CTA accuses Mozal of destabilizing business environment

Maputo, 26 Aug (AIM) – The Confederation of Mozambican Business Associations (CTA) has accused the Mozal aluminium smelter, on the outskirts of Maputo, of destabilizing the country’s business environment after it threatened to close down.

Mozal’s threats follow a dispute with the government concerning the price at which it must buy electricity. At Mozal, aluminium ingots are produced from alumina imported from Australia. The main local input is electricity, which is generated at the Cahora Bassa dam on the Zambezi, in the central province of Tete.

The contract under which Mozal buys Cahora Bassa power expires in March 2026. Negotiations for a new contract appear to have broken down, leading the main shareholder in Mozal, the Australian company South32, to threaten that it will close the smelter down.

Mozal’s forecast power requirements for the coming period are 950 megawatts – but Hidroelectrica de Cahora Bassa (HCB), the company that operates the Cahora Bassa dam, can only provide 350 megawatts. The only obvious supplier for the other 600 megawatts is the South African electricity company, Eskom, which means that Mozal should be negotiating now to acquire this power.

South32, at a Maputo press conference, claimed that current arrangements “do not provide confidence that Mozal will secure sufficient and affordable electricity beyond March 2026”.

With no agreement on a future electricity price, “we will limit investment in Mozal, stopping pot relining and standing down associated contractors starting this month”, threatened South32. “Without access to sufficient and affordable electricity, we expect that Mozal will be placed on care and maintenance at the end of the current agreement”. In reality, that is a threat to close down the smelter altogether.

The Mozambican government rejects such threats, pointing out that South32 is asking the company that operates the Cahora Bassa dam, HCB, to subsidise Mozal.

As result of the Mozal position, Duys Engineering Group, a South African engineering and manufacturing company for metal structures, announced over the last week the suspension of potshell repair and superstructure recovery operations in the country because “Mozal, as the main client, has cancelled all services related to these activities.”

According to CTA chairman, Álvaro Massingue, who was speaking to reporters on Monday, in Maputo, after Mozal has greatly benefited from the generous fiscal benefits offered by the government, it does not make sense to “threaten the country’s business environment.”

Mozal was the first foreign investment mega-project set up in Mozambique, and the initial agreements gave it extremely favourable tax incentives. It was argued at the time that this generous treatment was necessary in order to show that Mozambique was open to business and to attract further foreign investment.

According to Massingue, “the Mozal statement was followed by the sudden termination of contracts with approximately 20 Mozambican companies that supplied the company, directly affecting approximately 1,000 jobs and jeopardizing the survival of companies that had decades of uninterrupted collaboration with the smelter”.

The CTA has called on Mozal to channel 40 per cent of its production to the domestic market, ensuring the local transformation of aluminum into semi-finished and finished products, and “to substantially increase the number of domestic suppliers in its value chain, promoting the effective inclusion of small and medium-sized Mozambican companies”.

Massingue acknowledged that Mozal is recognized as a landmark of foreign investment in Mozambique, with an initial investment of approximately two billion dollars, “and it contributed decisively to the emergence of strategic infrastructure, the creation of technical skills, and economic development.”

Currently, Mozal represents approximately 30 percent of national exports, with annual revenues exceeding 1.1 billion dollars. It generates over 4,000 direct jobs and approximately 33,000 indirect jobs, supporting a chain of over 3,000 active suppliers, mostly national companies.
(AIM)
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