On April 24, Islamist rebels seized the city of Palma, Mozambique, forcing the French energy company Total to suspend its biggest project. The country suddenly made the headlines of the international news. The spread of this insurgency and the failure of the Mozambican security forces in dealing with it cannot be understood without first examining the path this Southern African country has taken since the discovery of liquefied natural gas (LNG) fields in 2013.
What was supposed to be a stroke of luck quickly put a “natural resource curse” on Mozambique and whipped up the population’s frustrations. These circumstances cannot be ignored if we want to understand the current the Islamist insurgency in the north of the country.
A “success story” for donors
For twenty years, the donor community claimed that Mozambique was a success story. Unfortunately, the lenders were not able to anticipate the abrupt change in the country’s fortune before everything went awry.
Looking back on recent Mozambican history, its long and violent civil war between the Frelimo and Renamo movements ended in 1992. This was thanks to a negotiated peace, which led to a stable regime and a period of sustained economic growth. GDP growth rate was an average 7.2% per year from 2000 to 2016, and the poverty rate dropped from 60.3% to 48.4% between 2000 and 2015. Mozambique received large amounts of international aid from the end of the civil war, accounting for more than half its budget until 2009. In 2015, it was still the 8th most assisted country in Africa. Health indicators and school enrollment also improved in the country.
But this progress was built on an unsound foundation. Elections, for example, have been held regularly, but they have been won just as regularly by the same party, Frelimo, which has been in power since independence in… 1975! After the war, Frelimo converted, without any qualms, from communism to political capitalism: the party controls the State and the economy. The political elite became an economic oligarchy thanks to privatizations: from 1989 to 1998, 800 of the 1,250 public enterprises were privatized.
Meanwhile, growth has not been inclusive enough, and social and regional inequalities have increased (the Gini coefficient rose from 0.47 to 0.56 from 2008 to 2014). The gap has widened between the prosperous southern region, home to the capital Maputo and the rural, poor and more populated northern and central regions.
In addition, growth has been largely driven by the extractive sector and by infrastructure projects related to it. Mining and forest exploitation are particularly heavy (Mozambique is Africa’s second largest coal producer and its fifth largest supplier of timber to China). Within a decade, the war-ravaged country transformed into a new rentier state, enjoying much investment from emerging countries (India, China, Brazil, and others).
A short-lived LNG euphoria
Between 2010 and 2013, offshore exploration led to the discovery of huge LNG deposits off the northern coast of Mozambique. These huge reserves, estimated at 160 trillion cubic feet, were hailed as a guarantee of turning Africa’s eighth poorest country (in per capita GDP terms) into a future major producer of LNG—a new Qatar.
Most of the major Western and Asian companies rushed to Maputo and promised the ruling elite huge investments of around 100 billion dollars over 20 years to develop the LNG potential. This LNG euphoria created an illusion of instant wealth and made Mozambique seem like the new Eldorado of the 21st century. Mozambique was destined to transform from a rentier state into an ultra-rentier state, courted by all the major companies and the governments of their countries.
Everyone got caught up in the euphoria, including the donors, who were all the more easily taken in by the fact that Mozambique seemed to be a model of macroeconomic management and privatization. That’s why the IMF decided to hold its “Africa Rising” conference in Maputo in May 2014. In early 2016, the IMF and the World Bank were still praising the management by the local authorities and encouraging donors to provide budgetary aid.
But, a few months later, the Wall Street Journal uncovered Mozambique’s political and financial scandal of hidden debt, initially estimated at $1 billion and later $2 billion (representing 13% of Mozambique’s GDP in 2016). After having praised “years of institution-building and sound economic management” in Mozambique, IMF Managing Director Christine Lagarde then accused the government of being corrupt.
The excesses of a political and economic oligarchy
Yet, warning signs had appeared well before 2016. Since 2012, the Mozambican State budget had been neither participatory nor very transparent, and supervision had been limited. By 2019, Mozambique ranked 64th out of 117 in the budget transparency ranking. Frelimo’s leaders had turned into a veritable political and economic oligarchy. Not content with undivided control of State resources thanks to the absence of an opposition party, they also took control of entire sections of the licit and illicit economy. President Guebuza’s clan came to dominate the transport sector, among others. The cost of corruption between 2002 and 2014 was $4.9 billion, or 30% of GDP. Meanwhile, Mozambique has come to play a key role in the heroin trafficking from Asia to Southern Africa.
On top of all that, the old enemy Renamo—dormant since the 1992 peace agreement—came out of its slumber. It had been demanding access to local power in the provinces, and from 2013 onwards it launched occasional attacks in its former strongholds in the north and center of the country. Its aim was less to start a new civil war than to remind Frelimo of its power to cause trouble in areas where LNG reserves had just been discovered.
After several ceasefires and the death of Renamo’s historic leader (Afonso Dhlakama) in 2018, a compromise was quietly negotiated and then made official by a peace agreement signed in August 2019. The regime appeased Renamo by undertaking to let it participate in the security services and in local power, and probably also by discreetly rewarding some of its leaders.
The formation of a political and economic oligarchy, the worsening lack of fiscal transparency, and the resurgence of the conflict with Renamo were at the time considered to be trivial issues that were being raised only by cynics of domestic and international civil society. Yet, all these developments were already the harbingers of a “pre-source curse”.
Ineffective anticorruption regulations and tools
The hidden debt scandal, which broke out in 2016, was the other collateral effect. The cause of this was a financial arrangement orchestrated by Mozambican state-owned companies mainly owned by the country’s intelligence services, foreign banks and a Lebanon-based company. It had been hidden from parliament and donors, but its details—now well known—have shed harsh light on the corruption of the regime.
Within Mozambique, the scandal involved President Guebuza, the Defense and Finance ministers, and intelligence officials. The anticorruption regulations and tools set up at the instigation of donors were thus obviously useless under a party-state regime with no real checks and balances.
This hidden debt scandal opened a Pandora’s box. From 2017 onwards, government corruption scandals followed one after the other at a steady pace: embezzlement of the Agricultural Development Fund, use of Social Security funds to buy planes, etc. With another corruption crisis erupting in Brazil at the same time, Brazilian firms operating in Mozambique also contributed to the ongoing story of local scandals.
As part of the hidden debts affair, Mozambique’s Finance Minister, Manuel Chang, was arrested in South Africa in 2018. He remains in custody there. The Pretoria authorities are hesitating between appeasing either their Mozambican neighbor or the US justice system, which has requested his extradition.
The “pre-source curse”
The scandal had an immediate financial impact. Mozambique experienced a staggering debt burden, a sharp depreciation of its currency, suspension of the IMF program, cut-off of budgetary aid, a crisis of confidence among donors, and an international investigation. In short, the model student turned out to be a professional swindler. Despite having benefited from the multilateral debt cancellation mechanism in 2002, Mozambique was indebted to the tune of 109% of its GDP in 2017! Half of its debt was contracted with commercial banks at high interest rates and for investments of very dubious usefulness.
The succession of scandals revealed that, like a speculative bubble in the financial market, a corruption bubble had formed in the Maputo regime as a result of the LNG discoveries. This corruption bubble revealed the inconsistency of IMF supervision. Indeed, the IMF had ignored the fact that Mozambique had become a classic case of the “presource curse”. The government had over-indebted the country before the first LNG revenues were received, income forecasts were over-optimistic, corruption was soaring, and the future LNG windfall was already causing tensions.
Turning to China
The 2016 scandal, the replacement of President Guebuza by Filipe Nyusi in 2015, and donor pressure should have changed the course of history. But, instead of working on cleaning up this huge mess a bit, the regime preferred to forge blindly ahead. While arrests have been made in Mozambique as part of the investigation into the hidden debt scandal, the government seems in no hurry to get to the bottom of it. Negotiations with the IMF are at a standstill.
According to the Natural Resource Governance Institute’s assessment of the quality of natural resource governance, Mozambique’s weak points remain its fiscal management of extractive sector revenues and the ongoing contrast between regulations and their enforcement. Blacklisted by donors and major banks, the Maputo government then turned to China to finance its infrastructure projects. The debt to China was quite small in 2010, at $45 million, but it has now reached $2 billion, representing 20% of total external debt.
This very rapid growth, which began before the 2016 scandal, has accelerated since. Lack of transparency in Chinese loans, combined with diverging information, are fueling suspicions of new hidden debts for an already over-indebted country. As for the regime’s concessions to the fight against corruption, they are just empty words. In the Transparency International index, Mozambique dropped six spots between 2012 and 2020, when it ranked 149th out of 180 countries.
The origins of the Islamist threat
It’s against this backdrop that the Islamist threat emerged in 2017, in the border province of Cabo Delgado. As in the case of Renamo, this threat—here in the form of the al-Shabaab (“youth”) movement—came about as reaction to the LNG euphoria. The troubles in Cabo Delgado have given it an atmosphere like that of the Niger Delta. This insurrection has its roots in two problems.
- The first is regional. All along the eastern coast of Africa, there is a Muslim majority. The Islamist networks there, which have been under pressure in Kenya and Tanzania, have partially relocated to northern Mozambique, where the authorities were not responsive to the Islamist problem.
- The second is national. Confiscation of the LNG windfall had been prearranged by the southern-based regime. But the reserves are located in the North, which is not only the historical stronghold of the opposition, but also where most of the population live—especially the poorest. In fact, 52% of Mozambicans live in the four northern provinces, where the poverty rate is 68% compared to 19% in the South.
The al-Shabaab militants, who are affiliated with the Islamic State, have already killed at least 2,780 people and displaced more than 700,000 since 2017. The ports in Cabo Delgado, which are strategic for future gas development, are their target. Behind their religious extremism is a radical anti-state ideology, which advocates the creation of a new order based on a certain vision of Islam; as such, it is less corrupt and more egalitarian. The militants can be compared to Renamo in terms of their origins in northern Mozambique and their hatred of the current government, but they are a new, radical version, recast to fit the new international context.
Also, unlike the old Renamo, they are not open to negotiation and cannot be won over. Furthermore, the rapid expansion of al-Shabaab, which is now jeopardizing the LNG investments, can largely be explained by structural problems in the Mozambican security forces. Like the government, their leadership has sunk into political racketeering, and the army and police are rife with corruption. To make matters worse, the Chief of Staff, Eugénio Mussa, died on February 8, shortly after being appointed on January 14.
Maputo under pressure from investors and its neighbors
The government was unable to contain the threat and turned to mercenary-type private security companies. It also prevented journalists and NGOs from visiting the region, to limit reporting on the worsening situation. But the seizure of Palma and the suspension of Total’s activities makes it impossible to hide the failure of the current security strategy. Meanwhile, a delay in the scheduled 2024 start date of production is becoming unavoidable.
Mozambique’s neighbors and its investors (ExxonMobil from the US, ENI from Italy, Total from France, CNPC from China, and their business partners) know that a new security solution must be found in order to save their natural gas Eldorado. They are thus currently urging a Mozambican government jealous of its sovereignty to internationalize the struggle by involving the SADC and the EU. But Mozambican leadership circles do not look kindly on this option, which would lead to prying eyes on the way the government is managing the problem.
Lessons from Mozambique
The president of Mozambique is expected in Paris on May 18 for a summit on financing African economies, a good occasion for looking at the valuable lessons the past decade in Mozambique has taught us—and that are not limited to that country.
A development model based on the extractive sector is a model that leads to collapse for poor countries with weak governance. It’s a model that creates few jobs, leaves the economy undiversified, and produces an industrialization effect that is minimal. The majority of the population continue to live off subsistence farming, while watching the elite get richer—a perfect recipe for armed revolt. What sets Mozambique apart is that it has been acting out this scenario even before the LNG exploitation has begun. It simply does not have the governance to avoid the pre-source curse.
Even though the corruption crisis has been the core problem in Mozambique since 2013, the investors and the governments involved prefer to focus on the effects (the jihadist danger) rather than the causes. While the threat is real today, we must not fall into misinterpretations: the form of revolt (jihadism) is a foreign import, but its substance is Mozambican. In Africa, 21st century jihadism closely resembles the tropicalized Marxist-Leninism of the 1970s: it is the modern international name for struggles that have ancient and local roots.
Finally, the extreme complacency of donors in the face of the financial excesses of the Mozambican establishment shows that corruption becomes a real problem only when it jeopardizes debt repayment.
Today, the dream of a new “Qatar of Africa” is gradually turning into a nightmare, and the first natural gas war is looming on the horizon.
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