Lusa - Business News - Mozambique: Total cancels agreements with local suppliers

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Lusa - Business News - Mozambique: Total cancels agreements with local suppliers

Maputo, April 21,2021(Lusa)- French oil company Total is cancelling contracts with local contractors and suppliers for the natural gas project in northern Mozambique, leaving companies in difficulties and indicating that the project may stop for months.

According to financial news agency Bloomberg, which cites documents exchanged between the French oil company and some local suppliers, Total is cancelling contracts with local suppliers such as Julio Sethi, a Palma-born businessman who has invested in buying land, a quarry and transport in Pemba, the capital of Cabo Delgado province.

"It's a total disaster. We don't know what will happen next," the businessman said, considering it unlikely that the French oil company will resume work this year due to the insecurity in the region, affected by attacks since 2017, the last of which was in March, killing dozens of people and adding to the humanitarian crisis in the region.

With work stopping indefinitely, Sethy says some of the tenants have also cancelled their contracts, including an insurance company that will move out at the end of the month, with more people expected to leave due to fears of an attack on Pemba.

"This was our biggest hope, so some of us invested everything we had and even went into debt with the banks to invest even more," the businessman concluded.

The oil company has indefinitely abandoned the Rovuma basin natural gas exploration megaproject, the largest private investment in Africa worth some €20 billion, after an armed group attacked the town of Palma on 24 March.

The most recent attack in three and a half years of insurgency caused dozens of deaths (still no official numbers) among residents and employees linked to the project.

Despite attempts since then, Lusa has been unable to obtain clarification from the oil company regarding the project's future.

At a press conference on Tuesday in Maputo, the president of the Confederation of Economic Associations of Mozambique, Agostinho Vuma, recalled the data he had provided last week in an interview to Lusa: 410 companies closed and 56,000 jobs disappeared in the affected districts, with an impact of €80 million (destruction, payment delays and goods in transit without certainty of delivery).

Vuma said that the figures include the attack in Palma and that, in hindsight, Mocímboa da Praia was the most affected district.

He also told Lusa that another 700 companies had closed outside the districts under attack, and 143,000 farmers had left the family farming sector since the beginning of the conflict.

The attack and the consequent delay in construction work by Total directly impact the country's economy, particularly concerning the ability to pay the public debt from 2024 when the interest rate will rise significantly following the renegotiation of sovereign debt bonds ('Eurobonds').

Armed groups have terrorised Cabo Delgado since 2017, with some attacks claimed by the 'jihadist' group Islamic State, in a wave of violence that has led to more than 2,500 deaths according to the ACLED conflict registration project and 714,000 displaced according to the Mozambican government.

The most recent attack was made on 24 March against the town of Palma, causing dozens of deaths and wounded, in a balance that is still ongoing.

The Mozambican authorities regained control of the town, but the attack led oil company Total to abandon the gas project site indefinitely, with production due to start in 2024 and on which many of Mozambique's economic growth expectations for the next decade are anchored.

MBA/ADB // ADB.

Lusa

Agency : LUSA
Date : 2021-04-22 10:29:00

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