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Posted on Friday, 27 November 2015 11:00

Mozambique Country Profile 2015: New man, same party, fresh challenges

By The Africa Report

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Managing resource wealth from the energy sector and a more politically divided country in the aftermath of a rebellion by the Resistência Nacional de Moçambicana (Renamo) party will dominate events in 2015.

Filipe Nyusi, the defence minister and ruling Frente de Libertação de Moçambique (Frelimo)'s candidate in the October 2014 vote, won 57.1% of the vote while Renamo was resurgent, taking nearly twice its percentage in the 2009 elections. He will take over from President Guebuza in January 2015. Implementation of the peace agreement, under which Renamo forces are to disarm and be integrated into the police and army, will likely carry on for much of the year.

Although peace will return, the implementation, monitored by international observers, will be fraught. Renamo will almost certainly hold back arms and men and retain a military option, as it has done since 1992. Frelimo, too, may balk at depoliticising state institutions.

The opposition Movimento Democrático de Moçambique led by Daviz Simango failed to make advances, scoring less than 7% of the vote, down from 8.5% in 2009. It has a young, urban and well-educated following but has yet to shake up the national political landscape.

Frelimo moves forward

Frelimo leaders have recognised that they must have a closer dialogue with Renamo to ensure political stability. This is a rebuke for the policies of President Armando Guebuza, who will step down in January 2015 after two terms.

Guebuza, who continues as party president, will remain influential although Nyusi will begin to consolidate power and establish priorities and direction for his new administration. But Nyusi's presidency represents continuity more than change. As a new and relatively weak political figure, his presidency could see a strength- ening of the party over the executive.

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The economy is set to grow strongly in 2015. Growth will be backed by massive foreign investment in the energy sector, which will eventually make the country a significant exporter of coal and liquefied natural gas (LNG). Development of the first plants is now under way. A projected 2018/2019 start date for LNG production is increasingly distant as investors struggle with limited infrastructure and difficult operating conditions.

The government is encouraging the domestic use of gas to promote industrial development as part of a gas master plan, developed with World Bank assistance, and which would account for 25% of all production under new petroleum legislation passed in August 2014. As well as imposing local content requirements, the law requires the state to publish energy contracts, but it includes the right to exclude sensitive information.

Coal sector losses

The troubled coal sector, where miners are struggling to become profitable, highlights the country's weak infrastructure. Rio Tinto wrote off most of its $3.7bn in coal investments in 2013. Brazil's Vale is now seeking partners to reduce exposure to risk. Some relief will come for Vale in 2015 when it will begin operating its own rail line, lessening dependence on the state-owned port and rail company, and easing transport bottlenecks.

The management of resource wealth by weak state institutions will be a growing risk. The government recognises that it needs assistance from Western donors, the World Bank and International Monetary Fund for this. These problems underline the economy's dualism: under-performing traditional sectors and dynamic mega-projects that employ relatively few people.

Structural reforms to improve competitiveness and promote labour-intensive private-sector growth – the need for which is reflected in declining global ranking in the World Bank's Doing Business survey – are a low priority for the government.

Fiscal priorities, otherwise, remain focused on the social sector, including social subsidies, health and education. The sector accounted for 68.3% of spending in 2014. Growing domestic revenue independence will support the government's assertive nationalism of recent years, which has seen donor influence curtailed.

Foreign assistance accounted for 33.5% of state spending in the 2014 budget, down 17% year-on-year, due to both donor austerity and fatigue with declining standards of governance and democratic pluralism.



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