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Regional integration at the forefront of Mozambique’s energy success (by Charnè Hundermark)

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By Charnè Hundermark

As one of the major resource-rich countries in sub-Saharan Africa, Mozambique has the potential not only to significantly advance its own socio-economic status, but also to significantly boost economic growth across the region. According to the World Bank Group, regional integration helps countries overcome the divisions that hamper the flow of goods, services, capital, people and ideas. While large-scale energy projects are expected to be commissioned in Mozambique until 2023, the country has seen a renewed political commitment to establish sustainable regional integration with neighboring governments and private operators. By prioritizing cross-border cooperation throughout its energy value chain, Mozambique is well positioned to achieve common goals, including widespread electrification, establishing energy security and accessing a regional market. wider.

Hydropower stimulates regional electrification

Mozambique is one of the major electricity exporters in southern Africa, largely due to its significant hydropower resources and growing potential for gas-to-electricity production. The 2,075 MW Cahora Bassa hydroelectric dam in Mozambique is the largest hydroelectric facility in southern Africa and has enabled the country to become one of the main regional electricity exporters. With only 500 MW purchased for domestic use, Mozambique transports the surplus electricity to neighboring South Africa, Zimbabwe and Botswana. Through the creation of the Southern Africa Power Pool – as well as cooperation agreements with Zimbabwe and South Africa – Mozambique has been able to effectively monetize its hydropower resources through proven demand links. In addition, this form of regional integration has enabled electricity-deficit countries in the region to increase their own electricity access tariffs and reduce the associated costs for their growing populations.

Integration increases market accessibility

The World Bank Group has hypothesized that fragmentation within sub-Saharan Africa has led to the creation of small, isolated domestic markets, characterized by high production costs and low investment. By leading regional integration, resource-rich countries like Mozambique can connect to growing markets in the sub-region including Tanzania, Zambia, Uganda, South Africa, Rwanda, and Africa. Angola. As a growing number of African countries shift their focus to cleaner energy sources, such as natural gas, regional integration can ensure that Mozambique’s significant reserves are effectively monetized. By prioritizing infrastructural connectivity, Mozambique can link directly to viable markets for liquefied natural gas (LNG) for export. In addition, regional integration can reduce the cost of bringing Mozambican gas to market. By integrating infrastructure and pooling resources, countries can reduce supply, directly access regional markets, and utilize current and emerging infrastructure, significantly reducing project costs for all parties involved.

Mozambique drives regional growth

According to the World Energy Council, security of supply remains one of the main driving forces behind the development of interconnections between countries. Faced with challenges such as lack of essential infrastructure, depletion of national energy resources and the need to diversify energy supply, countries like Zimbabwe and South Africa are looking to Mozambique as a solution sustainable energy supply. By leveraging these connections, Mozambique can ensure energy success, earn vital foreign exchange earnings, and build strong bilateral relations, thereby stimulating long-term regional economic growth. In addition, the World Energy Council notes that providing modern and affordable energy to developing countries to meet growing demand will have a domino effect on productivity and macroeconomic growth.

For international investors, regional integration among developing countries can foster a more attractive investment climate through the sharing of resources and, therefore, increased security and reduced risk. In fact, regional integration can lead to an influx of capital for projects larger than individual national developments. This is evidenced by projects such as the African Renaissance Pipeline Project – a 2,600 km gas pipeline connecting Mozambique’s natural gas to growing demand from South Africa – and the Temane Natural Gas Project – a project gas-electricity collaboration between the Mozambican government and the South African Energy and Chemicals Company Sasol. By taking advantage of integration opportunities, Mozambique can stimulate sectoral growth and establish itself as a regional and global competitor.

Yet significant challenges must be met if Mozambique is to realize the full extent of its growth and success in the industry. The absence of adequate complementary policies and regulations can lead to ineffective results and hamper productive cooperation. Additionally, the World Bank Group suggests that countries may have different regional integration priorities, depending on their connectivity gaps, economic geography, or preference for sovereignty in specific areas. . By responding to these concerns, Mozambique will be better equipped to monetize its natural gas resources, in which regional integration can ensure maximum project success.

Africa Oil & Power is working with the Mozambican government to promote investments in energy and various sectors including agriculture, industry, tourism, construction and logistics in 2021. www.MzGasAndPower.com for more details.

On March 8 and 9, AOP will host a Presidential Awards Ceremony (by invitation only) and a day of workshops in Maputo, leading up to the Mozambique Gas & Power 2021 Conference and Exhibition to be held later in 2021. L event is online. If your organization would like to organize a workshop, please send an email to sales@africaoilandpower.com. To register for free, please visit: https://bit.ly/3kQZx2b

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