● Familiar cabinet line-up suggests President Filipe Nyusi’s second term will look much like the first. However, the backdrop differs for these reasons:
● While Nyusi’s first term was characterized by a corruption-induced financial crisis, the economy and the mega-LNG projects are now expected to accelerate, and the country is slowly clawing back its financial reputation.
● At the same time, the political climate has deteriorated markedly, and the security outlook may worsen once again in the face of Mozambique’s insurgency in the north and a peace accord with Renamo severely strained by the tainted 2019 elections.
Following a crisis-ridden first term, Nyusi starts his second presidential stint with Mozambique’s economic outlook improving. The IMF expects a growth rebound of 5.5% this year, though this is below the government’s 6.5% forecast. Crucial drivers for the outlook will be the speed of the development of the Rovuma LNG projects, a potential return of the IMF program and other aid funding, climatic factors, and the potential economic ramifications of security threats.
Politically, however, the outlook for Nyusi’s second term is more troubled. Not only do the (widely criticized) 2019 elections threaten to undo the most recent peace agreement with Renamo, but Nyusi’s landslide electoral win also seems insufficient to strengthen the president within Frelimo. His post-inauguration cabinet appointments were an early sign that Nyusi is facing internal pushback. Frelimo’s Political Commission (PC), in which clamoring for the next presidential race is already starting, reportedly rejected many of the president’s cabinet choices.
In particular, the PC seems to have rejected Nyusi’s nominations for the prime minister post, namely Celso Correia (a close confidante and 2019 campaign manager, who will now oversee a restructured agriculture and development ministry), and Carlos Mesquita, who moves from the transport to the industry and commerce ministry. As a result, Prime Minister Carlos Rosario retained his post. The high degree of continuity evident in the cabinet appointments may therefore be driven by Frelimo’s PC rather than the president.
Creditor concerns
The Ministry of Economy and Finance remains under the leadership of the long-suffering Adriano Maleiane, who has had to steer Mozambique through the worst of the debt crisis. There have long been calls to replace Maleiane, but there seems to be no credible replacement. The prime minister may continue to act as an important backstop for Maleiane, particularly as the president has shown limited interest in the sovereign’s financial issues.
In 2020, the government should continue to claw its way out of its default crisis. Its 2019 debt restructuring deal with sovereign bondholders was an important first step. On the back of it, the IMF and World Bank are looking to move on from the financial scandal, which could mean the resumption of funding this year.
However, Mozambique is still not in the clear. First, the outcome of the UK court case involving Credit Suisse over the USD 622mn ProIndicus loan will determine whether Mozambique’s state guarantee has to be honored. Secondly, the fact that Russia’s VTB recently resorted to filing a UK lawsuit to force Mozambique to pay back its USD 535mn Mozambique Asset Management (MAM) loan may suggest that deepening bilateral ties between Maputo and Moscow have their limits.
Not only financially but also politically, the debt scandals still cast a long shadow. Nyusi faces threats as revelations about illegal payments continue to emerge. For example, during the recent US trial of Jean Boustani of Privinvest, which supplied the controversial maritime contracts, the evidence trail suggested that Nyusi personally pocketed USD 2mn. More incriminating evidence may surface as investigations and court cases, including the extradition of ex-finance minister Manuel Chang, drag on.
Upstream prospects
On the upstream front, momentum is expected to gather. Nyusi’s retention of the generally respected Minister of Mineral Resources and Energy Max Tonela spells continuity, particularly at a crucial time for the multi-billion-dollar LNG projects. While construction should speed up at the Total-operated Rovuma Area 1 LNG project following its final investment decision (FID) in June 2019, Exxon’s Area 4 FID is still outstanding. In the main, the hurdles seem to relate to commercial issues, including the financing of the shares of junior partners, including national oil company ENH.
Regulatory and permitting issues may also present ongoing challenges, for example, local content plans that must be approved by the government and revised periodically. A growing threat is the worsening security situation in Cabo Delgado province, which has forced the oil majors to revise their security posture amid growing concerns that some 500 soldiers allocated by the Mozambican army (FADM) to protect the LNG site on the Afungi peninsula are insufficient.
Peace and stability
The security outlook does not benefit from an inspired cabinet choice. Nyusi replaced erstwhile defense minister Atanasio M'tumuke with a civilian with little apparent security experience, Jaime Neto, an MP from Sofala province and a one-time Frelimo candidate for mayor of Beira. In any case, Nyusi will likely focus on security issues, which he has prioritized in recent years, at the expense of economic and other policy issues. As a result, the government’s security stance is unlikely to change markedly, either in relation to the Cabo Delgado insurgents or to Renamo, which is badly divided and aggrieved over the ‘stolen’ 2019 elections.
In Cabo Delgado, local jihadist groups, which have come to be referred to as Ahlu Sunnah Wal Jamaah (ASWJ), have carried out close to 300 reported attacks since the insurgency erupted in October 2017. Between 2018 and 2019, the number of security incidents nearly tripled:
Source: ACLED
Source: ACLED
The insurgency has as spread across seven districts; Macomia, Mocimboa da Praia, Palma (where the Afungi LNG site is located), Nangade and Muidumbe are the worst affected. While the security forces and local villagers remain the principal targets of ASWJ’s brutal attacks, 2019 saw the first (albeit isolated) incidents in which upstream contractors were killed/injured while traveling over land between Mocimboa da Praia and the Afungi peninsula.
ASWJ’s identity, leadership and demands remain murky. The rebellion is thought to be primarily homegrown, though the fact that Islamic State (IS) has begun to claim credit for some attacks has raised concerns that the insurgency may increasingly entail a transnational element. Still, it remains unclear whether there are significant financial or logistical links, perhaps via the DRC-based Islamic State Central Africa Province (ISCAP), or whether such claims are merely attempts to bolster jihadist threats.
2020 will be a critical juncture for the evolution of the insurgency. Russia’s ChVK Wagner paramilitary organization, which entered the conflict arena in September 2019, is regrouping after it lost several men in an insurgent attack and its relationship with the FADM is increasingly strained, which does not bode well for military operations.
