SA urged to help bring stability to Mozambique

Mozambican gas pipeline infrastructure critical to SA’s economy is not under threat for now from a growing insurgency. But even though the war between Ahlu Sunnah Waljama’a-Jamaa insurgents and the Mozambican government is only “a small blip on the radar of big South African business”, risk and crisis managers say that could quickly change.

Clashes began in 2007, but since violence escalated in 2017 nearly 700,000 people have been displaced and an estimated 2,600 killed.

Eleven days ago, the insurgents overran the town of Palma, a strategic logistics hub for a R900bn liquid natural gas (LNG) field under development by French gas and oil company Total. The insurgents held the town for seven days before government forces took back most of it.

More than 50 South Africans missing in Palma had been accounted for by yesterday, and the SA National Defence Force is helping the high commission in Maputo to repatriate those who want to return home, the ministry of defence and military veterans said.

This week, the SA Air Force repatriated the body of Adrian Nel, a 40-year-old construction worker from Durban, who died when insurgents attacked vehicles fleeing the Amarula Lodge hotel in Palma.

SA energy giant Sasol has invested more than $1bn (about R15bn) in a partnership that led to the construction of 865km of gas pipelines from Mozambique’s southern gas fields to Secunda and the continued development of the gas fields. South African banks and financial investment firms have also pumped billions of dollars into the fields.

Jason Griessel, director of Broll Risk Management, says SA could potentially face a multifaceted risk from the insecurity there.

“Mozambique has created many job opportunities supporting numerous South Africans whose livelihoods may be affected if this instability is prolonged,” he said.

While there is no immediate threat to the gas pipelines feeding SA, “if the situation is not dealt with decisively, it could impact on the stability of gas supply to SA or result in a dramatic increase in pricing for LNG”.

Griessel added: “SA businesses most at risk are industries that service and directly support the oil and gas sector, such as logistics, supply chain management and mechanical asset provision companies.

“South Africa’s banking sector has significant exposure with an investment of $485m in the northern Mozambique LNG production facilities. South African property portfolio owners, relying on tenancy by those servicing the LNG sector, could also be negatively impacted.”

Griessel said a long-term stabilisation strategy focused on security sector reform is needed. “The remedy to this situation needs to be led by Mozambicans. There needs to be long-lasting social and economic support to create opportunities for its people.”

SA and other at-risk nations should be doing “everything we can to reinforce the integrity of our borders, with co-ordinated information-sharing and resourcing of intelligence to understand what is feeding the insecurity”, he said.

Sasol spokesperson Matebello Motloung said the company has not been affected by the recent violence because its operations are in southern Mozambique. “We will take additional appropriate actions should it become necessary.”

Roelof van Tonder, director for market access and development at research and consulting company Africa House, said while there would be an economic impact on SA from the insecurity, “on current evidence the only real impact would be delays to the completion of the LNG projects.

“It is, however, still early days to say whether any other threats will materialise. A lot will have to happen before these LNG projects are cancelled. Economic opportunities, especially for South African businesses, will remain.”

Van Tonder said Sasol had recently announced a $760m investment in Mozambique’s southern gas fields.

Professor Theo Neethling from the University of Free State’s department of political studies and governance, said any economic threat to SA from the insecurity in Mozambique would be indirect.

“While the insecurity is concerning, given the number of SA logistical and supply businesses servicing the sites, it will not stop the LNG projects. There is simply too much vested in them for them to be canned,” he said.

But he said SA needs to ramp up its involvement in stabilising the region. “We have gone beyond the point where SADC [the Southern African Development Community] can manage this. With all its gas reserves, Mozambique has the potential to become the next Kuwait. To ensure the economic development of the region, and for its own preservation and growth, South Africa needs a stable and properly managed neighbourhood.”