Mozambique’s Confederation of Business Associations (CTA) has called on the government to avoid “at all costs” the closure of the Mozal aluminium smelter, on the outskirts of Maputo. CTA chairperson Alvaro Massingue, cited by the German agency DW Africa, warned that there would be “severe social and economic consequences” from any closure of the smelter. “It should be a common objective to avoid, at all costs, the closure of Mozal”, said Massingue.
He feared that closure would have a knock-on effect, pushing dozens of other companies that supply Mozal into bankruptcy, with massive redundancies. The key problem is that, like all aluminium smelters, Mozal’s main input is electricity. The contract under which Mozal purchases electricity expires in March, and it has so far proved impossible to negotiate a new contract.
The Mozal chairperson, Samuel Samo Gudo, told a Maputo press conference last week that without agreement on the electricity tariff, Mozal is in danger of shutting down. According to a report issued by the Maputo-based Zitamar News Service, the maximum tariff that the majority shareholder in Mozal, the Australian company South32, is willing to pay is 6.4 US cents per kilowatt hour But the Mozambican government points out that 6.7 cents per kilowatt hour is the minimum that should be charged to cover the costs of generating the 950 megawatts of power that Mozal uses. 0.3 US cents may not seem very much, but over a year it would amount to 25 million dollars, The government regards this as a subsidy and does not see why Mozambique should pay an annual subsidy of 25 million dollars to an Australian company.
Read Full Article on Club of Mozambique
[paywall]
Mozal’s current plan is to put the smelter on a basic maintenance schedule. It would not be shut down, but Samo Gudo said it would take 12 months to put Mozal back into operation, Mozal is the largest factory in Mozambique and is a key part of the government’s industrialisation strategy. But if Mozal closes, then Mozambique is facing, not industrialisation, but de-industrialisation.
Mozal employs 1,100 people directly, and about 5,000 indirectly. Losing all these jobs would be a devastating blow – hence the government has a strong incentive, even at this late hour, to negotiate a deal with South32. Massingue said the CTA regards Mozal as “a strategic asset” and suggested extending the current electricity purchase contract for a further six or 12 months. Massingue believed this would create space for further negotiation and perhaps for “sustainable agreements”.
[/paywall]
