The government wants the country’s largest factory to be a client of the state electricity company, but Australian group South32, owner of Mozal, is threatening to leave. The President of the Republic says he cannot accept a proposal with values that could lead to the “collapse” of the “golden goose,” the Cahora Bassa Hydroelectric (HCB). How will this negotiation end? Mozambican business leaders have already sounded the alarm: besides threatening to halt operations in March 2026, the majority shareholder has begun terminating contracts. E&M tells the story with several guests analyzing a dispute that puts Mozambique to the test in front of investors and foreign partners.
Impact on Mozambique
What would be the impact on Mozambique if there were changes to the operations of the Mozal aluminum processing plant? Inaugurated in 2000, it was one of the first major private investments in the country after independence. The plant symbolizes Mozambique’s industrialization dream and is interlinked—through taxes, jobs, supplier contracts, and exports—with many aspects of the national economy.
Electricity supply conditions, in terms of capacity and price, are a concern, as reported by Diário Económico. A financial report from South32 (majority shareholder of Mozal, with 63.7%) at the end of 2024 stated: “The group considers it reasonable to assume that an agreement will be reached to extend the supply of electricity from Cahora Bassa Hydroelectric (HCB) to Mozal beyond March 2026.” However, since then, the company’s outlook has become more pessimistic, and the scenario has worsened.
In February, following positions expressed by the previous government, Mozambique announced plans to “repatriate” electricity currently exported from HCB to South Africa for domestic use starting in 2030. This position is outlined in Mozambique’s Energy Transition Strategy until 2050. Since operations began in 1979, HCB exported most of its electricity to South Africa’s Eskom, with a smaller portion supplied to Electricidade de Moçambique (EDM). In 2024, Eskom bought 66% of HCB’s total energy. By 2030, the supply contract with Eskom ends, requiring key decisions on the commercialization and final destination of HCB’s clean energy.
Mozal, located near Maputo in the south, is powered by electricity from Eskom—a contract that expires in 2026. The plant is one of the country’s largest electricity consumers, needing 900 MW, which Mozambique’s grid cannot reliably provide. Hence, Mozal established a supply contract with Eskom.
“In this year of 2025, besides implementing rehabilitation projects, HCB, looking towards the energy repatriation planned for 2030, must consolidate its role in Mozambique’s energy development,” President Daniel Chapo.
Government Seeks Changes in HCB Energy Management
President Daniel Chapo confirmed on June 23 that in 2030 Mozambique will proceed with energy repatriation, ending the supply of electricity produced domestically to Eskom, in force since 1979.
“This year, besides rehabilitation projects, HCB, looking at the 2030 energy repatriation—Mozambique taking control of the energy source—must consolidate its role in the country’s energy development,” said the President.
“We will limit investment in Mozal,” dismissing “associated contractors from this month [August],” the company announced, anticipating that the factory will be placed under “maintenance” in March 2026.
In July, the government clarified its intention for EDM to guarantee energy supply to the aluminum plant. “The goal is to introduce EDM, which is responsible for marketing energy produced by our hydroelectric [HCB]. There are elements that need to be finalized for this,” said Council of Ministers spokesperson Inocêncio Impissa. “Mozal will not be left without power because it is an industry that matters, especially to Mozambicans,” he added.
South32 Announces Production End in March 2026
Mozal’s response caused shockwaves: in mid-August, South32 informed markets it would cut investment and release contractors and suppliers, as it only has guaranteed energy to operate until March 2026, when the supply contract ends. The group cited a lack of guarantees for continuity beyond that date.
The company stated it has been in talks with the Mozambican government, HCB, and Eskom to ensure sufficient and affordable electricity, allowing operations after the current contract expires. However, commitments so far “do not give Mozal the guarantee of sufficient and affordable electricity beyond March 2026. As a result, we will limit investment and release associated contractors starting this month,” anticipating that the plant will enter a “maintenance” regime at the end of the current contract. Production in fiscal 2026 is expected to be approximately 240,000 tons, reflecting fewer smelting pots in operation due to immediate suspension of their lining processes.
The scenario assumed Mozal would operate until the end of the current electricity contract and then enter maintenance. The group had already recognized an impairment loss of $372 million (€318.3 million) to support the announcement.
HCB, the “Golden Goose,” at Risk
A few days later, the President stated that the issue is tariff negotiation, adding that the rates proposed by Mozal would collapse HCB. “We are defending national interests. We cannot accept tariffs that make HCB subsidize Mozal and collapse the HCB, our golden goose,” said Daniel Chapo. “Neither Mozambique nor HCB has a contract with Mozal. Mozambique, through HCB, has a contract with Eskom, which is South African. In principle, this matter should be discussed with Eskom,” he added.
HCB Can Supply Part; Eskom the Rest
Negotiations are underway for 350 MW from HCB. Cahora Bassa can supply up to 350 MW of the 950 MW Mozal needs from 2026, limited by low reservoir levels due to drought, affecting energy production. The remaining 600 MW could be provided by Eskom.
Impissa reiterated that selling electricity to Mozal at the proposed rates would result in losses, as it would be below production and transport costs. Mozambique guarantees supply of 350 MW from HCB to Mozal from March, at the minimum price covering costs, including adjustments for 2028. He also highlighted Mozal’s “extremely low” fiscal contribution, representing less than 0.2% of state revenue despite being around 3.2% of GDP, suggesting a need to reassess fiscal terms and benefits for Mozambique.
“We cannot accept tariffs that would force HCB to subsidize Mozal and cause HCB to collapse, which is our golden goose,” said Daniel Chapo.
Businesses Affected by Contract Terminations
The Confederation of Economic Associations (CTA) reported that Mozal suddenly terminated contracts with around 20 companies, leaving at least 1,000 unemployed. CTA considered it “unacceptable” for a company benefiting from Mozambique’s fiscal and institutional environment to destabilize the business sector. They suggested that the government could offer energy concessions with clear national economic benefits, recommending that at least 40% of production be locally processed to semi-finished and finished aluminum products, boosting industrialization and local SMEs.
Light at the End of the Tunnel?
At the end of August, the government spokesperson stated negotiations continue in a “much friendlier environment” with all parties—Mozal, HCB, and Eskom—to ensure legally protected interests. The Mozambican government aims to support Mozal, improve negotiation terms, and ensure continued production without harm to any party.
Text: Felisberto Ruco & Editorial Team • Photography: Mariano Silva & D.R.
