Mozambique’s mining ambitions rely on infrastructure development.
MAPUTO, MOZAMBIQUE – Located on some of the world’s busiest shipping lanes, Mozambique is by no means remote; it is simply underdeveloped. Urgent investments are thus being aimed at bringing its rail, road and port infrastructure to a state whereby it is able to handle the demand of the mining industry. Rafael Benke, global head of corporate affairs at Vale, has said that the Nacala Corridor and Sena rail line are “just the tip of the iceberg” in terms of infrastructural investments and developments in the country.
In order to meet Mozambique’s projected goals of exporting 100 million mt/y of coal, the industry waits on CFM, the ports and railways authority, whose chairman Rosario Mualeia said that, despite some delays, the upgrade of the Sena line was back on track. There is a sense of skepticism across the industry as to if the $12 billion in required upgrades and expansions, as outlined by Mualeia, will be completed on time. Until the railway is able to meet demand, Mozambique’s celebrated potential cannot be realized. Given CFM’s financial limitations, its partnerships with the likes of Jindal and Vale ensure it has a 20% stake in all ongoing projects while the bulk of the funds can come from the deeper pockets of the private sector.
Though the iconic CFM central station in Maputo celebrated its centenary in 2010, the country’s railway lines were decimated during the civil war. Today, Mozambique has three railway lines connecting the inner parts of the country to its three main ports. The Beira Railroad, which includes the strategic Sena line, is the oldest of the three and connects Zimbabwe to Beira port by way of Moatize. The Maputo line links South Africa, Swaziland and Zimbabwe to Mozambique’s southernmost port near at the nation’s capital, and the Nacala line, the newest one, connects the Nacala Development Corridor, stretching from Malawi’s eastern border to the port of Nacala.
Recent negotiations between Malawi and Mozambique have led to an agreement allowing the Nacala Corridor to link with Malawi’s railway system through to Tete, creating the most direct route from pit to port. With heavy investment from the likes of Vale, this is still a project in the pipeline. Currently the Sena line, with its limited capacity of 2 million mt/y is the only complete railway link from Mozambique’s northwestern mining hub to its coast. The upgrades to which Mualeia refers will bring its capacity up to 6 million mt/y by the end of 2013, which are still insufficient to match demand. At the mercy of seasonal weather patterns and limited capacity, coal mines in Tete are left to rely on Mozambique’s roads. As a result, over usage from the industry has left the roads in substandard condition.
Newly-merged Royal Haskoning DHV’s business development manager Kevin Botes feels that inter-industry cooperation is not where it should be. “You cannot have 12 separate rail lines, each for a different mine; this makes no sense. These mines may only operate for 25 years, so a railway is a major short-period investment,” said Botes. “It would be better to have two decent rail lines, to Nacala and Beira, and perhaps a new port built somewhere else.”
Until rail and road networks are up to par, a network of companies are attempting to fill in the gap in services and logistics. Martin Potgieter, operations director at Mozam-bican company Executive Logistics, said: “During the last year there has been a definite move towards a more considered approach that allows for logistical shortcomings when developing a mining project in Mozambique.”
With a wider understanding of the need to re-evaluate an overly-ambitious approach to mining in the country, Potgieter is one of several logistics operators who are glad to see this more considered approach from the industry. Potgieter added that the investment focus in the country has shifted more to logistics while mining projects are being reviewed and slowed down for the time being.
Given Mozambique’s limited infrastructure and still-developing market, the importation of equipment and export of core samples for evaluation is a major and often difficult task. Facilitating the import and export needs of the industry is another niche market within the logistics arena, which can be quite tedious given customs and border regulations at the various entry points to Mozambique. Karen de Almeida, general manager for global supply chain and logistics provider UTi’s Maputo offices, commends the long-overdue installation of the Janela Unica Electronica (JUE)—single electronic window—at Mozambique’s ports.
As Beira and Nacala ports see expanding capacity to meet rising demand, Maputo is becoming an increasingly popular alternative to Durban. As such, inefficiency is no longer an option. Prior to the installation of the JUE, all customs paperwork was completed manually. Speaking of issues arising since its inauguration, de Almeida also said: “Still, if they have a snag with that program with something that they had not thought of prior, the process of getting that rectified is quite cumbersome.”
Though the installation of the JUE is a step in the right direction, in order to further improve customs and border processes, its could be issued to the various clearing and forwarding companies in addition to the clearing agents. “Arguably, this would improve clearance times for clients, making Mozambique a more attractive destination for imports,” said Rayno van Niekerk, general director of logistics provider Röhlig-Grindrod’s Maputo office. While van Niekerk has seen efficiency and infrastructure improve over the past couple of years, he does feel that some changes remain to be made. Overall, however, van Niekerk agrees with UTi’s de Almeida, who added, “However, the end target of what they want is realistic, and they are getting there.”
Seasonal flooding around the country can also be a problem. “It is not the government’s fault when things like the recent floods occur and wipe out roads, but the problem is that the recovery time is too long; if the roads are out for too long, then the recovery stops,” de Almeida said.
CLM Transport, another Mozambican company providing transportation services around the region, is trying to work around the logistical issues presented by cross-border dealings by forming alliances with similar companies in Zimbabwe and South Africa. Service exchange agreements between companies mean that Mozambican fleets arriving in South Africa can park in local transporters’ yards and avail of fuelling and load-forcing agreements, while CLM provides the same service in return, in Mozambique. “The first two trips through Mozambique for a foreign transporter are a daunting experience,” said managing director Brendan McConnell. “The language barrier is a big issue, and the permit requirements and legalities of height, width and axle-weight of loads are unique to Mozambique within the SADC region.”
Though the infrastructure challenge in Mozambique is one seen in countless developing countries across the globe, it is as much a part of the discussion surrounding the growth of the mining industry as are the mines themselves. Where Mozambique may have the potential to become a leading producer of coking coal globally, it also holds the potential for the world’s largest stockpiles of coal if rail and road solutions are not rolled out in a timely manner to supply the rapidly growing demand for transport from in and around Tete to Mozambique’s ports.
This article was written as part of the research conducted on African mining jurisdictions by Global Business Reports (GBR) as part of our partnership with African Mining Indaba LLC. The aim of this partnership is the production of the single most comprehensive intelligence report on the continent’s mineral sector. The Official Mining in Africa Country Investment Guide, will be launched next February 2014, as the only official publication providing country-specific information at Africa’s top mining event, the 2014 Investing in Africa Mining Indaba™ held in Cape Town, South Africa.