By Sarah O'Carroll, Environmental and Building Technologies Research Analyst, Frost and Sullivan

Infrastructure in Mozambique is currently undergoing significant expansion and major rehabilitation, writes Environmental and Building Technologies Research Analyst, Sarah O'Carroll, at global consulting and research firm, Frost & Sullivan. Thirty-four billion dollars is being invested in Mozambique's infrastructure over the next decade, and the private sector is spearheading development in the country.

History of Mozambique's infrastructure

While Mozambique was a colony of Portugal, basic infrastructure was developed to facilitate the exportation of minerals and other mining products. Much of this infrastructure was constructed in the southern region around Maputo, the country's principle port. A road network and rail corridor was constructed and a few ports were developed.  The Cahora Bassa dam was built, with a supply capacity of 2,075.0 MW and a small water supply network was established in Maputo, and the surrounding regions.

Following independence in 1975, the country was plunged into a 16 year long civil war, in which much of the country's infrastructure was destroyed. When the new government was formed in 1992, it began rebuilding the country.

Mozambique is one of the least developed countries in sub-Saharan Africa

The civil war left Mozambique, along with much of its infrastructure, devastated. Many of the roads need to be reconstructed and there is poor access to the agricultural and rural areas in the north. There is a single rail corridor, with three small branches, and large port backlogs, due to insufficient capacity building. The large capacity of the Cahora Bassa Dam allows Mozambique to export 40.0 percent of its energy to the Southern African Power Pool (SAPP), but only 10.0 percent of the country has access to electricity, due to very poor distribution infrastructure outside of Maputo. The water supply system has increased so that 63.6 percent of population has access to improved water sources, and there is only one wastewater treatment plant in the country.

Infrastructure development in Mozambique has accelerated over the few decades, so that now much of the development in the country is done through multi-billion dollar mega-projects. There are a number of major expansion and improvement projects underway and planned for the country, including at least ten mega-projects. Investment across all infrastructure sectors totals $34.00 billion, almost three times more than that of Botswana.

Mining industry driving infrastructure development

The Mozambican government has concessioned, and placed much of the county's infrastructure under private management, as it believes that privatisation stimulates development. The railway network and ports have been concessioned, and the water and energy and power suppliers have been privatised, which has accelerated development in these sectors, as they are less reliant on government funds to finance expansion projects.

Currently, the coal mining industry is the fastest growing industrial segment in Mozambique, notes Frost & Sullivan. Significant reserves of coking coal have been discovered in the Tete province and Zambezi area, and have attracted a number of prominent mining companies. Vale Mining and Rio Tinto are already developing mines in Mozambique and are constructing key infrastructure to facilitate the exportation of mining commodities.

The natural gas industry is also expanding. Thirty-two trillion cubic meters of natural gas has been discovered off the coast of Mozambique, close to Pemba. This discovery could make Mozambique one of the largest exporters of natural gas to Asia in the future. Gas field operations are expected to come online between 2014 and 2016. Currently, it is still unknown how the port infrastructure required to support this industry will be developed, but it is certain that the private sector will once again take the lead in driving the construction of new terminals and the like.

Transport and energy and power sectors are key priority areas

Frost and Sullivan has found that infrastructure development in Mozambique will be focussed on expansion and improvement projects in the transport and energy and power sectors, like Botswana and Namibia Twenty-two billion dollars will be invested in the transport sector, while $9.71 billion is earmarked for developing the energy and power sector.

• Many of the countries roads were destroyed during the civil war, so there are currently several ongoing road reconstruction projects. Projects in the roads sector will also see the improvement of major trunk roads, as well as the Nacala, Beira and Maputo road corridors.
• Investment in the rail sector will see the Sena railway line completed and a new railroad linking Mozambique to Botswana via Zimbabwe.  Planned projects for the rail sector are mainly for capacity building in the north, so as to support exports from coal mines in the region.
• The ports sector will see the greatest expansion as a new port is developed to serve the coal mining industry, and port capacity is increased fivefold, so that port backlogs can be eliminated. A new port will also be developed in Matutuine to serve the Mozambique-Botswana rail link.
• Capacity building in the energy and power sector will allow Mozambique to significantly increase energy exports to the SAPP, while at the same time increasing access to electricity in the county. There are several hydropower projects planned for the country, as well as the construction of four coal fired power stations to serve the northern region.

Private sector funding infrastructure projects

Because the private sector is taking the lead in developing infrastructure in Mozambique, it is not surprising that the majority of financing, of the ongoing and planned infrastructure projects, is privately sourced. Over the next decade, the private sector will invest $22.32 billion, accounting for two-thirds of investment in infrastructure development projects, estimates Frost & Sullivan. Mining companies, which are developing mines in the country, are prominent in project financing. Seventeen percent of all ongoing and planned projects are to be financed by mining companies. Vale Mining and Rio Tinto, in particular, are involved in the financing of rail and port projects crucial for the success of their mines. Development agencies are also key funding partners, accounting for the largest portion of private sector investment in the country. The World Bank, African Development Bank and several European development agencies are very active in the market, financing many of the mega-projects in the country.

The key to Mozambique's continued success

The private sector has, thus far, stimulated infrastructure development in Mozambique, by developing several mega-projects, which will see Mozambique's transport and energy and power infrastructure greatly improved and expanded to help support growing industries in the country. However, it will not be beneficial for the private sector to continue taking the lead in infrastructure planning for the country. Although improved transport networks, better ports and increased access to electricity, are essential for economic growth, improved water and social infrastructure are also desperately needed to ensure that Mozambique has a skilled and healthy population which can support the growth of the country. Going forward, it is essential that the government takes on a more collaborative role in infrastructure development. Centralised planning and decentralised execution will be key in ensuring that both economic and social development occurs. This, however, will not be an easy road, as the government will continue to rely on private sector funding for the next decade, at least for infrastructure development. Frost & Sullivan conclude that public-private partnerships will be the best solution, until the government has sufficient revenues from the mining industry to drive infrastructure projects in the country.

Samantha James
Corporate Communications - Africa
P: +27 21 680 3574
F: +27 21 680 3296
samantha.james@frost.com

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