Mozambique 16 Feb: Could graphite be Mozambique’s black gold?
Good afternoon. Yesterday, the Bank of Mozambique raised interest rates again, taking the central lending rate above 10% for the first time since late 2012, in an attempt to combat inflation that has now reached over 11%.
Since Mozambique was forced to seek more assistance from the IMF at the end of last year, continued monetary tightening has been on the agenda – as predicted by economists we spoke to a month ago [SEE: Bank of Mozambique expected to tighten further as pressures remain].
However, according to the Fund’s own economists, interest rate rises are unlikely to dampen price rises as both the financial system and the real economy are more impacted by other influences. Is it time to re-think the Fund’s austerity prescription?
SEE: Bank of Mozambique tightens again, despite IMF warning its actions are futile
Falling commodity prices worldwide have played a major part in Mozambique’s current financial crisis, with coal, gas, and other mineral resources bringing in much less foreign exchange than Mozambique had been counting on. Coal in particular feels like a commodity of the past, given the increasing global consensus on climate change – and as we reported last week, low oil prices could jeopardise some of the plans Mozambique had made for gas-based industrialisation [SEE: Low oil prices cast doubt on Mozambique’s Gas Master Plan].
Graphite, on the other hand, looks well-positioned, as it is a key ingredient in the batteries that could provide the energy storage solution that renewables need to become a viable alternative to fossil fuels. Syrah Resources is one company looking to take advantage of northern Mozambique’s rich graphite reserves, as Zitamar News reports today.
SEE: Mozambique graphite set to supply Chinese electric cars and American steel
As ever, the investment climate in Mozambique remains highly dependent on political stability – and that seems to be slipping further out of the Nyusi administration’s grasp. Renamo leader Afonso Dhlakama’s latest stance is that he won’t enter talks until his party has taken power and can guarantee his security in Mozambique’s central provinces where he was the target of a number of apparent assassination attempts last year. Though Dhlakama’s demands change frequently, talks seem a long way off right now.
SEE: Renamo insists on Zuma’s mediation to defuse Mozambique crisis
Have a great week.