London — The British Government has announced that it is to underwrite British investment in the expansion of the MOZAL aluminium smelter at Beluluane on the outskirts of Maputo.

The underwriting comes in the form of insurance against political risk provided by the Government's Export Credits Guarantee Department (ECGD). Through its Overseas Investment Insurance (OII), it will guarantee the safety of the British investment of 40 million pounds sterling (about 65 million US dollars) in the MOZAL expansion.

The investors are a syndicate of banks including Deutsche Bank, BNP Paribas and Societe Generale. The 40 million pounds sterling is to be put into the "Mozfund" which hopes to raise 155 million pounds sterling to buy inputs from South Africa for MOZAL-II. The insurance covers political risks in South Africa that could result in the non-repayment of the loan.

According to Britain's International Trade Minister, Baroness Symons "the MOZAL project has, to date, been a success story for Mozambique and the UK has played an important role through significant investment backed by ECGD".

MOZAL is being expanded to double its capacity to about half a million tonnes of aluminium ingots a year. At the current pace, the expansion will be completed in October 2003. It has been estimated that once finished, the smelter will increase Mozambique's gross domestic product by 7 percent.

MOZAL-II has the same shareholders as MOZAL-I, in the same proportions. BHP-Billiton is the largest shareholder with 47.11 percent. The Japanese company Mitsubishi holds 25 per cent, and the South African Industrial Development Corporation (IDC) holds 24.04 per cent.

The remaining 3.85 per cent belongs to the Mozambican state, and the government has negotiated funding from the European Investment Bank to ensure that it can pay for these shares. The government intends to sell off its MOZAL shares eventually to local investors.