Thursday, August 21, 2014

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Mozambique's Elite Development and Mass Poverty

Mozambique's economy may be booming thanks to its natural gas reserves, but whether ordinary citizens are benefiting is another matter.
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The port of Pemba Town, Northern Mozambique rapidly became outdated following discoveries of natural gas in the province. Photograph by Ton Rulkens.

Maputo, Mozambique:

A visit to Mozambique’s capital can be an experience in luxury. Maputo’s newly-built international airport sells aftershaves for $230 and bottles of Dom Perignon for $320. Across the city centre, bars and restaurants with names such as Café Continental, Nautilus or 1908 offer Western-style haute cuisine and cocktails. Upmarket residential areas display a bewildering array of 1960s modernist and Art Deco designs, brilliant sculptures and murals, while skyscrapers dominate the horizon.

Current projections place the country’s GDP growth rate somewhere between 7.5-8%. And on the surface, it is not hard to see why many have tipped Mozambique to become Africa’s next economic powerhouse.

But for the majority of the country’s citizens, Mozambique represents something very different. GDP and growth rates say little of the distribution of wealth and living conditions, and the country’s incredible riches exist alongside crippling poverty. For all its international investment, vast construction projects and high-end products, the country ranks 184 out of 187 in the Human Development Index, and some 55% of the population live below the poverty line.

Gas, glorious gas

The main reason for Mozambique’s current economic growth is its natural gas deposits. These reserves are estimated to be worth $350 billion – particularly significant given that the country’s current annual GDP is just $13 billion according to the World Bank. And by 2015, the country could be producing 100 million tonnes of natural gas a year, which would place it on the cusp of being one of the world’s top ten producers.

“The country is performing strongly in a gloomy global context…and GDP growth rates are predicted to be high – i.e. above 7% – for the coming years”, says Markus Weimer, Senior Analyst at Control Risks. Huge profits are expected for a particular elite, but Weimer suggests the prospects for the rest of society are far more uncertain. “The question is whether string GDP growth can satisfy the raised expectations of a large part of Mozambique’s young and growing population”.

On this, many Mozambicans are far from optimistic. Faustus Cavelelo is a tuk tuk driver who has also worked as a private bodyguard for international investors. He has witnessed first-hand the disparity in wealth between those gaining from the country’s growth and the rest of society:

“The big investors need bodyguards because yes, they are so rich”, he tells Think Africa Press. “Myself it’s hard to benefit…I work ten-hour days, every day.”

José, a waiter in Maputo, echoed this sentiment, decrying the standard of living for Mozambique’s ordinary citizens. “If you go to hospital you don’t get treated unless you bribe a doctor, or they’re your relative. You don’t get a job unless your family gives it to you. My children sit on the dirt at school – there are no chairs. None of this wealth is reaching us, none. If you go into the countryside you won’t believe how poor people are. They don’t give their children names before the ages of two.”

Trickle down or bubble up?

There are a number of possibilities as to why the benefits of Mozambique’s natural gas may not trickle down to the majority of the population. For one, some have suggested that the government is likely to accrue just $20 billion from extraction – less than 10% of the resources’ full value.

Experts cite poor infrastructure and a lack of expert labour as some reasons why Mozambique might fail to fully capitalise upon the gas boom. But the role of external actors may be far more significant. In order to attract outside investment and stimulate the economy, contracts have been awarded to foreign multinationals with large concessions and extremely favourable tax conditions.

These foreign companies comprise a large portion of Mozambique’s gas and coal industries. And government officials have frequently come under fire from civil society for the lack of transparency, bribery and corruption which are said to be commonplace in the allocation of these contracts.

Some attempts have been made to claw back some of these lost profits through an amendment passed in December that will require a 32% capital gains tax to be paid on sales of local assets by foreign companies. But it remains to be seen if this measure does end up bringing in extra revenue, and whether these funds will benefit the wider public.

Resettled for resources

International organisations such as the World Bank also claim to be helping Mozambique ensure extraction projects are fair and transparent. A spokesperson from the Bank commented: “We have supported recently the development of legislation on Concessions and PPP (public private partnerships) which brings greater clarity on contracts and improves transparency. We are also supporting the government review its mining and gas legislation to bring it more in line with international norms and practice.”

But for many, this is too little too late – some have already been written out the script. According to Alda Salamao, Executive Director of NGO Terra Viva, thousands of Mozambicans have been forcibly relocated to make way for extraction projects.

“Right now, in Palma, a community has lost its rights and is not aware of it. The land rights were transferred to Anadarko [a US petroleum corporation] for 7,000 hectares of land and offshore rights”, she says.

Jose Tembe, correspondent for Radio Mozambique and the BBC, adds that compensation for resettlement is often seriously lacking:

“I’ve seen the conditions in Tete myself”, he says. “The resettlement area houses were not properly built. They leak water, the plots are not clear, the urban planning and sanitation is poor. They are far from shops, hospitals, and there are no roads.”

In Maputo, The Human Rights League is taking the government to court over several cases of forced resettlement. “People really do not know their rights in these areas”, says Alice Mabota, director of the NGO. “They are never adequately consulted. They do not know their rights, the real value of the land, and what lies beneath it. They are not aware that the oil, natural gas and other minerals that they farm over every day are potentially worth millions – and they will see none of it”.

The elephant in the room

While Mozambique’s economic indicators signal triumphant growth, it is clear on the ground that growth in GDP is not the same as development. Billions in investment will do little to help a population when its benefits are restricted to small elite.

As the senior manager of a large international mining company commented, speaking under condition of anonymity: “My concerns about the leaders here are the fact that they seem to be unchecked. They don’t even really listen to us. If we stay here it will be because it’s financially viable, but it needs to be a more equal environment. It’s the elephant in the room.”

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“Right now, in Palma, a community has lost its rights and is not aware of it. The land rights were transferred to Anadarko [a US petroleum corporation] for 7,000 hectares of land and offshore rights”.