The solution to Mozambique’s long-standing economic woes might lurk beneath the Indian Ocean’s rocky sea floor.
The recent discovery of massive deposits of liquefied natural gas (LNG) off Mozambique’s northeastern coast by American and Italian gas developers could propel the nation to the forefront of Africa’s burgeoning energy exporting economy. The deposits could be worth $450 billion to $600 billion to a country with a gross domestic product of just $15 billion.
The potential boon from developing these LNG deposits could lift Mozambique out of chronic poverty. Mozambique remains one of the poorest nations in the world, despite a steady seven percent economic growth rate over the past decade.
President Armando Guebuza is cautious about the newly found treasure trove and he is adamant about avoiding what he calls the “resource curse.”
"Countries, when they have this sort of resource, instead of being a source of social harmony, [it] becomes a source of problems, social convulsions," Guebuza told the Wall Street Journal last month.
Guebuza’s worries stem from a series of deadly attacks by a rival political party, the Mozambican National Resistance (RENAMO). Guebuza’s party, the Mozambique Liberation Front (FRELIMO), has been in control of Mozambique since 1977, but officials fear the emergence of a new, lucrative resource like LNG could cast Mozambique into a downward spiral of deadly political turmoil.
All Mozambicans must reap the benefits of LNG development, Guebuza said. Current development projects would exclusively export LNG to foreign markets, but future plans must target the resource domestically, growing local industry, investing in the public sector and eradicating energy poverty. Only 11.7 percent of Mozambicans have access to electricity.
With multinational companies like Royal Dutch Shell courting the Mozambican government by promising to foot the bill for the $40 billion initial investment, it’s all but certain that development of the LNG reserves is imminent.
Guebuza’s final term as president ends this year. His successor will have an incredible opportunity to lead Mozambique into a new era of economic stability and energy wealth. However, Mozambique’s new leader will face many tough challenges--negotiating with foreign companies, containing political rivals, and managing other interest groups that desperately want a piece of the odorless, colorless pie.
An opportunity like this is rare for Mozambique. The decisions made by its leaders on LNG development will define Mozambique’s future--for better or worse.