- Angola and Mozambican economies have presented vast opportunities in their reconstruction programmes, especially in the energy sector, according to a new investment climate report.
The Frost & Sullivan report said it expects the current electricity industry reformation to reduce investment barriers significantly, saying both countries' investment laws give foreign and domestic investors equal access to investment incentives and enable the participation of private investor in public infrastructure projects. "Given the abundant feedstocks available in these countries, there are clear opportunities for investment," the group said.
The majority of the infrastructure in Angola and Mozambique was severely devastated during their respective civil wars. According to Frost & Sullivan, efforts to rapidly improve these economies have revealed the fragility of their infrastructure, and it is therefore of crucial importance to allocate adequate resources to accelerate the reconstruction of their electricity backbones.
The group further said the provision of electricity is a fundamental element for the development of other sectors of the economy. These two countries have therefore been upgrading and rehabilitating their electricity infrastructure as result of influx of foreign direct investment (FDI), mainly from China Exim Bank and the World Bank.
"The current regional economic growth, estimated at 6.0 percent per annum over the next ten years, and environmental concerns are the major drivers for the changes and transformation in the electricity industries in these countries," says Frost & Sullivan energy industry manager Cornelis Van der Waal. "The Angolan and Mozambican electricity industries have been under a process of reformation aimed at re-shaping them to address the current reality," he added.
The group further notes that although Mozambique is one of the largest electricity producers in the Southern Africa region, its population's access to electricity is only approximated at 10 percent, while the country's electricity demand is forecast to grow by 11 percent per annum until 2015 as a result of the boom in the agricultural sector, robust manufacturing output, as well as the increasing focus on rural electrification.
It said the Angolan electricity industry, on the other hand, seems to be at a similar stage of its development, with tremendous potential for growth. Despite the global financial meltdown, the group said, the current growth demand for electricity in Angola is estimated at 12 percent per annum until 2015.
"The national reconstruction programme is expected to remain a significant driving factor behind this continued surge," explains Mr Van der Waal, adding that, "The commencement of the Capanda dam operation in 2004, which almost doubled the country's electricity capacity, began a new era for the Angolan electricity industry."
Frost & Sullivan also said the investment environment in both countries is characterised by bureaucratic procedures in the majority of the government institutions, with high levels of corruption, saying as a result, international investors have shown some reluctance to invest in these markets.
"Efforts to create an atmosphere conducive for business can however be seen in the reduction of time to open a business and the opening of the electricity industry for private participation," asserted Mr Van der Waal, further noting that, "The recent implementation of effective macro economic policies, in conjunction with prudent fiscal policies, has resulted in a significant increase in foreign direct investment in these countries, which is expected to triple over the next ten years."
He said the hydro potential of both countries has been estimated at approximately 28 500 MW, of which, "A large part of this potential can be developed at a relatively low cost. Angola, which is the largest exporter of oil in Africa, can also explore its vast oil and gas reserves for gas powered generation. At the same time Mozambique has estimated gas reserves of five trillion cubic feet and hence significant opportunities for gas powered electricity generation exist," he concluded.
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