New coal giant Mozambique faces rising public anger

Mozambique is one of the world’s 10 fastest-growing economies, but its Department of Mineral Resources in Tete province still only has 15 employees, reflecting its struggle to manage resources properly.

On a recent morning in western Mozambique, a group of 500 families in the district of Moatize fed up with Brazilian mining giant Vale do Rio Doce gave up on writing letters to the government and erected blockades instead. They hauled logs across the railroad and piled stones on the highway, halting the flow of Vale's coal.

The families are among several thousand people displaced by mining activities in the region, recently discovered to hold the world's largest untapped reserves of coking coal, which is used in steel manufacturing. Vale, they said, had not honored its promises: their new houses had been poorly built, and the area where they were resettled was isolated and unsuited to agriculture.

The Mozambican government responded with riot police, and Vale's activities resumed within 24 hours, leading an opposition party to accuse the government of "betraying the people." Nevertheless, after months of silence, the protestors finally saw results: Vale promised to resolve their complaints within six months.

Driven by expanding industry in the BRICS countries – a bloc that includes Brazil, Russia, India, China, and South Africa – global coal production is set to jump by more than 50 percent before 2030. This is part of a wider boom in commodities that has driven mining and oil exploration to remote areas where it was previously considered unprofitable, often for lack of infrastructure. As a result, foreign direct investment (FDI) in Africa is expected to nearly double, to $150 billlion annually, by 2015.

Demand for minerals has made Mozambique one of the world’s 10 fastest-growing economies over the last decade, sitting alongside five other African countries on a list published by the Economist last year. Much of the growth has come through South-South partnerships like the coal projects in Moatize: financed by India and China and carried out by Australia and Brazil. 

But the quest for natural resources has brought mega-projects to governments that are often without the wherewithal or political will to manage and oversee them properly, a phenomenon known in its terminal stages as the “natural resources curse.” Within weeks of the protests in Moatize, Vale – Mozambique’s largest foreign investor to-date – was named for a Public Eye award.

The prize, sometimes called the “Nobel Prize of corporate irresponsibility," singles out corporations for destructive records on the environment and human rights, and there is little reason to believe that Mozambique will be the country to improve Vale’s corporate record. Mining investment has gone from $20 million to more than $1 billion annually since 2001, with little investment in the government agencies that oversee it, despite their ballooning workload.

Dept. in charge has 15 people, several broken motorcycles

In Tete Province, which includes Moatize, the same team that once administered a handful of prospecting licenses, is now responsible for nearly 250. Lagos Correia, chief engineer in the Department of Mineral Resources and Energy said flatly that “the reinforcement that the sector has gotten is not at the level currently required.”

His department, which oversees “geology, mapping, inspection, laboratory analysis, seismology, and small-scale artisanal mining,” has 15 people and several broken motorcycles. They share a pickup truck with other offices in the building.

It is not yet clear where revenue from the mining sector is used. Mozambican civil society groups like the Center for Public Integrity (CIP) have alleged graft and significant conflicts of interests of the part of government officials.

Last year, Mozambique’s application to join the Extractive Industries Transparency Initiative, a global ethical framework for natural resource extraction, was rejected for insufficient information about the flow of mining revenue. (Unsurprisingly, none of the other countries on the Economist’s top-10 are compliant, either).

Echoes across the continent

Mega-projects in Mozambique have been met with a chorus of criticism that echoes protests taking place across the continent: In the past year, citizens in South Africa, Guinea, Uganda, and Nigeria have taken to the streets to call for more equitable use of their countries’ mineral wealth.

A book-length report on mining in Tete published by the CIP last year argued that the net effects on the local population have been harmful, not only because of forced resettlement, but because of skyrocketing costs of living near mega-projects. Despite 7 percent annual growth over the past 10 years, the expansion of Mozambique’s economy has done little to address the country’s underdevelopment: Half of Mozambican children suffer from chronic malnutrition, and crop yields have remained stagnant in a country where 80 percent of the population are subsistence farmers.

Mozambique’s most prominent economist, Carlos Nunes Castel Branco, has shown that only 3 percent to 5 percent of profits from FDI are reinvested within the country, largely due to a string of recent tax breaks that leave many foreign companies without a tax bill for their first 15 years of operation in the country.

Even the IMF has called for Mozambique to reconsider the generous tax incentives it offers foreign capital. “These companies were drawn here by the coal, not the tax incentives,” Mr. Castel-Branco points out. Yet the government has consistently resisted calls to renegotiate the contracts it signed with multinationals investing in the country.

Isabel Pedro, a farmer who moved with her husband and six children to one of Vale’s “improved homes” in a resettlement tract last year, initially opposed moving outright.

“But the State is the State; white people are white people,” she said, laughing. For Ms. Pedro, “white people,” often used as shorthand for foreigners in Mozambique, are one and the same with the State – the same State that mediated Pedro’s resettlement. Until the government can show it has the population’s interests at heart, it may be clearing Vale’s railroads for years to come.

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