by Figueiredo Araújo – SANF 05 No 101
Mozambique has concluded an agreement with the former colonial power, Portugal, to reclaim the giant Cahora Bassa dam and guarantee economic independence as well as control of one of the major sources of electricity in southern Africa.
The Memorandum of Understanding, signed on 2 November, means that Mozambique will by the end of this year be in charge of a project located on its soil but on which it had no control for the past 30 years due to contractual obligations with Portugal.
The new arrangement gives Mozambique 85 percent of the Cahora Bassa Hydroelectric (HCB) project while Portugal will retain only 15 percent. The project has a capacity to produce 2,000 megawatts of electricity and is one of the main suppliers of power to the Southern African Power Pool.
Mozambique said the development is a victory against the last symbol of Portuguese colonial domination in the country. Prime Minister Luisa Diogo said “it is the beginning of a new revolution and the Mozambicans should make sure that the amount agreed is paid in time.”
The latest development opens the way for increased local investment in the project, with positive spin-off benefits for the SADC region. Mozambique has already indicated that it wants to expand the project to increase its generation capacity. The dam currently produces below its capacity and about 60 percent of the production is bought by South Africa’s ESKOM.
The Cahora Bassa is the biggest dam in southern Africa and was constructed in the 1960s by a consortium of South African, Italian, and German investors headed by the Anglo American Trust. Since construction ended in 1974 Portugal has retained control of the dam.
Until now, Portugal owned 82 percent of the project through the state-run Hidroelectrica de Cahora Bassa, which had management rights for the hydroelectric power plant.
Previous attempts to transfer ownership to the Mozambicans have faltered due to the complexity of the negotiation process. Changes of government in Portugal and the 16-year Mozambican civil war did not help the process.
Mozambique will, however, need to pay US$950 million to the Portuguese government as compensation for the post civil-war reconstruction and maintenance of the dam.
In addition to slowing down the negotiation process, the civil war resulted in serious damage to the transmission infrastructure, forcing the Portuguese government to fork out about US$2.5 billion to repair it.
The negotiation process gained new impetus with the restoration of peace in Mozambique in 1992.
The transfer of ownership of the Cahora Bassa project and its anticipated expansion should come as good news for the SADC energy sector which has announced fears that the region could run out of surplus electricity generating capacity by 2007 unless major new projects are undertaken.
Besides South Africa, Zimbabwe is the other major importer of electricity from HCB. Zambia and Namibia have started talks on the possibility of importing power from Mozambique in the spirit of regional cooperation and interdependence.
The demand for electricity is also high in Mozambique, with some vital projects put on hold due to lack of power. This is the case with the second expansion of Mozal, a world-class aluminium smelter located in the Maputo Development Corridor linking Mozambique, South Africa and Swaziland.
Other heavy-duty users of electricity that could benefit from increased power generation at HCB in Mozambique include the US$500 million Corridor Sands Mineral mining project in the southern Gaza province and the Moma Heavy Mineral Sands project in Nampula to the north.
Electricity is also needed for new developments in the Zambezi valley, a vast and fertile area that includes all districts of Tete and Manica provinces as well as the surrounding ones. The Zambezi valley is part of the area designated for Rapid Development Zones which enjoy substantial fiscal incentives.
The dam has potential to boost the efforts by the SADC region to achieve the Millennium Development Goals to reduce poverty by 2015 in the light of the immense potential benefits to the region.
This is also another milestone to achieving the objectives of the Southern African Power Pool to meet the high demand of the region’s energy needs.
