Mineral-rich Mozambique is considering the establishment of a sovereign wealth fund, the country’s finance minister said last week. “We think it’s a good idea,” Manuel Chang told AFP on the sidelines of an International Monetary Fund (IMF) conference on Africa. “But we won’t do what others have done,” he said, suggesting Mozambique would not rush into creating the fund, given other pressing demands that will require huge injections to fix, such as the infrastructure.
An estimated $10bn in foreign investment are expected to flow into the southern African country once a natural gas processing plant is built on its northern coast. Mozambique’s reserves are believed to be the world’s third largest. Chang said Mozambique should avoid “opening so many (bank) accounts and having all these billions, but continue to have a lack of roads and infrastructure to help develop the country”. Multinationals, including Texas-based energy giant Anadarko and Italy’s ENI, are expected to make their final investment decisions once Mozambique passes new legislation governing the oil sector.
Gas production is expected to come on stream in 2018 at the earliest. Anadarko alone has spent over US$ 3bn on its Mozambican investment to date and will spend billions more once the project goes into production, initially building two gas plants. Even before the gas project goes ahead, Mozambique has collected over the past year, more than a billion dollars in once-off capital gains taxes as multinationals sold off stakes in their projects. There are now questions over what to do with the windfall.
Despite recording economic growth of over 7% for over a decade, Mozambique remains one of the poorest countries in the world. The country is still rebuilding infrastructure devastated by a 16-year civil war. Only after the country had managed to balance its own budget, would it consider creating such a fund, Chang said.