A menace lurks beneath the seabed

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Natural resources are a blessing… for Mozambique’s rich and powerful, anyway. 

The discovery of major reserves off the coast of Cabo Delgado, Mozambique in 2010 resulted in a rapid influx of major energy corporations into the region. The likes of ExxonMobil and the China National Petroleum Corporation (CNPC) fighting for contracts reflects a Sino-American power struggle in the region. Yet such economic conflict between two contemporary superpowers is the least of Mozambique’s concerns. 

Now home to Africa’s three largest liquid natural projects, the Rovuma basin in Cabo Delgado, which divides Mozambique from its Northern neighbor Tanzania, was pegged to become “Africa’s Qatar.” However residents of the region are increasingly under threat. The petroleum corporation Anadarko’s own report projects hundreds have been evicted to make way for extraction projects, and thousands will lose access to fishing waters. The authorities have arrested several journalists reporting on such realities. 

On March 23rd, insurgents briefly overran Africa’s largest gas project

Such extraction is set against an extremely volatile backdrop. Mozambique has a violent history of war and insurgency, with the most recent uprising formally ending just last year. Locals fear that extraction will militarise the region further. Corporations have requested greater military protection and are willing to fill the gaps where the government fails, paying an estimated $1 million per month for security for their workers. The Russian private military firm Wagner, regarded as a tool of the Russian state and sanctioned by the Trump administration, has gained a contract in the region and now has 200 mercenaries deployed; it’s no surprise that such companies want better protection. On March 23rd insurgents briefly overran Mocimboa da Praia on the North-East coast of Mozambique, perhaps Africa’s largest gas project. This attack fits an upward trend of violent escalation in the province since 2017. Such insecurity may jeopardise the $30bn that was forecast to be invested in the region by 2030. 

Are such natural resources going to benefit Mozambique? In a 2019 report, the World Bank set out a goal for Mozambique to “diversify away from the current focus on capital-intensive projects and… towards a more diverse and competitive economy.” Yet major resource-extraction projects, especially run by multinational firms where incomes flow out of the economy, fail to meet this approach. Furthemore, such projects lay the risk of “Dutch disease,” an economic phenomena commonly associated with natural resource discovery. Due to Mozambique’s flexible exchange rate system, an increased supply of foreign currency as a result of foreign investment drives up the value of domestic currency, resulting in real exchange rate appreciation, weakening the competitiveness of a country’s export sector. As seen across oil-rich nations in the 1970s, the increased production and exportation of oil can be at the cost of a declining agricultural and manufacturing sector. 

Furthermore, those gains which are achieved will not be spread along egalitarian lines. Freedom House, an NGO that promotes democracy, awarded Mozambique a “freedom status” of just 45/100 this year, falling from the previous year’s ranking, due to a deeply flawed 2019 election. It’s “functioning of government” assessment is just as scathing, with business elites linked to the ruling party largely controlling decisions related to foreign investment in oil and gas. The state’s safeguards against corruption are ranked the lowest they could be. It’s most recent gini coefficient of 0.54 in 2014 suggests high levels of inequality, surpassing most fellow African states, bar a handful. The influx of natural resources are unlikely to reverse these trends. Studies have linked natural resource discoveries to an inhibitor in the progression towards democracy, especially in countries with already poor democracy rankings. Even if resource extraction does provide substantial wealth for Mozambique, it may be at the cost violence, corruption and greater inequality. 

Image: FH Mira via Creative Commons

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