The future of Mozambique’s aluminium giant, Mozal, hangs in the balance as its crucial electricity contract approaches its expiry date in 2026. This, according to Graham Kerr, CEO of South32, the main shareholder in the Beluluane smelter, who spoke to journalists after a meeting with Mozambican Prime Minister Adriano Maleiane.
Kerr highlighted the urgency of securing a new long-term power supply agreement, ideally extending the current contract until at least 2030. Mozal currently relies on South Africa’s Eskom utility for its electricity needs. However, Kerr argues this is a technicality, as Eskom itself sources 1,150 megawatts from Hidroeléctrica de Cahora Bassa (HCB) in Mozambique, which operates the massive Cahora Bassa dam. After supplying Mozambique with some of this power, Eskom then transmits 950 megawatts down to Mozal.
The wrinkle in this plan? Eskom’s well-documented struggles with load-shedding in South Africa. The prospect of diverting such a significant amount of power to Mozambique, even if it technically originates there, is likely to raise eyebrows among South African consumers.
Kerr made it clear that Mozal’s future expansion plans are contingent on a stable, long-term power solution. Currently, the smelter’s two production lines churn out 580,000 tonnes of aluminium annually, solidifying Mozal’s position as the country’s biggest electricity guzzler. Expansion talks, including the addition of a third production line, are on the table, but remain firmly on hold until the power equation is solved.
While the allure of building a brand new smelter elsewhere in Mozambique might hold some appeal, Kerr swiftly dismissed this notion. Adding a third line to the existing facility leverages established infrastructure, while venturing into uncharted territory in northern Mozambique would present a logistical nightmare.
Tax concerns were also addressed by Kerr. He clarified that the government collects a one percent royalty on Mozal’s revenue, on top of dividends it receives as a shareholder. The core sticking point? Mozal currently enjoys a corporate income tax exemption. However, Kerr pointed out that Mozal employees, both directly hired and those in supporting industries, contribute via personal income tax. In total, Kerr claims Mozal contributes a healthy 6.9% of Mozambique’s direct tax revenue.
Mozal’s future remains intricately linked to its power supply. The coming months will be crucial as negotiations with the government determine whether this aluminium giant can keep its current spark alive, or if its future dims along with the lights.
