Skip to content Skip to navigation

Mozambique and China: A fast friendship into the future

Mon, 1st Aug 2016

From the pristine, vast beaches of the Quirimbas Islands in the north to the colonial-style café esplanades in the capital of Maputo, Mozambique is a place of sun and leisure not exactly known for being a fast-paced destination. But in a time when heated discourse over the country’s recent economic downturn rises above the coffee-shop din, many events are quickly unfolding for a nation previously considered the paragon of economic development on the African continent. And no change can rival that of Mozambique’s evolving relationship with China.

The discussions invariably centre around  US$2.3 billion. This is the total off-budget debt that the current Government of Mozambique is being forced to reckon with by its western partners, which includes credit granted by western banks to public security sector companies designated by the preceding government. In restructuring this debt at a time when the local currency, the metical, is weakening, total public debt should surpass 100 per cent of GDP by 2016, according to estimations by Fitch Ratings. Indeed, debt restructuring of some sort seems inevitable in the near-to-medium term.

In addition to a shift in mood, recent events this past May have stirred up Maputo. President of Portugal Marcelo Rebelo de Sousa’s visit to the capital brought tidings of bad news. As Portugal currently chairs the G14 group of countries and institutions that finance the Mozambican state budget, he had the very unpleasant task of announcing, standing side by side with his Mozambican counterpart President Filipe Jacinto Nyusi, that the roughly US$300 million the group dispenses annually to the Mozambican budget was being suspended until the debt crisis is sorted.

That very day, another much more celebratory press conference took place elsewhere in the capital. Sun Jian, the Chinese ambassador to Mozambique, met with Nyeleti Mondlane, Mozambique’s deputy minister for Foreign Affairs and Cooperation, to convey China’s intentions of providing US$16 million in much needed infrastructure, including 200 water wells, 80 public buses, and construction of a cultural centre in Maputo. This partnership could not have been more timely.

“We want to increase aid to Mozambique as a way to help the country overcome this tough time,” states Sun, adding that “this country has been an example of one of the better-performing economies in the region.” This extension of aid posed a stark contrast highlighting the different approaches by Beijing versus Washington or Brussels.

Eleven days later, President Nyusi flew to Beijing for a high-level official state visit that analysts were quick to interpret as a dash to negotiate financial assistance. The Mozambican authorities dismissed this presumption, claiming that the visit had been under preparation for months. Regardless, what is certain is that Beijing gave President Nyusi a grand reception to further boost bilateral ties and prove to Maputo that assistance lies not only to the west of Mozambique but to the east as well.

MOZAMBIQUE BECOMES CHINA´S FIRST TRUE PARTNER IN AFRICA

President Nyusi may have landed in Beijing under pressure, but during his 5-day visit (16–21 May), Chinese authorities certainly spared no expense or gesture of good faith to reassure him of their support. After conferring with the highest level of government, including President Xi Jinping, Prime Minister Li Keqiang, and prominent local businessmen, the Mozambican president returned to Maputo with a Global Strategic Partnership Cooperation and Agreement in his briefcase.

For China, this is the first agreement of its kind with an African nation. Only Cambodia, Laos, Burma, Thailand and Vietnam have signed similar agreements with Beijing. The document sets out 14 principles by which to govern bilateral relations, with the aim to strengthen cooperation between the army, police and intelligence services of the two countries and to strengthen Mozambique’s national defence capacity, particularly with regards to training, arms supply, equipment and technology.

Additionally, a cooperation agreement was signed during the state visit providing relocation of certain Chinese industries to Mozambique to accommodate China’s ongoing restructuring of its own economy. Also promising is a framework agreement advocating energy cooperation between the National Hydrocarbon Company of Mozambique and China. As the African country is set to become one of the world´s top natural gas producers in the coming decade, Chinese companies have taken a foothold in the industry´s development.

President Nyusi was accompanied by a delegation of six members of the Mozambican government including Minister of Foreign Affairs and Cooperation Oldemiro Balói, Minister of Industry and Commerce Ernesto Max Tonela, Minister of Public Works, Housing and Water Resources Carlos Bonete Martinho, and Minister of Culture and Tourism Silva Dunduro.

In summarising the accomplishments at the end of his state visit, President Nyusi made certain to stress that the visit was scheduled prior to the G14’s decision to suspend financial assistance to Mozambique. “We did not come here to ask for help to pay our debts,” which he did acknowledge, “is a problem.”

Given Mozambique´s short-term financing needs, analysts continue to focus on what the visit may yield, for instance, in terms of credit lines. Joseph Hanlon, leading analyst of Mozambican politics and business, considers China’s investment an integral part of the government´s strategy in dealing with the debt issue.

The Mozambican government expects Chinese investment to rush in in exchange for the “selling of state companies and assets such as [the state´s] share of gas,” asserts Hanlon. “This would need to cover a significant part of the US$2.3 billion debt. If that were done, [the government] hopes that – as always in the past – donors and lenders have so much invested in the Mozambique success story that they will not let Mozambique collapse.”

Only a few weeks after President Nyusi returned from Beijing, the Mozambican government announced a move that could lead to partially privatising the country´s airport enterprise Aeroportos de Moçambique. Additionally, the Council of Ministers decided that the national railway company Caminhos de Ferro de Moçambique (CFM) would sell all its shares in the concession companies running the port of Nacala, Malawi Railways, and the railway from Nacala to the Moatize coal mines. This is expected to raise around US$150 million.

A government source informed Macao Magazine that despite the “very strong decision” by Beijing to strengthen political relations with Maputo, the preferred assistance route pursued by Chinese authorities over the last few months remains economical and financial, that is, strengthening the presence of Chinese companies and providing technological and unspecified financial support.

Loro Horta, a diplomat and leading analyst of China-Mozambique relations, underlines that the visit´s timing was no “coincidence,” though he is cautious about its results. “I think China will give some support to Mozambique; at least it will be more receptive than the West.” But, he adds, given the current internal and global slowdown Beijing is experiencing, it “has become more selective and careful in foreign aid”, taking a less risk-prone approach to global relations.

“China, though also affected by the [financial] crisis, is still a strong investor abroad, buying large companies in the outside world. Faced with a global economic crisis and the reluctance of Western countries to accept certain political models, many African countries are again turning to China,” Horta informs Macao Magazine. For example, Angola was an early proponent of this strategy with President José Eduardo dos Santos´ visit to Beijing in 2015.

A FLURRY OF ACTIVITIES AFTER THE BEIJING VISIT

Immediately following President Nyusi´s visit to China, a delegation of 70 Chinese businessmen from Shandong Province arrived in Mozambique. During the Mozambique-China Business Forum held in Maputo, Deputy Governor of Shandong Province Sun Wei, who led the mission, said that the trip’s aim was to “implement the business agreements signed” in Beijing.

The vice president of the Confederation of Economic Associations of Mozambique (CTA) Rogério Samo Gudo said the Chinese mission intended to “materialise the agreements from business and economic points of view,” highlighting areas such as energy, construction, infrastructure, services, hospitality and tourism.

Another indication of the expeditious relationship between the two countries manifested with President Nyusi’s June appointment of former Prime Minister Aires Ali to the post of ambassador to China. As head of government between 2010 and 2012, Ali is a respected political heavyweight, having previously been Minister of Education as well as  governor twice, first in Niassa province, north of the country, and then in Inhambane province, in the south. His political cache is perfectly suited to that of an ambassador to a global power and Mozambique´s global strategic partner.

In Beijing, Ali will have a heavy workload. He must first follow up with all the agreements signed in May. Addressing financial issues will also be on his list of priorities. Following a 160 per cent increase in funding to the country since 2012, China is now Mozambique´s foremost bilateral creditor.

Then there is the critical issue of investment. The recent economic downturn, particularly the metical´s depreciation, has been compounded by the downturn in the natural resources sector which was, for many years, one of the country’s strongest sources of growth. Luckily, Chinese companies are now coming forward with billions of dollars in infrastructure investment.

In such dire economic times, Chinese investment projects are ever more beacons of inspiration and progress. Recently, Zimpeto Stadium, the first major sports infrastructure built in post-independence Mozambique, was funded by China. Now, attention is focused on the Maputo-Catembe Bridge project: once completed in 2017, it will be the longest suspension bridge in Africa, constructed to the tune of US$300 million.

Construction has also begun on the new port at Beira, Mozambique’s second largest city. China Harbour Engineering Co. (CHEC) is leading the project for the new port, an infrastructure key to revitalising the country’s fishery industry. An overhaul of the entire production chain is in the works, including refrigeration and exporting processed products.

Another flagship infrastructure project spearheaded by Chinese cooperation is the Maputo Ring Road, built by China Road and Bridge Corporation who is also in charge of the Maputo – Catembe Bridge project. Eximbank also recently financed the completion of the new terminal at Maputo International Airport in 2012.

An international consortium including CHEC is also planning a US$1.0 billion investment in a new port serving Mozambique and its neighbouring countries, including South Africa. The Techobanine deepwater port project in Matutuíne district, southern Maputo province, is being promoted by another consortium led by Mozambican company Bela Vista Holdings, SA (BVH) that includes, again, CHEC as well as South African public railways company Transnet, according to weekly newspaper Savana.

NEW ENERGY OPENS UP A NEW CHAPTER

In mid-2015, a new US$400 million Chinese credit was announced for the construction of an electricity transmission line between the provinces of Zambezia and Nampula. The interest of major Chinese state-owned enterprises, such as China Three Gorges and State Grid, have been widely referenced in these major Mozambican hydroelectric projects.

Development of the gas sector and related infrastructure is actually expected to take in the biggest investments in the coming years. Mozambique’s vast natural gas resources comprise the country’s most abundant source of wealth and is expected to provide the nation with a new, more prosperous stage in its history. Here too, major Chinese enterprises are gaining a foothold.

This past March, a US$6 billion investment was announced for construction of a 2,600 kilometre pipeline. The China Petroleum Pipeline Bureau, part of the China National Petroleum Corp Group, and a shareholder in the Rovuma “off-shore” area 4, is in charge of the feasibility study. Once the investment decision is finalised, 70 per cent of the funding is expected to come from Chinese financial institutions.

This financing will be crucial, considering how much the debt crisis has impacted the country´s access to international financing. At a time when many large western banks and companies are giving Mozambique the cold shoulder, China is encouraging its companies to invest heavily, creating conditions for future development.

According to an analysis by Africa Monitor Intelligence, more important than financial aid, Mozambican authorities endeavoured to bring back “moral support” from Beijing.

President Nyusi’s welcome in the Great Hall of the People was certainly an alternative to the reception and support from the West. It was also an international platform upon which Mozambique could save face and retain its respectability which has often been undermined in recent statements made by foreign partners. The agreements signed indicate that, at least to the East, there is no shortage of confidence in the country´s future. And confidence, more than capital, is what Mozambique needs most.

Text Paulo G. Figueiredo

Photos Agence France-Press and Xinhua News Agency

(Issue N.35, July 2016)