Five Reasons to Invest in Mozambique
Event Africa Contributor 20/03/2018 Industry Events
One of South Africa’s top five African trading partners, Mozambique has been one of the ‘fastest-growing economies’ on the continent for the last two-and-a-half decades. It has outperformed both regional and global growth averages, with rich oil and gas reserves that are attracting substantial investment from across the globe. Additionally, the nation looks set to rise up as the ‘new’ Seychelles or Reunion if the optimism and energy continue in its tourism sector.
Lourenço Sebastião Sambo, Director General of Mozambique’s Investment and Export Promotion Agency (APIEX), says the nation recently hosted a senior South African delegation led by the Department of Trade and Industry. “The delegation was in Mozambique early this month to identify and explore trade and investment opportunities. And later this month, the first ‘Mozvest Conference’ will be held in Cape Town to outline investment opportunities in this African neighbour.”
He says there are solid reasons for South African investors to invest in Mozambique. Here are his top five.
ONE: The growing economy
Mozambique is anticipating investments in the energy sector (electricity) of over US$D10 billion in the coming 10 years as well as significant investment in the oil and gas sector (Anadarko LNG plant), graphite (various mining concessions have commenced), tourism sector – across the country, traversing the extensive coastline – and the agricultural sector. The International Monetary Fund and Mozambique government predict GDP growth of 5.3% in 2018, with inflation expected to be below 10% according to the Governor Central Bank. A Deloitte 2017 report calls Mozambique’s economic prospects positive.
With peace re-established, the country‘s macroeconomic stability is secure and Mozambique’s world-class endowments are creating attractive destinations for investment. At the conference, all opportunities will be explored, with advice on upcoming opportunities, benefits and success stories, prospective challenges and agile strategies in terms of finances and legalities.
TWO: Oil and gas
Mozambique is Africa’s third-largest holder of liquefied natural gas (LNG), with reserves of around 180 trillion cubic feet. Two main consortiums – one headed by the Texas-based Anadarko and the other by Italian ENI – will ensure that Mozambique becomes a major exporter by 2023.
Investment opportunities around natural gas abound in areas such as the supply of equipment driven by the construction of gas plants. The LNG development plan includes two 180,000 cubic meter LNG storage tanks, condensate storage, a multi-berth marine jetty, and associated utilities and infrastructure. ENI’s development plan foresees the drilling and completion of six subsea wells in addition to the construction and installation of an advanced technology FLNG with a future onshore liquefaction facility. Further major opportunities exist in the oil and gas sector; for example, Anadarko LNG Plant has pledged US$20bn to its liquefied natural gas (LNG) project.
Nial Kramer, CEO of SAOGA (South African Oil and Gas Activities) says, “Fostering synergy between Mozambique as an economic frontier and SA as a mature economic force will be vital in the development of the gas market in Mozambique and in ensuring that these considerable natural reserves are used as an opportunity to spur inter-regional trade and development opportunities.”
Mozambique has commercially important deposits of coal (high-quality coking coal and thermal coal), ruby, graphite, iron ore, titanium, apatite, marble, bentonite, bauxite, kaolin, copper, gold, and tantalum. It also holds some of the world’s largest untapped coal deposits. The company Vale from Brazil has made major investments in a coking coal mine. It was followed by some other players from Australia and India. With the current investment in infrastructure in the country and expectation that mining costs in South Africa will rise considerably over the coming years, Mozambique could gain a regional competitive advantage.
Mining and refinery equipment, maintenance services and machinery, automation equipment and other efficiency improving services will be needed to improve the profitability of the current and upcoming mining projects, providing investment opportunities for a company with such expertise.
The most recent World Economic Forum report on competitiveness called Mozambique one of the top ten tourist destinations that are expected to record greater growth in demand for leisure travel in the next decade. With pristine beaches and famed hospitality, Mozambique has all the makings of the next ‘Reunion’ or ‘Seychelles.’ The Government of Mozambique has chosen the tourism sector as one of the four priority sectors for investment in the current governmental cycle.
Tourism is also an important source of inclusive business and poverty reduction in Mozambique. This sector can boost competitiveness, expand economic opportunity and provide a pathway to prosperity. Tourism is one industry in the world where the goods or services are consumed at the site of production. It can also be an excellent mechanism for channelling resources from rich to poor. Commercial tourism activities provide an opportunity for local people to participate in direct employment, in providing goods and services to tourism businesses through the supply chain, but also through direct interaction with the tourist (for example crafts, excursions, food and beverage). The generation of earnings among those local people directly involved with the industry, in turn, stimulates indirect spend (of wages) in the local economy.
FIVE: Tax credits
Mozambique applies the unilateral method for the avoidance of double taxation of income to resident companies and the permanent establishment of non-resident companies. This makes the trading environment very favourable for corporates.