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Mozambique: Extractives for Prosperity, Vol. II May 2013 Summary of Recommendations No. Section Para Heading Recommendation 1) Economy (1/4) 1.1 The Mozambican Economy The Government of Mozambique must adopt a sovereign wealth/natural resource fund in order to effectively manage abundant natural resource revenues from its extractive industries and counter the ill effects of Dutch Disease and revenue volatility that are associated with the resource curse. 2) Economy (2/4) 1.2.1 Liquefied Natural Gas- LNG Price The Government of Mozambique must work with Anadarko, ENI and other operators in the Rovuma Basin to confirm that long-term, oil-indexed natural gas purchase agreements with built-in take-or-pay obligations are signed with offtakers in the high-demand markets of the Asia-Pacific region. 3) Economy (3/4) 1.2.2 Financing Liquefied Natural Gas Development-LNG Financing To optimize the value of natural gas production and export from the Rovuma Basin, the Government of Mozambique must negotiate with Anadarko, ENI, and other gas operators to ensure that the terms of the PSC will be equitable and allow for maximum government take. 4) Economy (4/4) 1.3.2 Global Coal Market Development-Coal Price The Government of Mozambique must work with Vale, Rio Tinto and other coal operators in the Moatize Basin to guarantee that buyers in China, India, and elsewhere in the Asia-Pacific region are obtained for the offtake of Mozambique’s thermal and coking coal. More importantly, the Government must work with coal project developers to secure investment for the infrastructure development that is necessary for expanded coal exports. 236
Mozambique: Extractives for Prosperity, Vol. II May 2013 5) Linkages (1/5) 1.5.1 Enabling an Environment Conducive for SMEs The Government needs to undertake careful studies to determine the potential for SMEs to develop in the extractive regions of Tete and Cabo Delgado and in the neighboring provinces – especially Niassa, Nampula, Zambezia and Sofala – and to link this SME development to both the needs of extractive industries 6) Linkages (2/5) 1.5.1 Shortfalls of SME Development The Government of Mozambique needs to work with IOCs operating in the Rovuma Basin to isolate possible synergies between offshore natural gas development and the country’s domestic industrial base. Since electricity generation is the primary source of offtake for natural gas, the Government of Mozambique should direct investment towards building up electricity transmission infrastructure. Further, the Government should look to develop alternative industrial uses for natural gas, including the use of gas in heating and liquid gas in transportation, as well as the development of manufacturing hubs for methanol, fertilizer, cement, iron and steel production. 7) Linkages (3/5) 1.5.1 Shortfalls of SME Development In order to create powerful economic linkages between Mozambique’s extractive industries and its domestic small-and-medium-enterprises, the Government of Mozambique must institute legislative reforms to improve its private-sector business environment. More specifically, reforms should encourage market-driven competition by reducing bureaucratic and regulatory constraints, eliminating the influence of state-controlled pricing and unequal taxation policies, addressing issues related to land-use rights, and increasing access to capital through the development of key financial agencies and institutions. 8) Linkages (4/5) 1.5.3 Education The Government must invest heavily in improving primary education on a national scale to tackle the country’s poor literacy rate and increase the competitiveness of its labor force in the long run. The Government should also consider working with IOCs to develop targeted vocational training in regions where extractive industries are active in order to facilitate local hiring by project developers in these areas. 237
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