Mozambique: As the Resource Bubble Bursts, Where Will the Rents Come From?

26 January 2021

The "resource curse" occurs when global mining and gas companies share the surplus from resource extraction with a small local elite, and little reaches ordinary people. Economists refer to this as "rent" - income derived from ownership or control over a limited asset or resource. Such income is attained without any expenditure or effort on behalf of the resource holder.

Frelimo has developed an elite and a patronage network based on growing resource rents and the vision of a gas bonanza in coming years. But the bubble has burst. Reversing the climate emergency is putting a rapid end to coal, and is capping the promised growth of natural gas. Vale is abandoning Tete and no new mines will open. There will be no railway to Quelimane. Even if Total continues with its current natural gas project, ExxonMobil and others are unlikely to start their parts, because of war and low gas prices. Global heating is causing an energy shift faster than most people - including Frelimo - expected.

Gemstones, gold, graphite and heavy sands will continue, but they do not provide huge rents. Frelimo thinks that its "blue bag" of cash to hand out will be constantly refilled, but Vale is a harsh reminder that time is over. Some hard thinking is needed about how to manage the fall in resource rents. jh

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