AN ALUMINIUM smelter has been operating in Mozambique for the
past ten years, taking the country's electricity to produce metal
used in European and Japanese cars and aeroplanes. The profits,
however, are benefiting foreign investors far more than anyone in
The smelter, known as Mozal, after the company that owns it, is
immense. Sited near the capital, Maputo, it is responsible for 30
per cent of the country's exports, and uses 45 per cent of the
electricity generated there. But I estimate that only $200 million
of its $1200-million annual revenue enters the Mozambican economy.
And of this, just $15 million goes to the Mozambican
I started investigating Mozal because the British Government,
through UK Export Finance, has previously backed loans to the
project. I quickly found that groups in the area, such as Justica
Ambiental (Friends of the Earth Mozambique), have been protesting
against pollution from the smelter.
In 2010 and 2011, exhaust fumes from the factory were released
directly to the atmosphere without being treated, including
hydrogen fluoride, sulphur dioxide, nitrogen dioxide, and ozone.
Treating fluoride pollutants and sulphur dioxide was a requirement
of the smelter's environmental-impact assessment.
Justica Ambiental and other groups gathered about 15,000
signatures calling on the Mozambique parliament to force the
company to stop polluting, to no avail.
DOCUMENTS from complaints lodged with the World Bank about the
pollution showed that the UK government was just one of many public
funders. The World Bank, the European Investment Bank, and the
governments of South Africa, Japan, France, Germany, and Canada
have all helped to finance the smelter. In total, half the cost of
building Mozal came from, or was guaranteed by, public
Given this level of institutional support, you would have
expected to see strong benefits for the people of Mozambique.
Extremely generous exemptions from taxes on profit and VAT were
given, however. The only tax paid is a one-per-cent turnover tax,
which averages at an estimated $12 million a year.
As well as UK Export Finance, CDC (formerly the Commonwealth
Development Corporation, the British Government's
development-finance institution) has also funded Mozal. CDC is an
official body that funds private-sector projects to aid
development. For several years, however, most of its money has been
given to private-equity funds, which are free to use them to make
profit out of whatever they like, including in some instances,
Nigerian shopping malls (Comment, 30 November).
In Mozal's case, CDC lent $53 million in the late 1990s and
early 2000s. A number of freedom-of-information requests eventually
revealed that it has been repaid $88 million in interest, plus the
original loan amount in full, at an average interest rate of 15.6
I estimate that all the public funders together have made an
average of $120 million a year out of the smelter - eight times
more than the government of Mozambique.
The other main financiers of the plant are the private
investors, BHP Billiton, which owns 47 per cent of it, and
Mitsubishi, which owns 25 per cent. BHP Billiton reports on its
profits from Mozal, which have averaged $114 million a year between
2005/06 and 2011/12 - seven times more than the Mozambican
In total, I estimate that for every $1 being paid by the smelter
to the Mozambican government, $21 has left the country in profit or
interest to foreign governments and investors.
THERE is more. The production of aluminium requires a great deal
of electricity, generally accounting for up to one third of the
cost of production. In Mozal's case, it appears to be far less.
Documents I obtained from UK Export Finance under Freedom of
Information Act requests reveal that Mozal obtains its electricity
at a fixed rate that is five times less than that of an average
resident in Mozambique.
In fact, the average resident in Mozambique doesn't have
electricity - just 12 per cent have access to it. Put simply, the
power used by Mozal could be used elsewhere.
MOZAMBIQUE is being presented as one of the success stories of
Africa. Annual growth rates of six and seven per cent have caused
the economy to double between 1998 and 2010. This growth is partly
thanks to Mozal, as well as a host of other mega-projects
extracting resources such as gas and coal. But in that time,
according to the World Bank, the number of people living on less
than $2 a day has actually increased from 15.2 million in 1996 to
18.3 million in 2008 (the latest year for which figures are
I am angry that the smelter pays so little in tax and so little
for electricity. I am appalled that the British Government, and
many others, backed this project with its outrageous terms.
Justine Greening and others can make some recompense, by giving
back the excessive money made out of the smelter, and supporting a
renegotiation which makes Mozal pay more tax.
For the time being, however, in the words of the director of
Justica Ambiental, Anabela Lemos, the World Bank and other
investors such as the UK "continue to support corporate abuse in
developing countries under the disguise of 'development'. Mozal
consumes more electricity than the entire population of Mozambique!
As for social benefits, we are still waiting for them, but we are
already feeling the impacts of the uncontrolled pollution of our
air and water."
Most worryingly, Mozal may be a symbol of the shining future for
development in Mozambique and across Africa. The real question is,
for whom is the future shining, and who is left in the shadows?
Tim Jones is Senior Policy and Campaigns Officer at the
Jubilee Debt Campaign.