Gas companies, and northern governments have been saying for years that the gas industry will benefit Mozambique economically and socially. However, this is not the first time we are hearing this. The fossil fuel industry all around the world has been using this line to hide the fact that it is actually they who will be benefiting financially, and exploiting the neocolonial rhetoric that Africa and poor countries need to be ‘developed’.
It is hard to find an example in Africa where fossil fuel projects have actually created a better social and economic situation for the communities directly affected by them and the country as a whole. In fact, in most cases, the communities are worse off, with no livelihoods and no means of income, and the host states end up with major losses from hidden costs, not to mention increased corruption, social instability and violence.
Mozambique remains one of the poorest and least developed countries and one of the most heavily indebted countries in the world. The 2018 statistics from the International Monetary Fund puts Mozambique at number 6 on the list of poorest countries. About 70% of the 28 million (number from 2016) citizens live and work in rural areas and around 70% of Mozambicans do not have access to electricity according to the World Bank.
In this economic context, it is problematic that the government of Mozambique has chosen a national development path focused on extractive industries, where the revenues are extremely unequally distributed among the population.
Energy companies have been operating in Mozambique for many years, but with no visible benefit to people. For example, Sasol’s Pande and Temane projects in Inhambane have been producing gas for 14 years, the majority of which is sold to South Africa. These projects have created only 300 permanent jobs during that time. The projects have been the centre of a contentious deal between Sasol’s Mozambique subsidiary, SPT (Sasol Petroleum Temane) and the Mozambican government, in which SPT sells gas to its parent company, Sasol Petroleum International, in South Africa at a very small percentage of market value. Sasol then sells it onwards at market value. In other words, Sasol is selling gas to itself, deciding on the prices and totally cheating the Mozambican government, which gains very little tax from these projects.
For more detailed information on this agreement, see the report from Centro de Integridade Publica (CIP): Sasol continues to milk Mozambique
National budget damage
This project will require a huge investment beyond the project itself, which would be better spent on social programs and renewable energy development. The project itself will require an investment of up US$ 30 billion.
As Anadarko’s 2014 Environmental Impact Assessment (EIA) states, this large investment could make this project the single largest investment project in Mozambique. This investment is in a country where the overall literacy rate is 45% and a mere 28% for females. This project will divert funds that should be going to education and other social necessities in order to build and maintain needed infrastructure for this project. When these projects occur, governments always have to spend huge amounts of money beyond what private investors provide.
In fact, in September 2021, Berlin-based organisation Open Oil published a report, Too Late to Count: a financial analysis of Mozambique’s gas sector, showing that the gas revenues to Mozambique will be much less than expected. In fact both Coral LNG and Mozambique LNG will bring $18.4 billion in revenues, less that half of what they had planned to bring in individually. Total alone had promised $ 50 billion in revenue from Mozambique LNG.
The report made the points that the very small stakes of the Mozambique state owned oil company, Empresa Nacional de Hidrocarbonetos (ENH) of 10% in Coral LNG and 15% in Mozambique LNG are worthless and may be a liability. Mozambique will lose billions in tax revenue because of corporate financial vehicles set up in tax-haven Dubai by several of the companies in the industry, and adds that most of Mozambique’s gas is already stranded.
No increase in energy access for local communities
About 70% of the country lacks access to electricity according to the conservative estimate of the World Bank. This figure is high even in comparison to other Sub-Saharan African countries and low income countries. Even for the 30% that is considered to have access, many of those people cannot actually afford the electricity, leading to millions more Mozambicans without electricity. Despite this incredibly low electricity rate, the project does not even attempt to improve that figure. The stated purpose of the Mozambique LNG project for example is to “gather, process, and export natural gas in liquid form known as LNG . . . [to] be used as a fuel source in other countries.”
While this project will destroy the natural resources that local communities depend on, they will receive none of the electricity benefits. The LNG will be immediately brought to other countries, to purchasers like BP, and companies and governments of France, India and Japan for example.
Natural gas does not even make sense to improve energy access in Mozambique. About two thirds of the population in Mozambique lives in rural areas far from the centralized grid. Therefore, an increase in the production of natural gas, which requires large centralized power stations, would not help to improve the country’s access to electricity. Furthermore, Mozambique lacks the pipeline infrastructure that would be needed to transport natural gas from the very north of the country where these natural gas deposits are located to the south where the highest demand is, or any other part of the country. To build such a pipeline network, which is prohibitively expensive, and if it were accomplished, would cement dependence on fossil fuels for decades to come. To increase access to electricity, the country would need to invest in small distributed renewable energy systems. Studies have shown that small solar systems that are community based would make the most sense in a country like Mozambique, which is flush with solar resources.
For references, see letter from JA! And Friends of the Earth US to US Export-Import Bank
Very few, if any, of the jobs that are created through this project will go to local communities, and so far the only jobs that have been created have been menial, unskilled and temporary, such as cooks and cleaners and construction workers at the Afungi LNG Park. And now that Total has claimed force majeure and stopped construction, there are no jobs at all.
Locals do not have the education to benefit from jobs. As the EIA states, most of the people who live in the district surrounding the project have received no formal education and much of the population is illiterate. In addition, the local population has little to no experience with the private sector. Therefore, they will not have the skills or education level to perform the jobs that this project will create. Programs to create capacity among local communities have failed to materialise due to corruption and were even used to extort money from affected communities that had to pay to put their names on the list for trainings that never happened.
Developing the labour pool with the skills required will take three to five years of substantial support and training. The gas companies have not provided the necessary apprenticeship and business development programs despite knowing for five years that thousands of workers with these skills would be required. The issue of employment has created hostility in many communities, with mostly young people being promised jobs, even though the companies have given up on plans for training programs.
Not only will the LNG project provide few local jobs, but has already removed the sources of livelihood that local communities depend on, with inconsistent and inadequate compensation. The EIA itself finds that the majority of the local communities are “highly dependent” on fishing, small scale agriculture, and other natural resources to make a living, and now that they have been displaced and moved far from their land and fishing grounds, they have lost almost all their means of livelihood.