Mozambique this week: Monetary policy, gas project delays, coal logistics, and political déjà vu
Hello, and welcome to the first Zitamar Newsletter of 2016 – we trust you had a good break and are settling in to a productive new year.
In Mozambique, after the publication last Friday of the IMF report that accompanied the Fund’s decision to grant Mozambique a $280 million emergency credit facility, the main news of the week is arguably yet to come with the central bank’s January monetary policy decision due later this afternoon.
After 2015 inflation made a late push in December to break through the psychological 10% barrier, will the Bank of Mozambique’s lending rate follow suit from its current level of 9.75%? Experts we asked agree that a rate cut, at least, is out of the question – and that if the central bank doesn’t hike today, it will do so soon enough.
SEE: Bank of Mozambique expected to tighten further as pressures remain
The IMF is optimistic that the Bank could start rebuilding its dollar reserves later this year, but one ‘tail risk’ it identifies is that Anadarko and Eni’s offshore gas projects in the Rovuma Basin do not in fact take their final investment decisions in 2016. In a week that saw the global oil price drop below $30 for the first time since 2004, Bloomberg Economist Mark Bohlund sees this as a real risk – arguing that the LNG projects in Mozambique and Tanzania are “among those most at risk of cancellations or delays” due to their higher costs compared with others around the world.
If so, perhaps a revitalised coal sector could ride to the rescue, but the ongoing expansion of the Sena railroad from Tete to Beira is unlikely to help due to a bottleneck at Beira port which will not be resolved any time soon. As Zitamar News revealed on Monday, even if the latest of numerous deadlines for the Sena line expansion – the first half of this year – is met, the port can’t handle any more than the existing rail line can already deliver. Although a planned expansion of Beira coal terminal is on the table, inertia in government and, we hear, at rail company CFM and port operator Cornelder mean it won’t happen until the start of the next decade at the earliest.
SEE: Beira port expansion lags behind expanded Sena rail capacity
In other coal news, Ncondezi Energy’s pit-to-power project in Moatize district has received a boost by signing up Shanghai Electric to take a 60% stake and to take over development of the project. The Chinese have a strong track record of project execution in Mozambique so far, and their enthusiasm for Ncondezi – in the context of China’s global ‘One Belt, One Road’ strategy, as Zitamar highlighted last year – could herald a new push to get the CESUL transmission project, to take power from Tete to southern Mozambique, off the ground.
SEE: Shanghai Electric closing in on 300MW Tete power plant deal
Finally, on the political front, the turn of the year brings a sense of déjà vu. Renamo leader Afonso Dhlakama continues to reject 2014’s election results and is alternating between solemn promises to take power by force imminently, and calling for talks with Frelimo, this time mediated by the Catholic Church and Jacob Zuma; meanwhile President Filipe Nyusi is expected to use the Frelimo Central Committee meeting in early February to consolidate his power and marginalise the influence of Guebuza loyalists. Sound familiar?
Happy New Year!
This week's stories: