A Mozambique government Minister has called on mining companies working in the country to focus on the future as it battles through the current economic downturn. Justice Minister Isaque Chande urged them to plan and execute structural measures to secure their investments. He was speaking at a two-day seminar in Maputo last week, called to allow the government and mining groups to discuss the effects of the falling global commodity prices on the sector and the wider economy.

Geological surveys over the past decade have shown that Mozambique has at least 5.66-trillion cubic metres of natural gas and a minimum of 20-billion tons of coal, as well as large deposits of heavy mineral sands and graphite. Between 2004 and 2013, the mining and hydrocarbons sectors attracted foreign direct investments amounting to some $14-billion.

But the end of the global commodities boom, with the concomitant fall in both demand and prices, has hit the country. For example, the price of thermal coal has, since 2008, reached a peak of $120/t, only to fall to below $60/t. While Mozambique mainly produces the more valuable metallurgical, or coking, coal, this price also fell significantly (to an average of $81/t during the first quarter of this year).

The government is worried about the direct and indirect job losses associated with this downturn. The knock-on effects are hitting thousands of local companies that supply goods and services to the miners. And it also reduces the tax revenues collected by the State. It is considering the possibility of creating mechanisms to reduce the impact of commodity price volatility on the country in the future.

One result of the situation is that the country’s economy grew at 5.3% during the first quarter of this year. While this is high from a South African perspective, it represents a decline from the 6.1% from the last quarter of last year.

Mozambique is also facing a growing debt crisis. The country’s debt has shot up from being equivalent to 42% of gross domestic product early last year to almost 80% today. This was the result of the discovery of secret loans – concealed from both the International Monetary Fund (IMF) and the Mozambican people – which are now known to total at least $2.32-billion. These secret loans have caused the IMF and Western countries to suspend aid to Mozambique.

Finance Minister Adriano Afonso Maleiane has reported that the country’s public debt totals $11.64-billion, the bulk of which ($9.85-billion) is owed to foreign investors. The government has admitted that it faces short-term payment difficulties but Maleiane insists that the debt is under control and that there “are no major concerns”. Mozambique appears to be hopeful of assistance from China. However, outside observers believe that it will be very difficult for Maputo to avoid having to ask the IMF for help.