How an Insurgency Threatens Mozambique’s Gas Bonanza

(Bloomberg) -- If all goes as planned, one of the world’s poorest countries will be transformed by Africa’s biggest-ever private investment splurge, but there’s a problem. Attacks by Islamist insurgents threaten hopes of exploiting huge natural gas deposits off Mozambique’s northern coast. More than 2,800 people have been killed and 700,000 displaced since violence began in 2017. The country’s export ambitions are linked to projects by some of the world’s biggest energy companies, but investments are being held up by the fighting.

1. What’s at stake?

As much as $120 billion in investment, according to Standard Bank Group Ltd., Africa’s largest lender. It’s unlikely all that money will materialize, especially if the violence continues. Still, even some projects would be a game-changer not just for Mozambique, where almost two-thirds of its 32 million people live on less than $1.90 a day, but potentially for neighboring countries as well. Besides providing a massive boost to state finances, it would also create several thousand construction jobs. Gas production could also bring changes that would address chronic electricity shortages and boost fertilizer production to drive crop output.

2. Who’s behind the attacks?

Most insurgents are poor, disenfranchised local youths living in northern Cabo Delgado province, a coastal area with vast, dense forests that has few roads. Some have come from Tanzania, Uganda and the Democratic Republic of the Congo. Corruption and abuses by the military and police in the region close to the border with Tanzania have made it easier for the insurgents to recruit. They organized as an Islamist group in 2007 and refer to themselves as al-Shabaab, as do locals, but they have no known links to the Somali group that goes by that name and is allied to al-Qaeda. In 2018, they aligned themselves with Islamic State, which has claimed responsibility for dozens of the attacks.

3. How did the insurgency start?

It began when 30 armed men attacked three police stations in the port of Mocimboa da Praia in October 2017, according to the United Nations Office for the Coordination of Humanitarian Affairs. That followed the arrest of local conservative religious leaders for allegedly inciting civil disobedience. The UN office said the violence “seems to be rooted in the radicalization of marginalized youth,” who “rejected poverty and social exclusion and started to reject traditional forms of Islam.” After the rebels aligned with Islamic State, the larger group implicitly threatened to target the gas installations. The sophistication, scale and frequency of incursions increased in 2020, with the attackers using rocket-propelled grenades and other weapons seized from the military. While violence abated during the rainy season at the start of 2021, it escalated in March when at least 100 militants attacked Palma, less than 8 kilometers (5 miles) from a site being developed by France’s Total SE, killing dozens.

4. How is Mozambique managing the threat?

The army has struggled as the insurgents’ ranks have swelled and they’ve gained access to better weaponry. Advocacy groups Human Rights Watch and Amnesty International accuse the security forces of extra-judicial killings and other heavy-handed tactics against suspects. The government hired Russian and South African mercenaries to quell attacks, but they have had limited success. More recently, the state has started social programs to address a lack of jobs.

5. What’s the gas worth to Mozambique?

The government expects to pocket about $96 billion over the next quarter-century from three liquefied natural gas plants that would turn Mozambique into a leading exporter of the fuel. The authorities plan to establish a sovereign wealth fund to manage the income, which could go a long way toward improving roads and ports and access to health and education. But Mozambique, which rated a poor 149th out of 180 countries on Transparency International’s Corruption Perceptions Index in 2020, will need to avoid pitfalls. History has many examples of countries whose natural-resource wealth failed to translate into economic success, a phenomenon economists call “the resource curse.”

6. How bad are the disruptions?

Work was suspended twice this year at Total’s site on the Afungi peninsula in Cabo Delgado, part of a planned $20 billion development that was expected to begin producing gas from 2024. Construction will be delayed for at least a year. In March, Exxon Mobil Corp. postponed approval of its planned $30 billion Rovuma project, also involving onshore installations, for a third straight year. Meanwhile Italy’s Eni SpA has pressed ahead with its smaller $7 billion Coral South development 80 kilometers offshore on a floating plant above the gas fields.

7. Are other countries helping Mozambique?

The U.S. agreed to train Mozambican soldiers, while France and Portugal have offered assistance. The 16-nation Southern African Development Community, a trading bloc, agreed in April on the urgent need for collective action while stopping short of offering specific help, and Mozambique President Filipe Nyusi has said foreign troops on Mozambican soil would compromise its sovereignty and international forces should only play a supporting role. Defense Minister Jaime Neto has urged neighboring countries to strengthen border controls.

The Reference Shelf

• Bloomberg stories on the threat to the gas projects and a warning about the insurgency from the Export-Import Bank of the U.S., which provided project financing.
• Mozambique needs to send an S.O.S. to stop ISIS, writes Bloomberg Opinion columnist Bobby Ghosh.
• A Human Rights Watch report on security forces’ conduct in northern Mozambique.
• A Bloomberg story on how Mozambique’s response to the insurgency is perplexing neighbors.

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