Mozambique stands at a critical crossroads as it attempts to reconcile its status as a burgeoning global energy player with a domestic reality marked by extreme poverty, rising debt, and a violent insurgency in its most resource-rich province.
Despite a reported five percent growth in Gross Domestic Product (GDP) for 2023, largely propelled by the start of gas production at the Coral South offshore facility, the benefits of this “paradox of plenty” remain elusive for the majority of the population.
A new policy brief investigating the nexus between oil and gas investments and development outcomes suggests that while Mozambique possesses the third-largest liquefied natural gas (LNG) reserves in Africa, it is currently a textbook case of the “resource curse”.
The report by the African Forum and Network on Debt and Development (AFRODAD) highlights that recent investments have not only failed to trigger broad-based economic transformation but have also exacerbated regional disparities and exposed systemic vulnerabilities, including corruption and debt dependence.
The Theoretical Paradox of Plenty
The “paradox of plenty,” or the resource curse, refers to the phenomenon in which nations rich in natural resources experience slower economic growth and weaker institutions than resource-poor countries.
In Mozambique, this is analyzed through the lens of the “Rentier State Theory,” which posits that states relying heavily on resource rents – specifically from oil, gas, and minerals – are less motivated to foster broad-based economic development or build accountable governance structures.
The report notes that Mozambique’s extractive industry absorbed approximately 70% of foreign direct investment (FDI) between 2010 and 2018. However, the sector’s contribution to structural transformation has been described as “minimal”.
Remarkably, the extractive sector accounts for less than 1% of total employment in the country, and royalties allocated to communities hosting these multi-billion-dollar investments are just 2.75%, among the lowest globally.
“Sub-Saharan Africa has a long history of external influence and neo-colonial control,” the report states, noting that countries without extractive resources often perform better because “they must develop their people to increase their wealth”.
Furthermore, Mozambique exhibits symptoms of the “Dutch Disease,” a situation in which a surge in demand for natural resources leads to an overvaluation of the local currency, thereby making other sectors – such as agriculture and manufacturing – less competitive.
In 2023, the country’s exports were dominated by coal ($1.76 billion), petroleum gases ($1.72 billion), and unwrought aluminium ($1.09 billion), indicating a pronounced lack of diversification across non-commodity sectors.
A Dominant Political Economy
Mozambique’s political landscape has been dominated by the FRELIMO party since gaining independence from Portugal in 1975. Following a 16-year civil war with the opposition group RENAMO, which ended in 1992, FRELIMO has won every subsequent election.
The concentration of power is immense; the report emphasizes that “the winner of the presidential election essentially takes all the power,” leaving the legislative branch often disregarded.
The political stakes have been heightened by the discovery of gas. The report notes that managing these resources has “intensified political competition and public dissatisfaction”.
Daniel Chapo, the FRELIMO candidate, was sworn in as president on Jan. 15, 2025, following a disputed 2024 general election that triggered post-election protests and violence, leaving over 300 people dead.
Tensions are often rooted in perceived regional marginalisation. FRELIMO’s strongholds are in the southern and northern-most (Makonde) provinces, while RENAMO has historically consolidated support in rural areas of central and central-northern provinces where residents feel excluded.
This regional divide is reflected in income inequality; data show that FRELIMO-stronghold provinces often have the highest Gini indices, indicating the unequal distribution of wealth characteristic of resource enclaves.
The Cabo Delgado Conflict
Nowhere is the disconnect between resource wealth and local reality more evident than in the northern province of Cabo Delgado.
Home to massive projects like the $30 billion Rovuma LNG Project and the $20 billion Mozambique LNG Project, the region has been the site of a violent insurgency since 2017.
The report describes the gas industry in Cabo Delgado as an “enclave,” meaning it operates with few “backward and forward linkages” to the local economy.
While multinational corporations such as TotalEnergies and Eni utilise offshore reserves, substantial numbers of locals have been relocated to accommodate onshore support infrastructure. These communities have “not yet reaped the benefits” of these agreements.
The ongoing conflict has roots in historical marginalisation and uneven development, but the potential profits from gas have become a “significant driver of conflict”.
Facing diminishing electoral influence, RENAMO resorted to violence in 2013 to demand a reorganisation of the state and access to future gas revenues. The government’s response, characterised by a heavy focus on security, has often “inflamed local grievances” and resulted in human rights violations.
Furthermore, the rise of radical Islamism in the region has disproportionately affected women. Women in Cabo Delgado face increased risks of exploitation, forced marriage, and gender-based violence (GBV).
Between 2017 and 2021, widespread violence displaced more than 735,000 people. Despite the industry’s economic potential, women make up only about 10% of the oil and gas workforce, hampered by discrimination, lack of education, and cultural norms.
The Debt Shadow and the “Tuna Bonds”
Mozambique’s economic stability is further undermined by a high risk of debt distress. In 2023, the government’s debt-to-GDP ratio stood at 93.90%. The report identifies a “hidden debt scandal” as a primary turning point for the nation’s credibility.
In 2016, it was discovered that three state-owned businesses had received $2 billion in undisclosed loans from the London offices of Credit Suisse and VTB Capital.
Backed by government guarantees, these funds were ostensibly for maritime projects, including a tuna fishing fleet – leading to the term “Tuna Bonds” – but a large portion was allegedly misappropriated.
The fallout has been severe. The debt burden has limited the government’s ability to invest in “essential public services and development projects”.
Loans for child development programs declined, and the proportion of children completing primary school fell significantly.
In 2024, Mozambique won a $3.1 billion case in London’s High Court against a shipbuilder accused of paying more than $200 million in bribes to Mozambican officials and bankers.
The crisis is exacerbated by military spending. The defence budget surged by 154.94% between 2017 and 2020 as the government attempted to contain the Cabo Delgado insurgency.
This increased spending “decreases spending and urgency on other critical services like infrastructure, education, and health”.
Energy Transition and the “Graphite Boom”
As the global community transitions to renewable energy, Mozambique faces another crossroads.
President Filipe Nyusi unveiled an ambitious $80 billion energy transformation strategy through 2050 at the COP28 summit. The plan aims to add 2,000 megawatts of new hydropower capacity and transition the transportation sector toward electric vehicles.
Mozambique already relies heavily on renewable sources, particularly the Hidroeléctrica de Cahora Bassa (HCB) dam. However, the country’s shift is complicated by its new reliance on gas as an economic anchor.
“Nascent petroleum producers are under pressure today to transition to cleaner sources of fuel,” the report notes, but they must balance these goals with “unique growth needs and resources”.
One major opportunity for diversification lies in “critical minerals” essential for green technology. Mozambique possesses vast reserves of graphite, lithium, and rare earth elements.
The Montepuez graphite mine in Cabo Delgado is among the largest in the world, and Mozambique accounts for 6% of global production.
To capitalise on this, the government recently authorized the establishment of the state-owned Mozambique Mining Exploration Company. The goal is to move beyond raw exports and “enhance value retention within the country”.
Policy Recommendations for Reform
The policy brief concludes that Mozambique must adopt a “balanced approach to resource management” to mitigate the risks of the resource curse. The study offers several specific recommendations:
- Develop a Downstream Industry: Mozambique must move beyond the export of raw materials. Supporting downstream industries for natural gas and minerals would diversify the economy, create jobs, and reduce vulnerability to global price fluctuations.
- Adopt a “Just Energy Framework”: Inclusive development is critical, especially for marginalized regions like Cabo Delgado. The report advocates for revenue-sharing mechanisms and community equity stakes in resource projects to mitigate conflict and improve social cohesion.
- Strengthen Local Content Laws: While the government has issued mechanisms for preferential contracting, the report notes that the country lacks “sophisticated technological and literacy levels in the extractive industry”. There must be a concerted effort to develop a local workforce and provide capital to indigenous entrepreneurs.
- Enhance Transparency and Accountability: The hidden debt scandal proved that Mozambique has “low transparency regarding debt acquisition and servicing”. The report recommends establishing independent regulatory bodies to oversee financial flows and promoting public asset declarations by political leaders.
- A Gradual, Strategic Transition: Mozambique should pursue a transition that accounts for its economic realities. This “energy progression” involves investing in renewables while ensuring oil and gas remain part of the mix to support domestic development in the short to medium term.
Despite the “moderate score” Mozambique received in 2023 for its implementation of the Extractive Industries Transparency Initiative (EITI), the report warns that the country’s future hinges on its ability to manage expectations.
“The case study of Mozambique has shown the importance of understanding the political economy surrounding resource extraction,” the report concludes.
“The management and expectations of the current and future generations must be realistic so as not to cause unrest.”
By Winston Mwale, AfricaBrief
The study was based on a qualitative analysis of academic literature, government reports, and statistical data, including GDP metrics and the Gini Index