Anadarko has signed the final investment agreement, approving a $25 billion liquefied natural gas project in Mozambique that could help transform the economy of one of the world’s poorest but natural resource rich country – Mozambique.
Apart from the huge natural gas discoveries of over 200 Tcf of recoverable natural gas, Mozambique also hosts the world’s biggest resource of graphite reserves (total 114,5 Mt at 16,6 % TGC for 18,6 Mt of contained graphite) part of which could be processed locally in Mozambique (industrialization of mineral processing, beneficiation) for mass production of graphene, one of the most sought after “new generation wonder material” in the world given its “critical importance” for enabling the upcoming transformation to a greener economy, processing of graphite into graphene oxide/graphene for value-added products could “accelerate the diversification and industrialization” of Mozambique’s economy.
Local processing of graphite into graphene could enable Mozambique to ship out “graphene powder” to Europe, to United States, to South America, to Asia, to Australia and to other African countries. Mozambique could become the world’s largest exporter of graphene oxide/graphene value-added products. This could have far more benefits to the industrialization and diversification of Mozambique away from natural gas dependence and improve the internal dynamics and links to other sectors, diversification of exports, substitution of imports .
The economy faces the challenge to diversify, integrate and industrialize. Chances are, in the current rush for “graphene, graphene oxide and its composites” the graphite of Mozambique, being an excellent raw material for mass production of graphene and graphene base products, could be “exported” mostly to be stockpiled “abroad” until there is “nothing left” in Mozambique in 40 to 50 years – “with no value addition that could be possible with local processing of part of it – it depends on Mozambicans “to do something” for “local processing” – and its possible thanks to recent advances in material science and engineering and new methods for turning graphite into graphene or graphene oxide and other products.
The “Startup and Entrepreneur Community and investors in Mozambique” are collectively mostly unaware about “graphite being” a potential feedstock for manufacturing carbon nanotubes and graphene, and as a neutron moderator in nuclear reactors. It is big issue to the “Mozambique´s growing commitment to inclusive and shared growth” the fact that Mozambique does not process locally part of “the graphite” it produces. Just exporting all “graphite” in raw form won’t do much good to the future generation and to the creation of internal linkages that could bring about benefits to other sectors of the economy and “more” employment generation for young people in Mozambique.
Graphite is not a metal. It is a type of molecular carbon, which is mined in a way similar to metal, and often used in similar ways (as compared to hydrocarbons like oil, coal, and natural gas, and to quarried bulk minerals like gravel and salt). Graphite is a form of carbon that is highly valued due to its properties as a conductor of electricity. It is also the basis for the “miracle material” graphene, which is the strongest material ever measured, with vast potential for use in the electronics industries. Graphite is a strategic resource.
The growing market for electric cars has turned lowly graphite into a hot commodity. The mineral graphite – a form of coal – is used in lithium-ion batteries, which power mobile phones, portable electronics and, increasingly, green vehicles. Electric cars are cheaper to run than hydrocarbon-powered vehicles and have been proven to reduce carbon emissions. The likes of Tesla, BMW and Toyota are already producing low-emission cars, and demand is due to soar: according to the International Energy Agency, demand for greener cars will rise to around 125m in 2030 from 3.1m in 2017.
From the logistics complex for graphite, owned by the South African company Grindrod, which won the logistics contract issued by the Australian company Syrah Resources, which is exploiting graphite in Balama district, in the neighbouring province of Cabo Delgado about 20,000 tonnes of graphite are now moving every month from Balama to Nacala, resulting in the export of about 1,000 containers of graphite a month. This is equivalent to more than 45 per cent of the containerised exports from the port.
When the logistics complex is operating at full capacity, it could handle 30,000 tonnes of graphite a month and export 1,500 containers.
More graphite factories will be installed in Montepuez and Lalaua districts (in Cabo Delgado and Nampula respectively).
President Nyusi recently said publicly that a challenge for Mozambicans is processing graphite locally, adding value and replacing the export of raw materials with the export of finished goods. The time has come, he added, for investors “to consider transforming raw materials into the final product right here in Mozambique”.
The President Is Right: It Is Time to “raise awareness of Mozambicans for a greater involvement in “entrepreneurial and innovation processes” that could set Mozambique on the path to development and adoption of technologies and solutions towards the commercial applications that can be progressed in composites, elastomers, fire retardancy, construction and energy storage – by locally processing graphite into value-added products in Mozambique, for the local market and for export of more valuable products.
Graphite can be processed locally, for example, to be used in producing “Graphene reinforced concrete composites” that could be used to increase resilience of civil infrastructure assets in coastal cities in Mozambique and the build-out of much needed water storage and flood protection infrastructures – thus helping to solve one of the biggest challenges Mozambique faces – Improving Preparedness for Natural Disasters (drought, flooding, tropical cyclones etc) and Fostering Economic Growth and Sustainable Development.
Local production of graphene from processing and transformation of graphite could also turn Mozambique into a supplier or exporter graphene-based ultracapacitors and energy-storage systems. Graphene-based ultracapacitors deliver high power, high energy, reliable and long-life storage solutions across the industry. Unlike batteries, ultracapacitors have up to 15 years of lifetime and no need for maintenance, which brings additional cost savings. This could help accelerate the improvement of the quality and quantity of energy throughout Mozambique for the much need industrialization and diversification of the economy.
Furthermore, locally processed graphite could promote the flourishing of solutions involving graphene-based membranes for water treatment that could also pave the way for Mozambique to achieve sustainable development (SDG) goal 6 – Ensure access to water and sanitation for all – provided that new technologies are adopted to modernize the management of the water supply and distribution systems in both urban areas and rural areas and the water sector management in water resources conservation and water services is also “descentralized”- abandoning the current “centralized decentralization model” (FIPAG, AIAS) – it is possible!
Large scale production of low cost and high quality graphene from abundant “graphite” raw material using eco-friendly methods is a critical step towards the widespread and sustainable use of the “wonder material” – Graphene, graphene oxide (GO), and their composites.
Mass production of graphene can be achieved through electrolytic process. A process very similar to the production of aluminum, using a new method for low cost, high yield and quality graphene that has already been developed. It is envisaged that this electrochemical method of graphene production from graphite could be readily scaled up using a multi-electrode cell with planar electrodes to produce more graphene in more than current methods of chemical vapour deposition and exfoliation.
This process uses readily available commercial graphite electrodes as the carbon source which is both abundant and cheap. Surprisingly, apart from graphite, the other consumables are H2 and electricity, and no by-product is produced. This method is not only eco-friendly but also very efficient. It offers a production rate of 450 g graphene per litre of molten salt per day. A molten salt volume of 10 L should be able to produce 4.5 kg graphene in a day.
Key benefits: Cost per tonne could be reduced by over two orders of magnitude, very high production rate compared to existing methods, very high quality graphene. Mozambique could be well positioned to become the largest exporter of “very high quality graphene” in the world.
Other counties would have to “import graphite” from the world’s largest “graphite project” located in Mozambique, stockpile in the destination country and use it to also produce “graphene” through the Eco-friendly production of high quality low cost graphene method. Mozambique will have location advantage – because one of the largest “graphite reserves and project” is located in Mozambique. Mozambique has upcoming energy projects that will use natural gas and also Mpanda Nkuwa that could find in the “electrolytic process” for producing graphene from graphite, a potential additional viable market to consume the power. The process has analogy with conventional aluminium pot lines – delivering high production rate, low production cost, high quality graphene.
It is matter of Mozambicans “taking advantage” of it – to benefit the development of the country – industrialization, job creation, value addition – and export of “more valuable and transformed products” from “graphite” – making Mozambique prosper from the rush for ‘graphene gold’.
According to a full feasibility study (FS) delivered by Snowden on Balama project in May 2015, it was confirmed Balama is the world’s largest flake graphite project. As detailed in the FS, Balama would have a nameplate capacity of 350 000 tonnes of concentrate per annum at 98 % TGC, with the reserves being sufficient for over 40 years of operation at full production. The average head grade would be approximately 19 % TGC during the first 10 years of operations. The FS estimated the IRR at 71 % with a post-tax NPV10 of US$1,1 billion and put the payback period at less than two years from commercial production.
An excellent business for the foreign investors, but without local Processing of graphite into graphene oxide/graphene for value-added products to be exported from Mozambique – the annual contribution to tax revenues will be so insignificant compared to “environmental and social impacts potentially associated with graphite mining operations” and “the actual value of a strategic resources” being mined to be exported for stockpiling and processing abroad” with no “beneficiation in Mozambique”.
Graphite as a strategic resource is more valuable to a country that owns the “resources” once processed locally into more valuable products.
Syrah and its wholly owned subsidiaries, (“Syrah Group”) have entered into a quotaholder agreement (“Quotaholder Agreement”) with Empresa Moçambicana de Exploração Mineira, SA (“EMEM”) which is to hold 5% of the quotas in Twigg Exploration and Mining Limitada (“Twigg”) on behalf of the Government of the Republic of Mozambique (“Government of Mozambique”). – EMEM will use its best endeavours to assist Twigg in its dealings with all governmental agencies including by supporting negotiations to obtain the delivery of reasonable grid power to its mine site at commercial tariffs.
Main areas of the business of EMEM include ensuring the active participation of the Mozambican state in mining enterprises, as well as stimulate the growth of the national extractive industry. To promote the acquisition of minerals produced in the national territory for domestic consumption and export. EMEM in coordination with local enterpreneurs (private sector), the academia – would be key in pushing for avoid “Undervaluation of graphite Mineral Exports” and Abusive Transfer Pricing that may occur and also the fact that Mozambique will be loosing a lot for not processing locally part of graphite – strategic resource that is not “renewable”.
Undervaluation of Mineral Exports – Profit shifting via the pricing of mineral products sold to related parties is a major concern for many mineral exporting countries. For developing countries, these risks are elevated where government agencies lack the mineral-testing facilities required to verify the grade and quality of mineral exports, as well as detailed sector-specific knowledge of the mining transformation process and mineral product pricing.
Abusive Transfer Pricing – Transfer pricing occurs when one company sells a good or service to another related company. Because these transactions are internal, they are not subject to market pricing and can be used by multinationals to shift profits to low-tax jurisdictions.
Syrah is moving toward battery anode development outside Mozambique. The company is the parent of Twigg Exploration and Mining Limitada (“Twigg”) that produces high-purity graphite produced by from the Balama operation in Mozambique. It hopes to develop the commercial battery anode material (BAM) plant in the US to supply the growing battery anode marketplace. (“EMEM”) is to hold 5% of the quotas in Twigg Exploration and Mining Limitada (“Twigg”) – if it processed locally graphite into more valuable products the economy of Mozambique and its people would benefit more. It is shows that the Mozambicans should be the ones initiating the process. It is in the Mozambique’s interest to see local processing.
Apart from the graphite projects in Mozambique, “involving large volume of non-renewable resources mining for export” (extractive industry), with no local processing into value-added products, the recently approved Anadarko-led Area 1 Mozambique LNG project will be Mozambique’s first onshore LNG development, initially consisting of two LNG trains with total nameplate capacity of 12.88 million tonnes per annum (MTPA) to support the development of the Golfinho/Atum fields located entirely within Offshore Area 1. The project has successfully secured in aggregate 11.1 MTPA of long-term LNG sales (representing 86% of the plant’s nameplate capacity) with key LNG buyers in Asia and in Europe. Additionally, the project is expected to have a significant domestic gas component for in-country consumption to help fuel future economic development.
The Mozambique government expects $95 billion of revenue over 25 years from the gas project and others led by Exxon Mobil and Eni SpA.
Recently, the president announced publicly that up to US$50 billion could be invested in the exploitation of natural gas in the Rovuma Basin in Mozambique over the next ten years. The contribution of natural gas “to state tax revenue” will be far bigger than that of “the graphite mining for export”. But the gas for power production could accelerate and make viable the local processing of “graphite” – for Mozambique to reap the benefits from “processing this strategic resource into valuable products locally – for local use and for export” – improving significantly the contribution to the “economic and social development” of Mozambique.
According to the Managing Director and Chief Executive Office of Syrah Resources, Shaun Verner, when peak production is reached, the Balama mine will bring the Mozambican state tax revenue of about “only” 17 million dollars a year. The mine is estimated to have a useful life of 50 year (approx. only 850 million dollars in tax revenue in 50 years if no local processing into value added products is done). The known reserves of graphite here are put at 114 million tonnes, making the Balama deposit by far the largest in the world (by comparison, known reserves in Turkey are put at 90 million tonnes, in Brazil at 70 million tonnes, and in China at 55 million tonnes). Mozambique has one of the largest deposits of high-quality graphite in the world – somewhere between 20% and 40% of total global reserves.
“Mozambique will make a very bad mistake,” if its “leaders, entrepreneurs, investors” continue turning a blind eye the “need for a significant domestic graphite component for “in-country processing of graphite into graphene oxide/graphene for value-added products to help fuel future economic development or more internal linkage – with far more transformative potential than what will be generated per annum in resource rent from graphite mining for export.
Mozambique is still an agriculture-based economy. One day the gas explorations will come to an end and the rest of the economy may suffer if the road to economic diversification is not taken. Furthermore, the value-added products from in-country processing of graphite into graphene oxide/graphene will contribute more to accelerating “development, industrialization and competitive export of value added or processed goods” – create more internal linkages in the economy than the “natural gas export or use for production of energy for export” – it is possible for Mozambicans to follow the path to in-country processing of graphite into graphene oxide/graphene for value-added products.
The country has 29 million people, nearly half under 14 years old. That means 500,000 will enter the labour force each year over the next decade, according to the World Bank. Economic expansion is stagnating at around 3 percent, about the same as population growth. Mozambique should learn from other countries that discovered “huge natural resources in the past” – to make the right decisions about the paths into the future.
Countries like Australia, Canada, Norway and Botswana have been able to use their rich natural resources to embark on a sustainable high growth path. At the same time, the majority of resource rich countries have not been able to replicate this scenario. In Nigeria, for example, GDP per capita decreased from US$1,113 in 1970 to US$1,080 in 2000 and poverty incidence increased from 36% to 70%, in spite of roughly 350 billion US$ Oil revenues over the same period (Sala-i-Martin and Subramanian, 2003).
Nigeria is not an isolated example: Angola, Sudan, Sierra Leone, Liberia and Congo, among others, are all gifted with considerable resource wealth while decennia-long exploration of this natural abundance has not lifted these countries from the lowest ranks in the Human Development Index list.
Natural gas may increase the probability of Mozambique failing to develop, and diversify in the near future due to a potential impact of Dutch disease on its agriculture and its much needed industrialisation for job creation for the younger population. This potential negative impact will put the livelihood of tens of thousands of peasant farmers at risk in a country where agriculture still accounts for a third of gross domestic product. Furthermore, it could promote non-inclusive growth fatally undermining democratic institutions and opening the doors to anarchy or oligarchic rule/elite Democracy
In a nutshell, “Dutch disease” strikes an economy when the discovery of a resource such as oil or gas draws in a flood of dollars, boosting the local currency but making all other exports uncompetitive. The term was coined to explain the decline of manufacturing in the Netherlands after the discovery of North Sea oil and gas in the late 1950s.
The need for diversification of the Mozambican Economy towards a sustainable, more inclusive growth and Economic Development is inevitable in the near future. The latest economic update from the World Bank shows that while there have been economic gains, inequality has increased, the country’s growth capacity is low, and the need to move toward shared growth, broadening the agriculture sector, which continues to have the highest employment potential, was recommended.
In that Mozambique Poverty Assessment report from the World bank entitled “Strong but not Broadly Shared Growth” dated April 2018, the following is highlighted:
“Chronic poverty continues to be a challenge following a period of strong economic growth. As of 2014/15, more than 4 in 10 individuals are unable to afford a basic food and non-food basket and are deprived in at least three core, non-monetary measures of human welfare (education, access to basic services, housing conditions and ownership of basic assets). The persistence of these deprivations is likely to continue trapping these households into a condition of monetary poverty. Most of the households likely to be chronically poor are in rural areas (84.9%), particularly in the provinces of Zambezia, Niassa and Nampula.”
Currently, the reality is that more than seven million Mozambicans work in the informal sector across different sectors of activity, with emphasis on agriculture, and contribute more than 60 percent to the gross domestic product of Mozambique and more than 80 per cent to the employment rate in the country.
The formal sector is estimated to cover only 700,000 jobs while to labour force constitutes 11.6 million workers. It shows the presence of a large informal economy, which is estimated to absorb 95% of the labour force. Around 300,000 youths join the labour force every year but the labour market do not create sufficient jobs in the formal sector.
In article entitled “Agricultural land is a Mozambican resource. The case for small commercial farmers”, by Teresa Smart and Joseph Hanlon, the following is said about the average rural cash incomes in Mozambique and poverty traps related to productivity, cultivated land and agricultural inputs:
“The median cash income in rural Mozambique is only 675 MT per person per year. Less than $2 per month. Peasant farmers are very poor. Most family farms are only 1 ha, because that is all the land a family can open with hoes in a year. Indeed, for the many families so short of food that they do not eat enough calories to work the entire day, even 1 ha can be difficult.
Nearly all peasant farmers use no modern inputs – fertilizer, improved seed, irrigation. Many donors follow a strategy of leaving the family farmers on their 1 ha, but trying to raise their production – through improved seeds, irrigation, post-harvest conservation, and sometimes various forms of conservation farming. But who pays and who carries the risk?
With improved seeds and fertilizer, maize yields can be doubled, making a major improvement to family nutrition. But this would require improved seed, costing perhaps 500 MT, and two 50 kg bags of fertiliser, costing 2500 MT. For a typical family, 3000 MT ($100) is most of their annual cash income. Donor agencies will not pay for this year after year. And what will happen if the rains fail. Even if donors provide an initial boose, most 1 ha hoe farmers will eventually not have the money to buy seed and fertiliser. Keeping peasant farmers on 1 ha is to doom them to poverty.”
In urban centers, most are in the informal sector and concentrated in activities with low productivity.
There is a clear intent to help the Informal Sector get out of poverty traps – Bringing it into the Formal Economy.
Since mid-2016, the Ministry of Industry and Trade (MIC), through the Institute for the Promotion of Small and Medium Enterprises (IPEME), has been running a campaign called ‘Quero Ser Formal’ ( I Want to Be Formal), the main objective of which is to train informal traders in accounting, management techniques and marketing.
In 2017, in a one-day conference in Maputo to discuss the role of the informal sector in the country’s economic growth, the Deputy Minister of Industry and Commerce, Ragendra de Sousa said: “we will do everything we can to help lift the ‘mamanas’ (informal women vendors) out of poverty”, but that the informal sector must increase profitability, and not settle for selling around 50 meticais’ worth of product and making a profit of 10 meticais a day.”
As it can been seen as regards to growth capacity from situations above more challenges will soon come about with the windfall of revenues from natural gas in Mozambique. There is a need to unlock the potential of agriculture to drive the economy further, there is need for rapid transformation of key agricultural value chains all of which will require skilled human resource as we know already – but recent advances in technologies can help – entrepreneurs should take the lead in starting that revolution towards the “transformation” for diversification of the economy of Mozambique to become a reality.
Diversification of the economy and broad-based economic development are critical for the long-term sustainable development in resource-rich developing countries (RRDCs) for two reasons. First, the high level of export concentration makes these economies vulnerable to commodity price fluctuations that can result in abrupt contraction of public resources and/or create a negative spillover effect in the rest of the economy. Second, extractive sectors are generally capital intensive, have weak links to the rest of the economy, and, as a rule, do not generate much employment. Therefore, investments in these sectors and their expansion have a low impact on the growth and productivity of other industries leading to a high concentration of gross domestic product (GDP) and a low impact on job creation.
As a matter of priority, the Mozambican government must encourage the diversification of Mozambique’s economy. It is the only viable way to survive the environment of global economic uncertainty with the external factors such as volatility of oil and gas prices, new regulations, contractual conditions, and logistic constraints that could come into play. It is crucial that government do not believe that natural gas will provide an endless source of revenue.
We can as an example, the challenges faced by the Gulf Cooperation Council member states (GCC: Saudi Arabia, Bahrain, Qatar, Kuwait, Oman and the United Arab Emirates) and Yemen . Efforts by the Gulf Cooperation Council member states (GCC) towards economic diversification have intensified in the wake of the sharp decline in oil prices by 75 per cent—from US$115 per barrel in June 2014 to around US$27 per barrel in January 2016. Despite financial wealth and relative economic and political stability in most GCC countries, the decline in oil prices has exposed the structural weaknesses of Gulf economies in their heavy dependency on oil and gas and inevitability of bringing about radical changes in the economic system.
Important lessons can be learned by Mozambique by looking at the challenges “to diversification of the economy” faced by the Gulf Cooperation Council member states faced:
· The high expectations for resource-based industrialisation have not been fulfilled in the Gulf region.
· The GCC countries, despite the abundance of capital and cheap energy, failed to develop an industrial infrastructure that could form the base for industrial and technological development, and their industries remained uncompetitive in the global markets, except for the petrochemical industry that is still heavily subsidized.
The fact that most GCC countries import almost 98 per cent of their needs from international markets also questions the wisdom of the Gulf development model and its consequences for sustainable development in the oil-rich GCC countries.
A possible explanation for the failure of GCC countries to develop an industrialisation programme could be their desire to create a service-based economy. Mozambique cannot afford to follow this path “of diversification” – it needs to become one of “the next Manufacturing Floor of the world” and create jobs for its 500,000 young people that will enter the labour force each year over the next decade, become a country that “processes what it produces” and “develop internal dynamics and linkages in its economy” and “replace significant imports with locally processed and manufactured goods” and “become a competitive economy” and net exporter of processed goods, parts and components goods and capital – and develop its people.
In the GCC countries, diversification means the allocation of resources to education, health, financial services, tourism, aviation and real estates. Diversification could also be seen by Gulf countries as long-term strategy, and hence there is no rush to disrupt their economic system as long as oil rents will continue to be the main source of government revenues for the foreseeable future (Luciani 2012).
For the case of Mozambique, the core challenge of “economic diversification” will not be technical, but political.
Technical issues are solvable with easy and “a handful of local energized, visionary innovators and entrepreneurs are willing to tap on exponential technologies (eg. Internet of Things (IoT), Artificial Intelligence (AI), Distributed Ledger Technologies (DLT) in combination, robotics, 3D construction printing, etc.) to create “abundance backbones” that will boost agriculture development in Mozambique as well as the value addition chain in ways never seen before.
I posit that “abundance backbones” are a new kind of “re-engineered dynamic soft and hard infrastructure” for accelerating transformation through digitization and business enablement for SMEs with troika approach – using IoT, AI, DLT in combination and 3D construction printing for social and economic good, enabling levels of aggregate efficiencies not possible before in a developing poor country context like Mozambique.
Differently from the GCC countries, Mozambique will be starting from scratch. With the possibility for rethinking from the ground-up, and “re-engineering intelligent business distribution infrastructure development” that will accelerate the much needed “agricultural transformation” and contribute to the Mozambique economy and deliver the needed “soft and Hard/built infrastructure” to support commerce and m-commerce/e-commerce in Mozambique to increase employment and production as well as improving the competitiveness of the national economy and business, driven by the market oriented agriculture, with strong involvement of the family and private sector to generate jobs and income, ensuring food and nutritional security, the provision of raw materials for the domestic industry and generation of surplus for export.
Autor: Abel Viageiro, empreendedor tecnológico (Chemical Engineer, “Industrial IoT engineer & Industrial AI-enriched Solution Architect)