Mozambique has enormous reserves of natural gas and other natural resources such as coal, graphite, heavy sands, among others. Investments in exploration and exploitation activities over the last two decades have generated FDI volumes in the order of tens of billions of dollars which, among other benefits for the economy, have resulted in high fiscal gains.
Thousands of jobs have been created for nationals and investments have been made in essential socio-economic infrastructure. There have also been many situations of conflict arising from processes of population resettlement in the resource exploitation areas and other accusations of injustice against the local inhabitants.
These and other problems confront us from time to time regarding the long-term costs and benefits of major projects.
The massive investment expected in the natural gas sector in Cabo Delgado province has the potential to transform Mozambique into a middle-income economy, depending on how well the country capitalises on the opportunities.
As this is a non-renewable resource, the current generation has a responsibility to ensure that the benefits are maximised for itself and for future generations.
After several years of demands by civil society and academia, a sort of national consensus was reached on the need for a Sovereign Wealth Fund (SWF), and the Government took the sober decision to create a SWF based on a model founded on principles of good governance, transparency, accountability and independence.
Under the terms of the WB proposal, the Mozambican SWF aims to i) accumulate savings by maximising the value of the fund with a view to ensuring that the revenues from non-renewable natural resources are spread over several generations and ii) contribute to fiscal stabilisation, with a view to insulating the State Budget and the economy from the harmful impacts resulting from fluctuations in commodity prices on the international markets.
The representatives of the people will have the supreme responsibility to establish a regulatory framework that does not allow deviations in the letter and spirit of the objectives for which the fund will be created
These are objectives that explicitly address the concern to find a balance to meet the needs of present and future generations. The proposal under discussion suggests / recommends that the component of infrastructure financing is integrated into the State Budget, and it is up to the MEF, in the normal process of budget execution, to decide on the allocation of resources, with the Fund not intervening in the process of making that decision.
However, the lack of clear definition of the funding objectives is seen as potentially putting the FS at risk of becoming the victim of appetites contrary to the public interest, since the transfer of FS resources to the State Budget without clarity as to their use may turn into a true “blue bag”.
Our State Treasury should be duly armoured so as to avoid its application in less transparent investment vehicles, as was the case in the Angolan Sovereign Wealth Fund scandal.
In this regard, we hope that the exercise of regulatory and supervisory power by the Assembly of the Republic can mitigate this risk.
The people’s representatives will have the supreme responsibility to establish a regulatory framework that does not allow for deviations in the letter and spirit of the objectives for which the fund will be created.
This regulatory framework should explicitly determine the guidelines for defining and updating the investment policy, the general criteria for the choice of external and internal managers, as well as the selection of the auditor of the FS.
However, legislating is not enough to ensure that the FS is well managed. There must be proper accountability for non-compliance with the law, FS policies, norms and standards. And for that to happen, transparency should be the watchword, obviously maintaining the confidentiality of sensitive information for the financial markets.
Finally, it is up to this generation to ensure that, through the FS and more political, legal, economic and social mechanisms, Mozambique is not another victim of the resource curse. This challenge is for “yesterday” since, although natural gas is considered clean compared to oil and coal, the Paris Agreement imposes the commitment to reduce the emission of greenhouse gases, where fossil fuels stand out, although the roadmap to achieve the goal of limiting the increase in the planet’s average temperature leaves open the specific actions to be taken by nations.
