No.232, 20th May 2002
Minister of Mineral Resources and Energy, Castigo Langa, on 13 May signed, with a group of foreign investors, the project implementation agreement for the Limpopo Corridor Sands project, in the southern province of Gaza. This project received formal approval from the Mozambican government last week.
The project is for the mining and processing of heavy mineral sands in Chibuto district, in the Limpopo valley, about 190 kilometres north of Maputo. Chibuto contains the largest known deposit of titanium bearing sands in the world, which was discovered about four years ago.
Corridor Sands will mine the mineral ilmenite (iron titanium oxide), which is then smelted into titania slag, which is sold to the pigment industry. Other products from the mine will be rutile (which is 95 per cent titanium dioxide, and can be used directly by pigment manufacturers and titanium metal producers), zircon (zirconium silicate, used in the ceramics industry), and high purity iron, which is the by-product of ilmenite smelting.
The company that will mine the deposit, Corridor Sands Limitada, is wholly owned by the Southern Mining Corporation of South Africa. But once there is full project approval from their shareholders, Western Mining Resources of Australia will take a 54 per cent stake in Corridor Sands, and the Industrial Development Corporation (IDC) of South Africa 10 per cent, leaving Southern Mining with 36 per cent.
Western Mining's General Manager of Projects, Ian Smith, told the signing ceremony "Development of this project has the potential to position Corridor Sands and Mozambique as a major supplier of titanium feedstocks to the world throughout the 21st century".
Initial production will be 375,000 tonnes of titania slag a year, rising to a million tonnes a year at peak production. At full production, this one mine is expected to be producing 20 to 25 per cent of the titanium used throughout the world.
"This is one of the key metals of the 21st century", said Smith. "In the next five to ten years, people expect consumption of titanium metal to increase considerably. Titanium metal is the same strength as steel, but much lighter, and it is non-toxic and non-carcinogenic".
Total funding requirements for the first phase are around $495 million, but for the complete project the requirements rise to around a billion dollars. The investors expect that not less than 40 per cent of this will be equity, In the coming months negotiations with banks will be undertaken to ensure that all the funding will be available so that construction can start in early 2004.
The project takes a long view. Smith said it would take two years of construction before the first furnace was installed, and 12 years before all eight furnaces envisaged were operational.
The mining and smelting operations will last for at least 50 years, possibly much longer, depending on the exact size of the deposit.
Langa said that Corridor Sands would make a significant addition to Mozambican exports, and would generate considerable employment. The construction phase will involve 3,000 jobs, and construction activities will continue for some ten years at a lower level, with about 1,000 workers. There will be 800 permanent mining and smelting jobs.
Langa stressed the indirect impacts on the Chibuto economy, arising from the infrastructures needed for the mine. There will be either a new railway, to carry the minerals to Maputo port, or a new mineral jetty will be built on the Gaza coast.
The project will consume large amounts of electricity (149 megawatts at full production). Langa said initially a line will be built from the MOTRACO power station to Chibuto (MOTRACO is a joint venture formed by the Mozambican, South African and Swazi electricity companies initially to supply power to the MOZAL aluminium smelter on the outskirts of Maputo).
"At a later phase, another line from South Africa will be needed to strengthen the availability of power", said Langa.
Looking into a more distant future, when a new dam is built at Mepanda Ncua on the Zambezi, there will be a transmission line from that dam to Beira and Maputo, which could also be used to supply Chibuto. The electricity made available though these various lines, "will doubtless also supply other projects", said Langa.
The investors sought to calm environmental fears. Rob Still, Chief Executive Officer of Southern Mining, denied that Corridor Sands would leave an enormous hole in Chibuto. For only a small percentage of what is dug out is ilmenite, rutile or zircon. The rest is simply put back. As the work advances, so the area just mined is filled in again.
The Italian government on 16 May announced that it is writing off Mozambique's public debt to Italy, estimated at $400 million.
The announcement was made by Alberto Michelli, a personal envoy of Italian Prime Minister Silvio Berlusconi, after a meeting with President Joaquim Chissano.
Michelli said the amount involved is 80 per cent of a total debt of $500 million. The remaining $100 million is private debt.
"We're ready to sign the cancellation of the debt, in June at the FAO (United Nations Food and Agriculture Organisation) conference in Rome", he told journalists.
The Mozambican and British governments on 15 May formalised the cancellation of all of Mozambique's remaining bilateral debt to Britain in a brief ceremony in Maputo.
The amount cancelled was £105.6 million (about $152 million). The debt was largely incurred through export credit guarantees.
Foreign Minister Leonardo Simao said the decision to cancel the entire debt was taken by the British government "in the spirit of enhanced HIPC" (phase two of the Heavily Indebted Poor Countries debt relief programme, the completion point of which Mozambique reached in September 2001).
Simao said he had been involved in discussions with the British government to reduce the debt since 1997, "in order to make savings that could give impetus to our education, health and roads programme".
The British government was represented at the exchange of notes by Baroness Valerie Amos, the Minister of State in the Foreign Office with responsibility for Africa. She said that Britain "has been very impressed with the work of the Mozambican government in putting together its poverty reduction strategy".
She hoped that the health and education programmes vital for poverty alleviation would be given "added impetus" by the debt cancellation.
Mozambique and the Fund for International Development of the Organisation of Petroleum Exporting Countries (OPEC) have signed an agreement under which the OPEC Fund has cancelled $7.7 million of debt owed by Mozambique.
This debt relief is the OPEC Fund's contribution to the original HIPC (Heavily Indebted Poor Countries) initiative for Mozambique.
The Fund has also pledged to cancel a further $1.2 million of debt under phase two, or "Enhanced" HIPC.
The Fund has been cooperating with Mozambique by providing soft loans for the development of the education, health, energy, roads and other sectors.
The government of the United States intends to provide assistance in finalising an agreement on the management and rehabilitation, by the private sector, of the northern port of Nacala and the Nacala-Malawi railway.
This pledge was given by the US Assistant Secretary of State for African Affairs, Walter Kansteiner, during a regional meeting of Transport Ministers, chaired by Mozambican Minister Tomas Salomao, in Nacala, on 12 May. The meeting was attended by the ministers from the other two countries served by the Nacala Corridor, Malawi and Zambia, and the US ambassadors to Mozambique and Malawi.
Among other issues, the meeting was to discuss plans for rehabilitation of the railway line, which currently serves mainly Malawi.
Addressing the meeting, Kansteiner called for the involvement of the private sector in developing the Nacala Corridor.
While in Nacala, Kansteiner and his delegation visited the port and discussed with the Mozambican authorities the plans for the rehabilitation of the railway.
Kansteiner's delegation also included Peter Watson, the chairperson of the Overseas Private Investments Corporation (OPIC). As an autonomous institution, OPIC has the task of supporting American companies in their investments abroad through loans, and insurance against political risks.
During his stay, Kansteiner also visited the Cahora Bassa dam on the Zambezi, the Niassa reserve, in the far north of the country and the Bazaruto archipelago, off the coast of the southern province of Inhambane, in order to obtain "a better understanding of Mozambique's development potential, and to promote American private investment".
The United States government has disbursed a $26,000 donation intended to support a refugee camp in the northern province of Nampula.
The grant, to be managed by a US Christian NGO, World Relief/Mozambique, will be used in the purchase and installation of water tanks, and the financing of micro-credit projects for the refugees, who are mostly from the Great Lakes region.
The American ambassador Sharon Wilkinson announced the donation in Nampula where on 14 May she inaugurated the refugee centre.
The camp was set up by the Mozambican government in coordination with the United Nations High Commissioner for Refugees (UNHCR) to house asylum seekers from the Great Lakes who are currently accommodated in two centres in Maputo, and in Nampula.
The Islamic Development Bank (IDB) has granted Mozambique a loan of $30 million to finance the transmission lines that will carry power from the Cahora Bassa dam on the Zambezi to the northern province of Cabo Delgado, according to Abdul Kha Leck of the Islamic Council of Mozambique, cited in "Noticias" on 10 May.
The money will be used for transmission lines to the main Cabo Delgado cities of Pemba and Montepuez, which currently depend on obsolete and expensive oil fired generators.
The IDB has also approved a fund of $5.3 million for the building of 60 schools in Cabo Delgado, Niassa and Nampula provinces. This bank has also allocated $3 million for the construction of 15 health centres, again in Cabo Delgado and Niassa.
Kha Leck said that the IDB management expressed willingness to provide more support for Mozambique's development - but claimed Mozambique lacked the internal capacity to carry forward the projects financed by the IDB with the desired speed. In some cases, IDB money had been available for four year, but the projects had not advanced.
The IDB has also financed overtly religious projects, namely building and equipping four Islamic centres (in Nampula, Angoche and Pemba in the north, and Matola in the south) intended to publicise and promote islamic culture and religion.
The United Nations World Food Programme (WFP) has pledged 21,600 tonnes of foodstuffs to be distributed to about 400,000 people affected by drought in central and southern Mozambique, according to the WFP Information Officer in Maputo, Inyene Udoyen.
Udoyen told AIM that the food aid, notably maize, is to cover the period from May to July. There are fears that there could be a severe food shortage in some provinces, a situation which might put the lives of thousands of needy people in danger.
The food aid will cost the WFP about $11 million, and the foodstuffs will be distributed in 37 districts affected by the drought.
The 2001/2002 agricultural year has been characterised by poor rainfall, mainly in the central and southern regions, leading to the loss of many crops. It is calculated that about 400,000 people have used up all their food stocks.
Assessments carried out recently by the Mozambican government, the WFP, the UN Food and Agricultural Organisation, and the International Institute for Harvest Research in semi-arid areas indicated that the situation in the country is worsening, and many more people will require food aid.
Most of the country's rural population practice subsistence farming, and have no access to other means of earning an income.
The governor of the southern province of Inhambane, Aires Aly, has suspended Izidoro Rosa Loforte from his post as administrator of Panda district following a number of irregularities detected during Aly's recent visit to the district.
Aly would give the paper no further details, saying only that "this suspension is to allow investigations into the findings of my recent visit".
However, government sources explained to reporters that, besides the poor performance of his administration, Loforte is also accused by the provincial Planning and Finance Directorate of mismanagement of funds, to such an extent that the local government offices in Panda do not have even one working telephone.
The directorate notes that the district did not bank any money during the whole of the past year. All the money collected was used and no documents were produced to justify the expenditure.
Loforte is also accused of appointing unqualified staff to posts as finance managers, without any training.
In Inharrime district, in the same province, Aly heard complaints by the local residents, particularly in the locality of Chacane, against the local state officials, who are accused of behaving more like business people than civil servants.
"We have no technical staff to assist in agriculture, and the district directors are no more than business people or tourists, who spend the time in Maxixe and Inhambane towns", complained the residents.
In reaction, Aly threatened to "get rid of" district leaders who behaved like "tourists". He said "we should be serious and set an example. We should work to relieve people's suffering. We should stop playing around. The provincial directors should control the use of the available scarce resources. Vehicles are to go to localities as Chacane, Cogune, and Zavora, not to Maxixe or Inhambane".
Despite the complaints, Aly commended the local residents for their efforts in the fight against absolute poverty, particularly in mitigating the negative effects of the drought, currently hitting much of southern and central Mozambique.
Three tantalite mines, closed in the 1980s during the war of destabilisation, are to be reopened at the end of this year in the central province of Zambezia.
These mines, at Morrua, Moiane and Marupine, are currently undergoing restoration work, as part of the efforts to reactivate the Mozambican mining sector.
According to Estevao Pale, National Director of Mines in the Ministry of Mineral Resources and Energy, mining currently only accounts for between one and two per cent of Gross Domestic Product (GDP), and only three per cent of the value of Mozambican exports. Speaking to reporters on 10 May, at the end of a meeting of the Ministry's Coordinating Council, he said that these figures were insignificant, bearing in mind Mozambique's mineral potential. Pale believed that, as a result of the rehabilitation measures under way, and the law on mining passed last month by the country's parliament, the Assembly of the Republic, the share of the mining sector in GDP could rise to 10 per cent.
Among the activities to boost the sector is an institutional capacity building project, budgeted at $33 million, aimed at supporting small scale mining, training, inspection, and environmental education, as well as geological assessment, which is essential for reaching a correct understanding of the country's mineral resources.
There are some parts of the country, notably the provinces of Niassa, Sofala and Gaza, where in-depth geological studies have never been carried out.
Prime Minister Pascoal Mocumbi on 16 May confirmed that the government has cancelled the monopoly granted in 1996 to Mozambique Airlines (LAM) on the domestic "backbone route" between the five main cities, Maputo, Beira, Quelimane, Nampula and Pemba.
LAM is, in theory, a private company, but currently 100 per cent of its shares are owned by the Mozambican state. Potential competitors, notably the privatised light aircraft company TTA, have always complained bitterly against the LAM monopoly on the most profitable domestic routes.
The government's decision, Mocumbi told a press briefing, "takes into account the liberalisation of air transport and the undertakings that Mozambique has signed up to internationally".
He did not think LAM would necessary lose out, provided it had "a dynamic management", and was able to enter into agreements with a strategic partner. In today's world of civil aviation "it is rare to find airlines that are not associated with other, strong partners", said Mocumbi.
Widespread smuggling of sugar has led the Sena sugar company at Marromeu, in the central province of Sofala, to threaten to lay off part of its 6,000 strong work force. The company warns that redundancies are inevitable, if serious measures are not taken against the contraband of sugar, mainly from Zimbabwe and Malawi, Anton de Waal, the director of projects at the sugar mill, told AIM that the company cannot survive while it faces problems in marketing its sugar owing to the glut of smuggled sugar.
The contraband Zimbabwean and Malawian sugar has paid no taxes or duties, and is sold at prices lower than those that the Sena company can charge for its product.
In the past few years there has been a significant investment to rehabilitate the Mozambican sugar industry, and investors have yet to recover the $300 million ploughed into the sector. The threat to lay off workers shows the frustration of the Mauritian investors at Marromeu at the failure by the authorities to contain the smuggling.
De Waal deplored the government's inefficiency in curbing contraband, saying that even with the resources allocated by the company to the customs services the smuggling has not been curtailed. Last year the company provided the Mozambican state with vehicles and means of communication, "but, even so, we continue to watch every day the entry of large amounts of smuggled sugar into the country", he said.
To indicate how seriously smuggling is hurting his company, de Waal said that after the formal inauguration of the rehabilitated mill last October, it had produced, by January, 16,000 tonnes of sugar, and intended selling 4,000 tonnes per month. But from November to January the Sena company only managed to sell 1,000 tonnes a month.
Compounding this, international sugar prices have plummeted. When the company decided on investing, a tonne of sugar fetched $405, but it has now dropped to $380.
Asked if a possible alternative was to export the sugar, de Waal said that it is not in the interest of his company to export because the international market offers lower prices than the domestic one.
De Waal warned that contraband is not just a problem for the Sena company. It affects all four of Mozambique's sugar companies which between them employ more than 25,000 people.
The Mozambican government has accepted the proposal for a 22 per cent increase in the statutory minimum wage.
Consensus on a 22 per cent rise was reached on 6 May at a meeting of the tripartite negotiating forum between representatives of the government, the trade unions and the employers' associations.
A meeting of the full cabinet on 7 May decreed a 22 per cent rise for all sectors of the economy. This means that the minimum wage in the industrial and service sectors rises from 665,707 to 812,163 meticais ($34.2) a month.
But agricultural wages are much lower. The 22 per cent rise pushes the minimum agricultural wage from 459,222 to 560,251 meticais ($23.6) a month.
The crippled ship, the "Lissom", has finally left Mozambican waters, after a stay of three months in Maputo port.
The "Lissom" was towed into the Indian Ocean on 18 May, heading for a Pakistani scrap yard. But the "Lissom" has left behind some headaches for the local authorities. The ship, travelling from China to West Africa, caught fire on the high seas and its crew was evacuated. At the time, the "Lissom" was carrying a cargo of 22,000 tonnes of rice. A Russian tug towed it into Maputo port in February, where most of the cargo was transferred to another ship which then took it on to its original destination.
However, some 800 tonnes of rice remained in the "Lissom"'s holds - and when the ship was left unguarded in the port's "waiting zone", it was looted. Local residents took small boats out to the "Lissom", boarded it and stole every grain of rice they could lay their hands on.
When samples of this rice were submitted to laboratory tests, it proved unfit for human consumption. Although the authorities have warned that the rice poses a serious threat to public health, very little has so far been recovered.
The Maputo provincial attorney, Arone Nhaca, is investigating those who were responsible for leaving the ship abandoned, and in an area where it was so easy to board.
Faced with large scale defaulting on debts, the Mozambican government's National Cashew Institute (INCAJU) is imposing new conditions on peasant farmers who want their cashew trees treated with chemicals to combat fungal diseases.
According to a report in "Diario de Mocambique" on 17 May, any peasant who now wants INCAJU to spray his trees must pay 50 per cent of the cost up front.
The northern regional delegate of INCAJU, Filomena Muaiopue, told the paper this switch in policy was necessary because, when the entire spraying was financed on a loan basis, farmers simply did not repay the money. During the last two years, "we didn't get even a minimum return on the investments made", said Muaiopue.
In the coming campaign, the chemical spraying of one cashew tree will cost 33,000 meticais (about 1.4 US dollars). Given the poverty prevailing in the Mozambican countryside, the likelihood of many peasant farmers being able and willing to pay for the chemical treatment of their trees in advance is remote.
In the major cashew producing region, the northern province of Nampula, 800,000 trees were sprayed last year, and 300,000 in the year 2000. This year the target is 1.3 million, but the new payment methods must call that figure into doubt.
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