the main benefits of
utilising gas, is that this natural resource has a “transversal value chain”,
underlining its role in the development and productivity of many different
industrial sectors. The Government is working alongside the private sector and
civil organisations to come up with a legal instrument proposal that will regulate
the national participation of local content in large projects, so as to
stimulate the industrialisation and serve as an incentive to the growth of
national entrepreneurs.
When he found individuals who
were allegedly not complying with the emergency measures, he demanded money or
goods from them. He threatened to throw them in jail, if they did not pay up.Arnaca
said that both Naciala, and the community policemen (who was not named) are
under arrest, and are facing both disciplinary and criminal proceedings. He did
not say how much money this duo had succeeded in extorting from the citizens of
Sussundenga.“As soon as we knew about this, from denunciations made by members
of the public, we took measures which culminated in the detention of the young
man”, said Arnaca. “He was claiming to be a police officer newly stationed in
the region”.