The News
Mozambique is at growing risk of defaulting on its debt as political tensions over last year’s disputed election were heightened with the return of opposition leader Venâncio Mondlane to Maputo on Thursday.
The country’s economy has been devastated by months of deadly protests leading to the shutdown of critical industries including a graphite mine in northern Mozambique operated by Australian firm Syrah Resources that counts Elon Musk’s Tesla among its clients. David Omojomolo, Africa economist at Capital Economics, told Semafor Africa there was an increasing risk of default as investors reacted negatively to the political uncertainty. “We expected a slowdown or contraction of economic growth in Q4 2024, and if the present conditions persist, stagnation or further contraction in the coming months,” he said.
The situation could also affect key gas projects, which are being counted on to attract foreign direct investment, including a $20 billion liquified natural gas project by TotalEnergies. Capital Economics warned in a recent note that the country “will almost certainly be heading for a sovereign default” if the plans are scrapped. The project, in the north of the country, has previously faced delays due to security concerns over a rebel insurgency in the region.
Arriving at Maputo’s main airport after more than two months of exile, Mondlane said he was ready to take part in talks over October’s contested results. “I’m here in the flesh to say that if you want to negotiate... I’m here,” Mondlane told reporters.
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The final election results released in December showed that Daniel Chapo of the ruling Frelimo party won 65% of the presidential vote. But international observers say the election was marred by irregularities and Mondlane says his victory was “stolen.” Chapo is due to be inaugurated as president next week. Mondlane has threatened to swear himself in as leader on the same day and lead further protests against the result.
At the start of the protests last year, S&P Global Ratings cautioned that the rising unrest in Mozambique could raise already high risks of default. The uncertain economic situation in the country is compounded by the impact of Cyclone Chido, which wreaked havoc in the region in December — killing 120 in Mozambique and damaging more than 155,000 homes.
Negotiations for a three-year International Monetary Fund credit program also hang in the balance. The IMF said in December that discussions with Mozambican authorities would resume “once the political transition has been completed.”
The View From Southern Africa
South Africa’s economy has also been affected by the protests sweeping its neighbor: Pretoria began rerouting trade and travel from Mozambique’s Lebombo border post to the one it shares with Eswatini after South Africa’s Road Freight Association raised alarm over truck drivers being stranded for days at the former.
Eswatini’s sugar industry, which largely relies on the port city of Maputo for exports, has also faced significant disruptions due to the protests. The Eswatini Sugar Association said that it was mulling moving its operations to Durban in South Africa despite the higher costs, fearing potential losses. The association generated $305 million from exporting over 26,000 tons of sugar to markets including the United States in 2023.
Notable
- Around 13,000 people have fled from Mozambique to Malawi, The Guardian reported, trying to find shelter in a country that is grappling with one of the worst food shortages in its history after a severe drought.