Mozambique: Tete industrial investment zone on the cards, say analysts

The government of Mozambique is to develop an industrial development zone (IDZ) in Tete Province, to make use of the area’s plentiful coal reserves, analysts told African Business.

Rovubué Industrial Free Zone will be developed on the border of Chiúta and Moatize districts with mainly private sector funding, although the government may commit some money to infrastructure, such as power, water and road services. Some Maputo-based security analysts – who declined to be named – confirmed that the government is in talks with likely private sector investors in the IDZ but they are unlikely to put pen to paper until the final investment decision is taken on the project’s anchor tenant, a steel plant.

The Tete Iron & Steel Project is to be developed by Baobab Resources of the UK, the International Finance Corporation of the World Bank and Metallurgical Corporation of China. According to Mozambique’s Minister of Industry and Trade, Max Tonela, the Chinese group will provide technical support.

The $905m plant will be supplied with locally mined metallurgical coal and also local iron ore. Tete’s iron ore deposits have not yet been developed but reserves are currently estimated at 759m tonnes.

The government hopes that both local and regional manufacturing companies that require steel will be attracted to the IDZ, but there is also the potential for the steel to be exported to other countries. Industrial and manufacturing companies that invest in the IDZ will also be able to transport their goods via the three new railways that are either already in place or under construction between Tete and the Indian Ocean ports of Nacala and Beira.

Metallurgical Corporation of China and ABB completed the feasibility study into the steel plant at the end of November. The first $770m phase, with production capacity of 500,000 tonnes of steel rods per year, is planned by 2020. And thereafter,

And thereafter, output will be ramped up to 1.5m tonnes per year in phase two. The provincial government estimates that up to 2,500 jobs will be created in iron ore mining, although it is not clear whether this includes employment at the steel plant.

Coal plants

Several coal-fired plants are also planned in the area. The Tete reserves include thermal as well as metallurgical coal, so there will be plenty of convenient feedstock.

Most of the main coal mining investors in the province have pledged to develop coal-fired power plants that will be able to supply electricity to Tete, the rest of Mozambique and the Southern African Power Pool. As well as creating some employment in their own right, the power plants can provide electricity to industrial consumers in the Rovubué IDZ.

On 20 December, Ncondezi Energy reported that it was close to finalising the terms of investment on its 300 MW coal-fired plant in Tete, which it expects to jointly develop with Shanghai Electric Power Company. Jindal Steel and Power has severely reduced the size of its Tete power plant from the original vision of 2,640 MW, which was announced in 2011, to the current plans for 300 MW, which is to be developed in two phases.

Boosting regional growth

Tete’s economy is currently built on the export of energy resources: coal from the Moatize Basin and electricity from the Cahora Bassa hydro scheme. With coal prices recovering and new rail lines soon to be completed, it would be easy for Maputo to rely on coal exports to drive economic growth in the region.

While the government faces criticism over the ongoing debt crisis, the proposed IDZ will provide a welcome boost to the local economy. It is hoped that the Rovubué scheme will create much-needed employment for north-west Mozambique. Despite strong national growth over the past 20 years, development has focused on the south of the country.

Neil Ford