Local Content Policy in Mozambique

State and Investments in Natural Gas From the Rovuma Basin

Abstract

With the economic opening in the late 1980s, the establishment of Mozal, a multinational with Anglo-Australian capital, in Mozambique signaled the viability of the national market for receiving more foreign investment, transforming it into one of the countries in sub-Saharan Africa with the largest flows of foreign direct investment. Indeed, economic assessments from 2006 to 2016 indicated the country had the highest economic growth in the region, with megaprojects contributing 40% of GDP. However, since 2016, economic and political indicators have been deteriorating, compromising the country's image in the international market. Concurrently, significant natural gas reserves were announced in the Rovuma Basin during this period, projecting the country as one of the largest reserves in Africa and the fourth largest globally. In light of theories that the market tends to leverage regulation to its advantage, this article analyzes the nuances surrounding the relationship between the state, local business owners, and investors in the approval of local content legislation. It is concluded that the country's economic and political situation restricts the state's negotiating capacity, granting undue advantages to investors to the detriment of the national private sector. Almost a decade later, the proposed local content law, initially formulated by the government in 2014 and revised in subsequent years, remains unapproved.