Nuno Quelhas, CEO, Whatana Investment Group

MACIG Connect Series

“Whatana has also been awarded a license by the government to conduct studies on a hydro dam in the Mugeba area.”

Whatana is an investment-holding firm focused on Mozambique. Please provide a brief introduction to Whatana and the history of the company.

Nuno Quelhas (NQ): Whatana was established in 2005, at which time the company was predominantly an opportunistic portfolio and investment company due to the economic development phase of Mozambique at that time. In 2005, Mozambique changed its government and the president was much more business-focused. Africa also started to go through a positive economic cycle, due to Europe and America facing difficulties and fast-growing economies like China and India that were looking to Africa for resources. By 2010, Whatana started to realize the potential of Mozambique’s resource sector and decided to focus our investment strategy on resources. In implementing the new resources orientated strategy, the company went through a divestment phase during the 2012 to 2014 period, of non-strategic assets. Whatana then implemented a three-pillar strategy consisting of resource investments, resource services, and strategic investments. Resources investments are equity participations on both subsoil exploration of resources and the transformation of these resources. The strategic investment pillar is investments that the company already had in its portfolio, but did not want to divest of, due to their great potential in a growing economy like ours. Within the strategic investment sector, the company has participations in the mobile telecommunications company, Vodacom, as well as in the financial sector company, Bayport. All other investments that Whatana has are in pillar one and two.

As Whatana is a resource-focused company, could you elaborate more on Whatana’s current position in the mining industry?

NQ: Whatana has participation in Gold One (Mozambique), which is a gold project in the Niassa province. Gold prices are currently low and the investment is facing difficulties to continue to raise capital in the current markets. Whatana also participated in the fifth round of oil and gas bids and won the bid for a block in Palmeira with Delonex.

Within the resource transformation sector, Whatana has three projects that the company is currently developing. Together with AES, Whatana was awarded the license and international bid for the Moatize power plant. During the recession in 2008, AES had to withdraw participation and the project acquired a different strategic partner, ACWA. By the end of 2014, the project was quite close to financial closure, but there was a substantial deceleration in coal prices and currently the project is on standby. The power plant’s objective is to supply the Moatize mine with 220 megawatts (MW) and so the mine has to be fully operational for the power plant project to continue. The remaining power will go into the Electricidade de Moçambique (EDM) grid, to strengthen the supply of energy to the Tete region.

Whatana has also been awarded a license by the government to conduct studies on a hydro dam in the Mugeba area. The project is for 150 MW to 170 MW and we are currently identifying developers to conduct studies. The third transformation project is in collaboration with a Norwegian fertilizer company called Yara, which is one of the biggest urea producers in the world. The aim is to secure some domestic gas from the Rovuma Basin as to establish a $2-billion urea plant.

Mozambique recently reformed its legal framework with regards to the mining sector. How have new local content policies affected Whatana’s strategies and investment into the sector?

NQ: CTA is a private sector association that is in liaison with the government with regards to various industry issues and Whatana participates in meetings regarding the resource sector. There has been a significant amount of discussions regarding local content; however, there is a lack of clarity about what the government intends to do and whether the ideas will come through as policies or as incentives. If we want to develop a sustainable economic environment, transactional empowerment will not be beneficial, as shareholders are not intellectually empowered within the industry. Local content policies should thus be transformational rather than transactional.

Infrastructure and in particular power have been a challenge for the mining industry. What is the current trend in the availability and development of power for the mining industry in Mozambique?

NQ: Mozambique needs to significantly advance in terms of independent power producers that can structure power generation around individual opportunities. The risk is that industries of particular projects can decline, which will affect the individual power plant. The government has taken the view that all produced energy must be sold to EDM and EDM will sell power to particular projects. This approach does create some buffers for oscillations in commodity sectors. The negative side is that one may have to produce energy to sell to a company (EDM) that currently does not have the economic strength to give a financeable power purchase agreement.

What is Whatana’s final message for our international readership?

NQ: Mozambique has a significant amount of opportunities to offer, and Whatana will continue operating within the country with long-term views. Africa is a continent that will positively change over the next 40 years. The geographical position of Mozambique gives the country a great advantage, as there is 3,000 kilometers of coastline with three significant ports, with hinterland corridors already in place, and that plays a significant role in the logistics of the SADC Region. The country has political stability and our micro-economic policies are quite conservative. Mozambique has the conditions to attract a substantial amount of the capital that flows into Africa. If the gas developments take off within the next 20 years, Mozambique can become an economic powerhouse of Africa.

This interview was part of research being conducted by GBR for its Mining in Africa Country Investment Guide (MACIG) 2017. The 2016 edition of MACIG was published in early February and can be accessed here. The GBR team is currently in Mozambique conducting the necessary research and interviews for the mining and oil & gas sectors. To participate in this report, please contact Molly Concannon at mconcannon@gbreports.com or +258 82 559 4115.

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