Outward Trade & Investment Mission to Maputo, Republic of Mozambique

24-30 November 2019

Executive Summary

  • Cessation of conflict between Renamo and Frelimo was agreed on the 1st of August 2019, and the peace agreement between the two parties was signed on the 6th of August 2019;
  • On the 18th of September 2019 Anadarko/Total made the official decision to go ahead with the exploration of Area 1 in the Carbo Delgado Province;
  • ENI/ExxonMobil will make a decision on Area 4 during the course of the first quarter 2020;
  • The auxiliary projects to the LNG will include huge construction projects and a substantial increase in the agricultural sector and downstream beneficiation;
  • The IMF and World Bank have come to a truce with the Mozambiquan Government and this should improve the economy moving forward;
  • The ENI offshore project is being manufactured in Singapore so there will be no work for South African companies;
  • Anadarko/Total project in Area 1 has been substantially funded by the ECIC and Standard Bank and this should create work for South African companies;
  • The Oil and Gas Logistic Base in Pemba will be fully operational by mid December 2019;
  • Local Content in Mozambique has not yet been legislated but a draft policy has been created and is under discussion. Once it is legislated the aim is that it is user friendly to potential investors, but it will be enforced by creating incentives and penalties.

Day 1  – 25th November 2019

Opening Briefing by Mandisi Mpahlwa, SA High Commissioner to the  Republic of Mozambique

The cessation on conflict between Renamo and Frelimo was officially announced on the 1st of August 2019 and on the 6th of August the peace agreement was signed by both parties. Prior to the elections a new dispensation for how provincial (eleven provinces) governments are elected was agreed to by both parties, this meant that potential governors of the provinces must now campaign for their constituents’ votes, rather than being appointed by the national government.

This took place, however, there was a split in Renamo with the military faction no supporting the leaders and this resulted in them obtaining only 21% of the national vote and all eleven provinces being won by Frelimo. The new president of Mozambique will be inaugurated on the 15th of January 2020 and the new government will take office in February 2020.

On the 18th of September it was announced by Anadarko/Total that they would move ahead with the development of Area 1 of the LNG in the Carbo Delgado province. ENI/Exxon Mobile’s decision will happen during the course of the first quarter of 2020, and this will be work an addition $30 billion. The development of Area 1 will see $20-25 billion in investment and this is double the current GDP of Mozambique.

There will be many auxiliary projects to the LNG and many of them will be in the construction and Agro-processing sectors. There is a very low skills base in Mozambique so there are many opportunities for South African companies to partner with Mozambiquan companies and opportunities for skills transfer.

The IMF and the World Bank together with the Mozambiquan government look to be reaching a truce which will add impetus to the economy.

Address by John Rocha, Chief Director, Trade Invest Africa, “Doing business in Africa”

An MOU between the dti and the Ministry of Commerce and Industry of Mozambique with a view to bilateral economic cooperation was signed in February 2019. A bi-national commission chaired by both Presidents has been established. There are many other previous projects completed by the governments of South Africa and Mozambique that have been initiated by the two governments, for example:

  • Agro-processing
  • SEZ’s;
  • Manufacturing;
  • Pharmaceutical.

Some specific project in Carbo Delgado are:

  • Rail
  • Ports Infrastructure;
  • Energy Infrastructure;
  • Road Infrastructure;
  • Water Infrastructure in Palma, Pemba, Nacala and Maputo.

Specific projects completed by the two governments working together:

  • Maputo development corridor (agreement signed 23 years ago) and all aspects have now been implemented;
  • Beluluane Industrial Park in which the DBSA invested $82.5 million, there are now thirteen countries operating in it and it is still producing benefits for Mozambique;
  • Mozal Aluminium smelter;

During the period 2014 – 2018 South Africa invested $23.4 million in Mozambique and the priority sectors, excluding the LNG are:

  • Agri-processing;
  • Fisheries;
  • Textiles;
  • Tourism;
  • Infrastructure;
  • Industrial equipment;
  • Services.

IDC’s exposure in Mozambique

  • Rovuma Basin US$100 million in four areas;
  • Total value US$150 million – $2.2 billion in the gas pipelines from Mozambique to South Africa;
  • The IDC together with ECIC are investigating giving funding to support South African export to Mozambique.

ECIC coverage

  • Capital goods and related services for Carbo Delgado, they will give a 15% down payment and then the commercial banks will provide 85%;
  •  Minimum repayment period two years;
  • Do not cover consumables or perishables;
  • $1 billion set aside for projects in the Rovuma Basin and the Anadarko/Total project;
  • They are also looking to partner with the Afrexim Bank on more LNG funding;
  • A condition to the 85% bank loan is the 50% must be local (SA) content and 20% from the host country;
  • For projects outside Africa there must be 70% SA content;
  • The ENI offshore project will have no work for South African companies;
  • The Anadarko/Total has been funded by ECIC and Standard Bank and there will be work for South African companies;
  • For the construction the main contractors are SAIPEM (75%) and McDermott (25%);

Day 2 – 26th November 2019

Visit to the Port of Pemba

The Port of Pemba has currently only one dock with a petroleum dock to the right of the port. The port is currently operating a 50 percent of capacity and they are looking for money to extend the port during the course of the next two years.

Port of Pemba 2017

Port of Pemba 2019

Oil and Gas logistics base

The necessary applications were submitted some time ago for the base to go into operation and they were expecting the go ahead during the course of the next week, and to be fully operational by mid-December 2019. The base will initially be used to facilitate the transportation of construction materials for the on-land site in Palma and the off-shore rigs in Area 1 (Area 1 is part off-shore and part on-short). Finally, it will be the port for the transportation and off loading of oil and gas.

Logistics Base 2017

Logistics Base 2019

Visit to Regis Mozambique (Wessel Stander)

Regis offer:

  • Safe and efficient onshore logistic services;
  • Rental of heavy-life equipment;
  • Flatbed and lowbed trucks and trailers for hire;
  • Procurement and project management;
  • They also have 34,085m₂ if land available for development, they are already hosting both Saipem and Form-scaff on these premises.

Briefing by Wessel Stander

In addition to the LNG project, Pemba has a ruby mine and a graphite mine and there is the potential for a gold mine. Area 1 on the LNG is part off-short and part on-shore and the off-shore rig is being constructed in Singapore. The residential camp has been given to Wilson-Bailey Homes.

For the onshore portion of Area 1 (Total is the operator), the key contractors are Saipem and Fluor and they will sub-contract portions of work to other companies. Note that Saipem is currently using their Milan office as a base for the project but will move to Mozambique some time next year.

With regard to the sub-contractors, of which Regis in one, the observe the following procedure:

  1. Will do due diligence on all potential suppliers;
  2. They will also look the ‘local content’ of the work to be done and whether the sub-contractor is Mozambique registered or not;
  3. Once a company has been selected, they will tell it what indemnity is required, Regis’s indemnity cover is costing between $8000-$9000 per month.

Visit to LBH Group

LBH offers a multipurpose liner service to Mozambique and countries along the East African coast. They currently offer vessels once a month to the ports of Durban, Nacala, Pemba, Mocimboa da Praia and Mombasa.

Day 4 – 28th November 2019 (Day 3 was used to travel from Pemba to Maputo)

Update on ExxonMobil Rovuma LNG Project – ExxonMobil

The Rovuma Basin is estimated to have 85 trillion cubic feet of gas reserves that should last more than 25 years, with the production at 7.6 metric tons per annum ExxonMobil have had to increase the size of the train(s) that will transport the LNG and this now makes the finished train the largest in the world. Their development plan has been approved and the reserves will produce 8 times the energy of Cahorra Bassa in terms of energy.

The final plant will require 40,000 tons of steel and the onshore plant will be 200,000 m₂ during construction this will require 20,000 employees and they would like 25% of them to be Mozambiquan. They want to percentage of local working on the project to be over 90%, and during the construction phase they will train Mozambiquan’s in the required skills, they have developed tailored training schools for this purpose.
100% of the off take has committed buyers and the target for start-up (production) is 2025. The EPC contract has been awarded.

The rest of the day was taken up by ‘diplomatic’ speeches and business to business meetings.

Day 5 – 29th November 2019 – presentations at the Hotel Gloria

Brief from Ben Cavel, Total

  • Area 1 of the LNG project belongs to Total and the biggest ‘well’ of gas is between Area 1 and 4 – so it is a shared reserve and the Mozambiquan government has decided who will take what.
  • The Afungi Site improvement project is a construction on some 556 houses for the relocation of residents of Carbo Delgado;
  • Total have employed 4 consultants to teach these relocated people how to live in a formal community – they have never done so before;
  • The employee camp has been increased from 400 beds to 1150 beds and at the peak there will be 14,000 workforce;
  • The Palma Afungi highway is now open;
  • The onshore EPC (Engineering, Procurement and Construction) contract has been awarded to a JV McDermott/Chiyda/Saipem;
  • The offshore EPC has been awarded to Techni FMC and VanOord;
  • Total has a strong focus on local content;
  • In November 2018 Anadarko/Total did a skills assessment around Mozambique, they identified some individuals who met their needs and others that could be trained to fulfil their needs;
  • Local contents will be assessed on: Local workforce, local procurement, support of government institutions;
  • Any contract awarded for a period longer than 6 months has a legal requirement that you register a company in Mozambique.

Brief from ABSA Mozambique

  • ABSA currently have 44 branches in Mozambique and is the fourth biggest bank in the market;
  • They focus on having relevant partners for their bank and do not want to be the biggest in the market.

Oil and Gas overview

  • $800 million has been committed to the LNG project;
  • ABSA issue regular assessment reports on this sector.

Agricultural sector

  • Population on Mozambique is around 31 million people;
  • By 2035 this will increase to around 38 million people;
  • This equates to 50 thousand meals in the Carbo Delgado alone and 90% of this is imported from South Africa;
  • Only 2% of food producers are farmers the rest are small inefficient individuals;
  • 90% of the food is of poor quality due to low mechanisation;
  • Mozambique needs more downstream beneficiation in the agricultural sector.

Brief from SAIPEM

  • Major shareholder in the CCS JV;
  • It is it’s fourth month of construction and will go on for the next five years;
  • They intend employing 5000 Mozambiquans;
  • Their suppliers page is: http://www.mzlng.com/

Brief from the Local Content Commission – Florival Mucave, President Local Content Commission, CTA

  • Mr Mucave worked as the draftsman of the Local Content Policy;
  • The pillars of the proposed local content legislation are:
    o Employment;
    o Training and Capacity building;
    o Transfer of Technology and know-how;
    o Local participation.
  • The enforcement of this legislation, when passed, will take the form of incentives and penalties;
  • The LCC want to make the legislation friendly to potential investors.

Brief from FNB

  • There have been large investments in the LNG made by First Rand already;
  • FNB are the largest investment bank on the African Continent.

Appendix  – Things that have happened since my return

Mozambique: Renamo priority is to complete demobilisation – AIM report

Ossufo Momade, the leader of Mozambique’s main opposition party, Renamo, declared on Wednesday that the demobilisation of the members of the Renamo militia is one of his main priorities, but this process should allow the beneficiaries to return to their homes with some dignity.

According to a report in Thursday’s issue of the Maputo daily “Noticias”, Momade was speaking in the Dutch city of the Hague at a meeting with the Director of the Dutch Institute for Multiparty Democracy (NIMD), Thijs Berman, as part of a working visit to Holland that he began on Monday.

“The demobilisation of the soldiers is a priority for Renamo”, Momade said. “But our soldiers are still in our bases because this is a process which should unfold in a decent fashion. Our demobilised soldiers should go home with dignity”.

He said demobilisation requires a great deal of patience and attention, and so Renamo is insisting that its men should be recruited into all branches of the defence and security forces, including the State Intelligence and Security Service (SISE).

The demobilisation and disarming of the Renamo militia should have been completed by now – but there has been little visible progress since Momade signed a peace agreement with President Filipe Nyusi on 6 August. Even the dismantling of Renamo military bases, which should have happened by 21 August, appears to have stalled – there has been no announcement that a single base has been dismantled,

Momade also reiterated that Renamo has nothing to do with the recent ambushes on the main roads in the central provinces of Manica and Sofala.

“The attacks occurring in the country, particularly in the central region, have nothing to do with Renamo”, he insisted. “They (the attackers) say they don’t agree with Ossufo, and they attack the public, vehicles and even institutions. What have these targets got to do with opposition to Ossufo Momade?”

It is widely believed that the dissident group calling itself the “Renamo Military Junta” has carried out the attacks. The Junta denounces Momade as “a traitor” and claims that its leader, Mariano Nhongo, is the true President of Renamo.

“These people (the Junta) are acting on their own account”, said Momade. “Renamo remains focused on the demobilisation, disarming, and reinsertion into society of our forces”.

He explained that his visit to Holland is intended to seek out partnerships that will contribute to the construction of a “more consistent” democracy, which guarantees the welfare of Mozambicans.

“We want our party to grow and become even stronger”, Momade said. “And in the municipalities that we are running, we want to set an example of good governance, through transparency, and through improving the quality of life of the population”.

Renamo, he added, “will continue to work so that the people feel they own their country, and there is no harassment or limitation of opportunities because of political party allegiance, the province where people live, their religion or their skin colour”.

On Wednesday, Momade also visited the Dutch parliament. He is scheduled to meet with representatives of the Foreign Ministry, and of Dutch political parties, as well as with municipal managers and academics.

Mozambique: Total shares more business opportunities

The major contractor charged with the construction of the Total-led Mozambique LNG Project’s initial two train development, along with five of its major subcontractors, have this week presented themselves to business communities in Maputo and Matola.

The organisations presenting at the seminar were:

– CCSJV – contracted for the overall engineering, procurement and construction of the LNG facility

– IFS – Camp Management

– Garda World – Security Services

– Gabriel Couto – Roads Construction

– I-SOS – Medical Services Provider

– Renco Dorce WBHO Consortium – Camp Construction

Each was asked to present its forward plan for the procurement of goods and services and the required standards.

Total’s Mozambique Country Chair, and Managing Director of the Mozambique LNG Project, Ronan Bescond says the dissemination of information relating to contracting opportunities with the Project is a core pillar of its local content plan.

“We want to make sure that local business has the information they need to bid and succeed”.

“The Project expects to award contracts of up to $2.5 billion to Mozambican owned or registered companies over the five-year construction period. This represents more than one third of our total onshore contract, with the bulk of the rest being spent on highly specialised, technical goods and services that cannot currently be sourced in Mozambique.

“We already have a very clear idea of how we will allocate about half of that 2.5 billion commitment, including how we will spend the first $750 million with locally owned companies”.

“This is great progress as FID was only taken in June which means the vast majority of contracts have not yet been awarded.”

Erik Prince’s FSG quits Mozambique oil and gas logistics venture (17 December 2019)

  • Chinese owners decided to pull out of joint venture, ENH says
  • Mozambique is to draw about $60 billion in gas investments

Frontier Services Group Ltd., the Hong Kong-based company founded by Erik Prince, has decided to quit a logistics joint venture with Mozambique’s national oil company, even as the country readies to receive about $60 billion of investments in natural gas export projects.

The Chinese majority shareholders in FSG decided to withdraw from the partnership that was called ENHL – Frontier Service Group Lda., Omar Mitha, chairman of Mozambique’s state-owned Empresa Nacional de Hidrocarbonetos EP, told reporters Tuesday in Maputo, the capital. FSG is yet to formally communicate the decision, he said. The company didn’t immediately respond to an email seeking comment.

“The partnership no longer exists but it was their decision,” Mitha said. “They’re are no longer interested in the business. We’re OK with that.”

Prince, who founded and sold private military company Blackwater Worldwide, which won hundreds of millions of dollars in contracts from the U.S. government during the Iraq and Afghanistan wars, also had a fishing joint venture with a Mozambican state-owned company called Ematum SA, which has faced delays.

Prince had also planned on providing security services in the southeast African nation, he told reporters in 2017. Companies including Exxon Mobil Corp. plan on investing about $60 billion in massive offshore natural gas resources discovered nearly a decade ago off Mozambique’s northern coastline.

FSG in July this year registered a security services company called FSG Mozambique Segurança Lda. in the country, with Lucílio Matsinha as a 51% shareholder, according to the government gazette. Prince is a minority shareholder in FSG and an executive director.

https://www.linkedin.com/posts/club-of-mozambique_tenders-activity-6614837359190126592-bgHl/

Mozambique: Nyusi promises to “use all means” to contain armed violence in Cabo Delgado (19 December 2019)

Mozambican President Filipe Nyusi said yesterday that he will “use all means” to contain the armed violence in Cabo Delgado, northern Mozambique, as the attacks are a blow directed at the rule of law.

“We will not rest and we will use all possible means to ensure that our citizens enjoy the peace and tranquillity they deserve [in Cabo Delgado],” the Mozambican head of state said during a reception for Mozambicans in the diaspora at the Ponta Vermelha Palace in Maputo.

The Mozambican president said the armed attacks carried out by as-yet unidentified groups in Cabo Delgado are an attack on the Mozambican state, causing suffering in communities.

“These groups of evildoers perform criminal acts like destroying crops and houses and beheading men and women, among other macabre things,” President Nyusi said.

The Mozambican head of state asked everyone involved to engage in finding solutions, because the armed violence was undermining the country’s development.

“We express our condemnation of all these acts, which constitute an attack on our democratic rule of law and our people,” he said.

Russia’s VTB Sues Mozambique State Firm at Center of $2B Debt Scandal (7 January 2020)

The Mozambican firm took a loan from VTB as part of a costly project that U.S. authorities say was an elaborate front for a bribery and kickback scheme.

Russian state lender VTB has filed a lawsuit in Britain’s High Court against a Mozambican government company it lent hefty sums to as part of a project now at the center of a $2 billion debt scandal, an online court filing shows.

The filing, dated Dec. 23, names as defendants the Mozambique state and Mozambique Asset Management, which took a $535 million loan from VTB as part of a costly project that U.S. authorities say was an elaborate front for a bribery and kickback scheme.

It says the case relates to “general commercial contracts and arrangements” but does not elaborate. It provides no further information other than that VTB Capital, the investment banking arm of VTB, is being represented by law firm Freshfields Bruckhaus Deringer.

It does not state whether the case relates to the loan, which Mozambique and VTB had been trying to restructure. The deputy head of the legal department of VTB Capital said in October the loan represented a “significant exposure” it expected to be repaid.

Mozambique’s National Energy for All Programme begins in the first quarter of 2020 (7 January 2020)

The construction work for the first phase of the electrification of Mozambique, as part of the “National Energy for All Programme” (ProEnergia), which aims to ensure that all citizens have access to electricity by 2030, begins in this quarter, Mozambican weekly newspaper Domingo reported.

ProEnergia, launched in November 2018 by the President of the Republic, Filipe Nyusi, has an estimated cost of approximately US$5 billion, which will be allocated to Electricidade de Moçambique (EDM) and the Energy Fund (Funae).

The programme is intended to solve Mozambique’s current situation, in which only 30% of the population has access to electricity. The weekly reported that the government has already managed to raise US$300 million for the implementation of the first phase of electrification.

This phase of the project, which runs until 2021, is intended to provide between 350,000 and 400,000 new connections, through a combination of systems within and outside the national power grid and basic conditions to ensure the implementation of the programme and achieve universal access by 2030 are now being implemented.

Mozambique: Rain and war block Cabo Delgado – By Joseph Hanlon (20 January 2020)

Torrential rain during more than two weeks has cut off northern Cabo Delgado, while the civil war continues.

The main – and only reasonable – road from Pemba north to the gas developments of Palma runs through Macomia to Mocimboa da Praia. But on 28 December flood waters washed out pillars causing several sections of a major bridge over the Montepuez river in Quissanga district to collapse. Two days later the rains also washed out a bridge over the Messalo river on the same road, in Muidumbe district.

The normal distance from Pemba to Palma by the washed out bridge is 400 km. The only route open at the moment goes a long way inland via Montepuez and Mueda; it is 600 km long of which 200 km is dirt, and is passible only by large 4X4 vehicles. Attempts are being made to bypass the Montepuez river bridge but that will take at least two more weeks.

Palma airport has re-opened and at least three companies are offering flights between Pemba and Palma.

Flooding on the Messalo river also swept away a pylon on the electricity transmission line running from Macomia to Ouasse on Monday (13 Jan). Power to the districts of Muidumbe, Nangade, Mueda, Mocimboa da Praia and Palma was cut and is unlikely to be restored until Tuesday. (Noticias 16 Jan)

The EDM northern director of transmission, Felisberto Uissitomo, said the material and equipment needed to cross the swollen Messalo has been mobilised. Vehicles cannot reach the site of the fallen pylon. All the cables and other equipment needed must be carried on porters’ heads for about ten kilometres. There are also security concerns as the site is within an area that has been affected by insurgent raids.

Guerrillas last week attacked a Land Cruiser near Chapa village in Mueda district on the road from Mueda town to Montepuez – the only open road from Pemba to Palma. (Carta de Mocambique 17 Jan)

No one was killed or injured in the attack, which was carried out by people wearing police uniforms, believed to have been stolen. This is the second attack in Mueda district; the first occurred in November in Nastengi village.

Last week’s attackers are thought to be the same group which, a few days before, attacked Magaia village in Muidumbe district.

Hull of FLNG unit ready for launch (15 January 2020)

The Italian energy company ENI, in coordination with Mozambique’s National Hydrocarbon Company (ENH), plans to launch on Tuesday the Floating Liquefied Natural Gas (FLNG) unit that has been under construction, at the naval shipyard of Samsung Heavy Industries, in the South Korean city of Busan, since March 2018.

Cited by Radio Mozambique, project manager Luca Faccenda said the hull of the unit “is particularly important since it will contain the LNG. This is the ship that will produce the liquefied gas, and that liquefied gas will remain stored on board the ship”.

The hull is 43 metres long and 66 metres wide. Its storage capacity is 234,000 cubic metres. The annual production from this unit should be 3.4 million tonnes of LNG.

“We are ready to launch the hull into the water, which is a very specific activity for a ship with these characteristics”, said Faccenda. It will take many hours, starting on Monday night (Korean time), and ending at about 08.00 on Tuesday.

When the vessel is complete and fully tested, it will be towed to the Mozambique Channel, where it will float above the Coral South gas field, in Area Four of the Rovuma Basin, off the coast of the northern province of Cabo Delgado.

Lesley Squires
11th December 2019