MOZAMBIQUE
Conflict targets mining sector in financially troubled Mozambique
The escalating conflict between Mozambique ' s ruling party and the militant wing of Renamo, the opposition party, is weighing on the country ' s economic growth as anti-government fighters target key transport routes linked to the mining sector.
RENAMO REFUSES TO ACCEPT THE RESULTS OF MOZAMBIQUE ' S 2014 ELECTION AND WANTS TO TAKE POWER IN SIX OF THE COUNTRY ' S 11 PROVINCES.
Renamo refuses to accept the results of Mozambique ' s 2014 election and wants to take power in six of the country ' s 11 provinces. The two parties fought on opposite sides of the country’ s bitter civil war, which lasted more than 15 years and officially ended in 1992.
The country has stabilised and held elections since, but throughout 2016 attacks by Renamo have increasingly disrupted Mozambique ' s commodity exports, increasing costs for companies and scaring away foreign investment.
The attacks have raised concerns that the country could enter a cycle of increasing political instability and worsening financial problems that will ultimately lead to a sovereign default. The government approached bondholders at the end of October about restructuring its unsustainable debt load, which which currently stands at 130 percent of GDP. The deteriorating security situation looks set to compound the country’ s economic problems. In January, fighting between government troops and Renamo forced around 2000 Mozambicans to flee the country ' s coal-mining heartland of Tete, according to the UN Refugee Agency.
Road and rail traffic linked to the coal mines has also been regularly targeted by militants. In June and July, Renamo gunmen carried out a series of attacks on the Sena railway line, one of two lines used to export coal from mines in Tete province. This led to the Brazilian mining company Vale indefinitely suspending its use of the Sena line, reducing capacity to export from the company ' s Moatize coal mine. The mine started producing in 2011 and is the fourth biggest coal mine in the world. These incidents were followed by two more in October targeting the remaining Nacala railway line, sparking fears that it too might see shipments suspended.
The disruption to the mining sector is likely to to take a significant toll.“ When it comes to stabilising Mozambique ' s economy the importance of Mozambique ' s mining sector should not be underestimated,” says Chris McKeon, an analyst at political risk firm Verisk Maplecroft.
“ If a mine closes or reduces output it sends a shockwave
THE DETERIORATING SECURITY SITUATION LOOKS SET TO COMPOUND THE COUNTRY’ S ECONOMIC PROBLEMS
through the economy – negatively impacting a wide range of businesses – from logistics compa-
58 Business Times Africa | 2016