The development of two of the major planned LNG projects, namely the Eni-led Coral South FLNG Project and the Total-led Mozambique LNG Project in Cabo Delgado, is good news for the Mozambican economy, says Gerrit van Rooyen, an economist at NKC African Economics.“Financing for these LNG projects has been approved, construction has begun, and despite the lower gas prices and increased security costs, the projects remain very profitable.” But, he says, protracted low gas prices and an escalation in the insurgency could discourage further investment in the Rovuma basin, which would be a massive blow as these investments would be substantial and are crucial to the country’s economic development. "The cost of the construction of these projects is estimated at $35 billion, which is roughly the current size of the Mozambican economy. The construction would require some local labour and resources, but it is unlikely that Mozambique possesses most of the special skills and materials needed for these projects which would have to be imported.”In time, the taxes, royalties and licence fees from these projects will boost government revenues which could be used for growth-enhancing infrastructure spending or to expand employment through the increase of public services, he says.“The increased revenue will also help the country to service its burdensome public debt stock. As debt service costs diminish, the government will also have more resources for public investment.” According to Van Rooyen, despite several consecutive years of strong growth, the developmental needs of Mozambique remain enormous.“The lack of infrastructure and the weak rule of law are not only deterrents to private investment but also create fertile ground not only for insurgencies but also for crime syndicates that exploit the country’s resources and use it as a gateway for trafficking of illegal goods and slaves.”
INSERT: "The lack of infrastructure and the weak rule of law create fertile ground for crime syndicates that exploit the country’s resources."– Gerrit van Rooyen
