Mozambique and Germany have a
special relationship, that was formalised when the German Democratic Republic
established diplomatic relationships with the then newly independent Republic
of Mozambique in 1975. Since then, a great many Mozambicans have been educated
in Germany. Another 20,000 were employed in Germany as contract workers. Since
the 1980’s, Germany has spent more than USD 1 billion in development aid to
Mozambique. Whilst this is laudable, this relationship must evolve to change
focus away from aid and towards investment, in response to the numerous
opportunities in gas development and other sectors.
German companies need to
invest in the development of new gas prospects, in the servicing of the
existing developments and in the building of a petrochemical sector in
Mozambique. Germany has a strong petrochemical industry that can take advantage
of the opportunities in Mozambique with Africa’s USD 1.2 Billion population
providing a ready market for such an industry. This will ultimately lead to a
win-win situation for both countries. It will not only help to generate
economic growth, but will also ensure the creation of good paying jobs, skills
developing apprenticeships and the transfer of technology to Mozambique.
Gas is fast establishing
itself as a key player in the global energy transition dynamics as nations seek
to significantly reduce carbon dioxide emissions and other air pollutants. The
realisation, that developed economies like Germany and fast-growing economies
like China can only realistically meet their emission targets without forgoing
economic prosperity by adopting gas as a major source of energy has put
countries with large gas resources, like Mozambique in the focus of investors.
The share of gas as a primary source of energy has been steadily growing since
the 90’s, and this trend is expected to continue. In China, gas now accounts
for over 7% of primary energy use from about 1% in 1990. In Germany, gas
accounts for 27% of primary energy use from about 15% in 1990.
German demand for gas is
projected to continue its rapid growth as the country steadfastly continues to
implement its in 2010 adopted energy transition strategy known as the
Energiewende. According to the plan, greenhouse gas emissions are expected to
reduce by at least 80% in 2050 when compared to 1990. Gas is currently
Germany’s second most important energy source after oil. It imports nearly all
of the gas it consumes, from Russia (40%), Norway and the Netherlands with only
5% sourced domestically. Domestic production is expected to run out within the
next decade, setting Germany up for even more imports from outside. There is
therefore, a general consensus in Germany that even more gas resources must be
secured from abroad to ensure Germany’s economic growth prospects. Plans to
source more gas from Russia have however earned the government heavy criticism,
including from Germany’s American allies who see this as leading to an
over-dependence on Russia and creating potential National security threat to Germany.
Diversifying Germany’s sourcing of gas, from new producers like Mozambique
therefore presents an attractive proposition for Germany as a nation and German
companies in particular.
Mozambique holds 100 trillion
cubic feet (Tcf) of proved natural gas reserves. It ranks 15th globally,
however the country is still largely underexplored. As the government continues
to encourage exploration, it is likely, that the proven reserves will increase
in the coming years to rival that of more established gas frontiers. Oil Majors
Total, ENI and Exxon are leading development efforts expected to initially cost
a combined USD 30 Billion. Committed off-takers, include EDF of France, Tokyo
gas of Japan and Centrica from the UK who have all committed to be off takers for
the next two decade. Notable however, is the absence of German companies either
as operators or major off-takers, despite Germany being one of the world’s
largest gas importers.
“It is time for German
companies to play a greater role in the development of Mozambican gas industry.
Germanys needs gas and in exchange, our companies can provide investment
capital, technical Know-how, technology and education” said Sebastian Wagner,
Executive Chairman of the German African Business Forum.
In November 2019, German
Chancellor Angela Merkel announced the creation of a USD 1.1 Billion investment
fund during the ‘Compact with Africa’ summit in Berlin. This fund, and other
institutions in Germany like the KFW development bank offer various instruments
to ease German investments in Mozambique. However, there is an increasing
realisation, that such government initiatives to invest in Africa in general
and in Mozambique in particular are best implemented by channeling the funds
through private sector German and Mozambican companies. In a recent online
conference organised by the German African Business Forum, Chancellor Angela
Merkel’s personal representative to Africa, H.E Günter Nooke called German
companies to take advantage of these opportunities.
Now more than ever, both
countries must take the opportunities presented by the development of gas to
strengthen their special bond. Mozambican exports to Germany currently stand at
USD 270 Million USD yearly and are dominated by aluminium. This amounts to just
3% of total exports. According to Verner Ayukegba, SVP of the African Energy
Chamber, there is room for growth and a significant demand for German
technology and investments in Mozambique. “Mozambique is one of the most prized
investment destinations in Africa at the moment. Mozambican companies are
prepared to partner with their German counterparts to service the nascent gas
industry.” “We have a golden opportunity here to strengthen both Country’s
economies, whilst at the same time making significant strides towards the
reduction of greenhouse gasses with the promotion of gas consumption to the
detriment of heavier polluters like coal”, Verner concluded.