News24

Mozambique seals deal

2012-04-15 12:10

Maputo - After decades of wrangling, Portugal has finally relinquished its remaining stake in the Cahora Bassa hydro-electric dam to its former colony Mozambique, as part of plans to overhaul the national electric grid.

Portugal's Prime Minister Pedro Passos Coelho on Monday signed over half of his country's remaining 15% stake in the dam, with the rest to follow in two years through a share-swap.

Mozambique agreed to pay $42m for an additional 7.5% stake now, bringing its holding to 92.5%.

Envisaged as Portugal's grand colonial project, the dam on the mighty Zambezi River was completed in 1974, the same year Portugal pulled out of Mozambique.

In a deal struck with the new government, Lisbon retained a majority share in HCB (Hidroelectrica de Cahora Bassa), the company that runs the dam.

National pride

Portuguese engineers stayed on to keep it operational during a civil war between 1977 and 1992.

Getting it back has been a matter of Mozambican national pride ever since.

Twenty years after the devastating civil war that left the country without a proper power infrastructure, only one in five Mozambicans has regular access to electricity.

Most of them are in the capital, Maputo, which receives power routed through neighbouring South Africa.

Cahora Bassa only began turning a profit in 2010, three years after the building of a line to South Africa, a project that required clearing vast mine fields.

Mozambique's powerful neighbour buys 65% of HCB's output. The dam has a capacity of more than 2000 MW.

Economic point of view

"Owning Cahora Bassa is a source of political affirmation and self-esteem but, but from an economic point of view I don't see that it gives you much bargaining power when you deal with a consumer like South Africa that has a monopoly power," said Antonio Francisco, research director at Mozambique's Institute of Social and Economic Studies.

However, Mozambique could become an energy player not just in regional markets but globally too.

The hydro-power generator is southern Africa's biggest source of "clean" energy, but is dwarfed by recent discoveries of "dirty" fuel only 100 kilometres away.

Foreign giants like Brasil's Vale and Australia's Rio Tinto are mining coal in what is believed to be the world's largest untapped reserves in Moatize, also in Tete Province.

"Cahora Bassa is... a foundation in the expansion and integration of energy infrastructure and energy industries in our country," said Mozambican President Armando Guebuza after clinching the deal with Portugal.

Mozambique's grand plan is to harness both the potential of hydro power and coal coking plants in the Zambezi Valley by building a power transmission line between Tete and the country's south to fuel industrial growth and social development.