Stepping off the aeroplane in Tete, north-west Mozambique, feels like stepping into an oven. The town claims to be one of the hottest on earth, so it seems a cruel twist of fate that it’s also home to some of the world’s richest coal deposits, the extraction of which requires exhausting physical labour at the best of times. Working in Tete’s open-cast mines is a hard life.

Life is not easy for the mines’ owners, either. The global price of coal was in free-fall even before oil started following suit late this year; and transporting the coal from Tete, Mozambique’s most inland province, to ports on the Indian coast has proven fraught with difficulty. Rio Tinto wrote off almost $4bn it had invested in Mozambique earlier this year after it was prohibited from sending coal on barges down the Zambezi. Brazil’s Vale, the largest investor left in southern Africa, is currently making a loss on every lump of coal it digs out of the ground – but is determined to make it work. A new rail line to a purpose-built terminal at the port of Nacala in the north-east of the country is due to open at the start of 2015, and works are advancing on phase two of Vale’s coal mining project at Moatize, in Tete Province.


New broom

Mozambique held mostly peaceful presidential and parliamentary elections on October 15, which resulted in a reduced majority for Frelimo, the party that has held power since Mozambique's liberation from Portugal in 1975, and a win for Frelimo’s presidential candidate, Filipe Nyusi, a relatively low-profile former defence minister who will be the country’s first leader from the resource-rich northern half of the country.

The opposition cried foul, as it has done on every occasion since Mozambique started holding elections in 1994, but although all observers saw some evidence of fraud, few believe it was on a scale worthy of invalidating the official results.

The current administration will remain in power until the end of 2014, and parliament is promising to debate a bill to create an official ‘leader of the opposition’ role for Afonso Dhlakama, leader of main opposition party (and former rebel army) Renamo and runner-up in every presidential election Mozambique has ever had. Giving Mr Dhlakama a job may placate him, and dampen residual fears about a return to violence. The most likely outcome is a combination of reform and continuity from yet another Frelimo administration, but with a new man taking the reins from Armando Guebuza, who has won plaudits for sticking to the country's constitution and stepping aside after serving the maximum two five-year terms.

Nevertheless, many hope the Nyusi regime will herald a reduction in corruption – something that has become a major impediment to foreign investment in Mozambique. “Outsiders generally agree that corruption has got worse under the Guebuza administration,” says Colin Waugh, a partner at Maputo-based investment and financial advisory firm SCP Africa. “Donors have voted with their feet, and one of the reasons is the continuing corruption,” he says, adding that investors from countries with strict anti-bribery legislation can find it hard to compete in Mozambique with companies from elsewhere.

Tourism hope

Mohamed Tariq, a Mozambican of Pakistani extraction who owns a chain of hotels and other businesses in the northern city of Nampula through a Portuguese-domiciled holding company that he owns with seven brothers, says corruption and bureaucracy are the biggest things holding back investment in the country. “It depends where you are coming from,” he says – echoing Mr Waugh’s point that some cultures find it easier to deal with. One of Mr Tariq's brothers, who lives in Portugal, finds Mozambican corruption very hard to deal with. The bureaucracy, on the other hand, is a Portuguese legacy, Mr Tariq argues.

Mr Tariq has seven hotels in the city, though only two are currently open. The rest are being refurbished and expanded. “In Nampula we don’t have tourism at all – we survive on conferences,” he says – the main participants being the government and non-governmental organisations. New hotels are opening every day, he says, and “are always full. Occupancy is always over 80%. And the service is the worst – but things are changing.”

Prices are extraordinary, by developed-world standards: a run-down room with a broken toilet, and breakfast consisting of one bread roll, costs about 2000 meticais, the equivalent of $65, a night; for genuine three-star standards, a tourist can be expected to pay upwards of 3500 meticais, or $112. Mr Tariq has also won a contract with the local government to open a visitor information point at Nampula's airport – to be staffed by employees who are currently learning customer service in Brazil and Portugal.

After the tourists...

Nacala, a three-hour drive east of Nampula on the Indian Ocean coast, used to be a tourist destination – but no more. Picolien Jane Eilander-Kingsley and her husband Ian Kingsley opened Libélula Dive Lodge on the shore of the attractive bay in 2009, having moved from the Cayman Islands where Mr Kingsley, originally from the UK, had been a diving instructor. Back then, South Africa-born Ms Eilander-Kingsley says their business was 90% tourism; now that’s down to 5%. “The rest is contractors and businessmen,” she says. At 2700 meticais a night, their comfortable lodge is never short of occupants.

The dirt road leading down to Libélula Lodge starts opposite the end of the access road to Nacala's airport, currently under construction but due to open by the end of 2014 after many false dawns. When it does open, it will be Mozambique’s biggest airport, dwarfing even the one in the capital, Maputo.

Nacala is a boom town, or rather two boom towns. Nacala Porto is the bigger one, home to both the deepest natural port in east Africa and the terminus of a rail link to Malawi. On the other side of the bay, the old town – Nacala-a-Velha – was until recently a sleepy backwater, but has “exploded”, Ms Eilander-Kingsley says, since Vale started building its coal terminal there. 

Health problems

Nacala is unrecognisable from how it looked only a few years ago, according to Ms Eilander-Kingsley. A US-built hospital opened three years ago, while three private clinics have opened in the past year and a half. “Before, it was so 'third world' it was unbelievable,” she says. Nevertheless, poor healthcare is a big issue. Of Ms Eilander-Kingsley's staff of 16, on average one will take five days’ compassionate leave every month having lost a family member, commonly to malaria. Staff are taken to private clinics if they start showing symptoms; although the state-run hospital in theory provides affordable treatment, the bribes required to get seen in the first place are too expensive.

Nacala will be where Australian mining company Syrah Resources sends its graphite for export when its mine starts production in 2016 – despite that mine being far closer to Pemba, Mozambique’s northern-most port. Plans are afoot to expand Pemba port, but for now it cannot compete with Nacala. A new logistics terminal is in place in Pemba, designed to serve the offshore gas industry; Anadarko from the US and Italy’s ENI are leading the two consortia currently awaiting special legislation allowing them exemptions to Mozambique’s local content and taxation laws.

The special legislation may be approved by the end of 2014, and Mr Waugh says the Guebuza administration is “trying flat out over the next few weeks to get some things passed”, and the gas legislation is “definitely a Guebuza agenda priority”. “Whatever its sweeteners are, [the current administration] wants to get them while it's still in power,” he says.

Generating opportunities

For Syrah Resources, however, Mozambique has been an exemplary investment destination. “Mozambique has been fantastic,” says managing director Tolga Kumova. “It has welcomed us with open arms. It has been highly supportive in every sense of the world. It understands what we’re trying to do with the business.”

As far as upheaval around the elections goes, Mr Kumova was never worried. “We haven’t been stressed in any way, shape or form,” he says. “Mozambique right now is all about foreign investment and generating opportunities for people to find employment, so I don’t think [the investment climate] would change that much. [The country is] trying to increase GDP, so it needs foreign investment to do so.”