Mozal threatens to close down

Maputo, 16 Dec (AIM) – The Mozal aluminium smelter, on the outskirts of Maputo, has threatened to suspend its operations as from 15 March.

The Mozal chairperson, Samuel Samo Gudo, told a Maputo press conference on Tuesday that the company has been unable to reach agreement with the Mozambican government on the tariff Mozal should pay for its electricity.

Electricity is a determinant cost for all aluminium smelters and, without agreement on the price, Mozal is in danger of shutting down.

According to a report issued on Tuesday by the Maputo-based Zitamar News Service, the maximum tariff that the majority shareholder in Mozal, the Australian company South32, is willing to pay is 6.4 US cents per kilowatt hour

But the Mozambican government points out that 6.7 cents per kilowatt hour is the minimum that should be charged to cover the costs of generating the 950 megawatts of power that Mozal uses.

0.3 US cents may not seem very much, but over a year it would amount to 25 million dollars, The government regards this as a subsidy and does not see why Mozambique should pay an annual subsidy of 25 million dollars to an Australian company.

Environmental factors are making the situation much worse. Samo Gudo pointed out that, even if it wanted to, the Mozambican government could not provide Mozal with 950 megawatts. This is because the Zambezi Valley is in the grip of a drought.

HCB, the company that operates the Cahora Bassa dam on the Zambezi, is entirely dependent on the levels of water in the reservoir behind the dam. Currently, there is not enough water in the reservoir to generate the power for HCB to meet its commitments.

Even if it rains heavily in the current rainy season (which began in October), Samo Gudo doubted that this would be enough to allow the dam to operate normally. He thought that two or three normal rainy seasons would be needed to build up the Cahora Bassa reservoir.

This month is the deadline for Mozal to buy raw materials and consumables for its normal operations. That deadline is now passing: “every passing day is another nail in the coffin”, said Samo Gudo grimly.

Mozal’s current plan is to put the smelter on a basic maintenance schedule. It would not be shut down, but Samo Gudo said it would take 12 months to put Mozal back into operation,

Mozal is the largest factory in Mozambique and is a key part of the government’s industrialisation strategy. Dozens of other companies supply goods and services to Mozal.

Mozal employs 1,100 people directly, and about 5,000 indirectly. Losing all these jobs would be a devastating blow to the Mozambican economy – hence the government has a strong incentive, even at this late hour, to negotiate a deal with South32.

(AIM)

Pf/ (471)