The International Monetary Fund (IMF) acknowledges that the suspension of operations at the aluminum smelter Mozal, located in Maputo province, represents a risk to the economy. The closure decision, scheduled for March, was taken after the Australian company South32 failed to secure a new electricity supply agreement at competitive prices.
“Risks to Mozambique’s economic outlook are currently strongly negative, with the suspension of Mozal — which represents 4% of Gross Domestic Product (GDP) — as an example,” the IMF’s assessment report on the Mozambican economy stated, under regular consultations approved on February 13.
According to the financial institution, external risks facing the country also include “pandemics, natural disasters, regional conflicts, reductions in external aid, and commodity price volatility,” while domestic risks “include increased insecurity in Cabo Delgado, which could delay liquefied natural gas (LNG) projects, foreign currency shortages, and weak performance in the non-mining sector.”
“Ongoing negotiations over electricity tariffs with Mozal represent additional risks. Positive risks include LNG production coming earlier than expected in Eni’s Coral Norte project,” the same statement reads, adding that “fiscal vulnerabilities could intensify due to spending pressures and losses by state-owned enterprises.”
The Organization of Mozambican Workers – Trade Union Central (OTM-CS) said the smelter suspension amounts to an “earthquake” due to its weight in the national economy and the expected layoffs. “If this prediction materializes, we will be facing a kind of national earthquake, whose magnitude we will feel immediately, since this multinational contributes significantly to GDP, with approximately 4%, being one of the largest industries in the country, boosting exports and generating thousands of direct and indirect jobs,” said the organization’s secretary-general, Damião Simango.
Recently, Mozal announced it will proceed with collective layoffs under an operational suspension (“care and maintenance”) regime starting March 15. In a document sent to the Mozal Trade Union Committee and consulted by Diário Económico, the company proposes compensation of “6% of annual salary for each year of service for those earning above seven sector minimum wages, and 40 days of salary per year of service for the remaining workers.”
South32 confirmed that, despite Government efforts to resolve the dispute over energy tariffs, it will suspend operations. “It will move into care and maintenance due to the inability to secure sufficient and affordable electricity supply. We are working closely with our employees and partners during this transition,” said Graham Kerr, CEO of South32 and the main shareholder of Mozal, after presenting the group’s results.
Quoted in a statement released by Reuters, the executive added that last year South32 recorded a $372 million impairment in its operations, as it failed to secure energy supply at affordable prices due to the impact of drought on Mozambique’s hydropower generation. He also noted that it was not possible to reach an agreement at reasonable prices with the backup energy supplier, South Africa’s Eskom.
According to the CEO, in Mozambique the mining company directly employs more than two thousand people, with another two thousand outsourced, and the factory accounts for one-third of jobs in the country’s manufacturing sector. “The cost of maintenance, including contract terminations, is around $60 million, and ongoing annual care and maintenance costs will be about $5 million,” he recalled.
For its part, the Government said it is making every necessary effort to prevent the aluminum smelter from closing. The assurance was given by the Minister of Mineral Resources and Energy, Estêvão Pale, speaking on the sidelines of a mining and energy conference held in Cape Town, South Africa.
“We are doing everything required for Mozal to continue operating,” the minister said, without detailing the status of negotiations with the company or electricity suppliers.
The minister’s remarks came at a time when South32 announced, in December 2025, that it would place the aluminum smelter under a “care and maintenance” regime starting March 15, 2026, if a new electricity supply contract was not secured.
“A new electricity supply agreement was not guaranteed and, therefore, Mozal will be placed into care and maintenance around March 15, 2026,” the company said in a statement sent to the media, adding that “the raw materials required to sustain operations beyond March 2026 have not been procured.”
Last year, the Government said it was closely monitoring the company’s situation following the suspension announcement due to the absence of a new electricity supply agreement. According to the Council of Ministers spokesperson, Inocêncio Impissa, a technical team is working with Mozal and the entities involved to avoid negative impacts on workers, suppliers, and other stakeholders.
“There is a team doing its work with Mozal and the entities involved to ensure that the company’s future is not harmful to any of the parties,” Impissa said.
Without providing details on the stage of negotiations, the official clarified that any decision will be made public at the appropriate time. “When the result is effectively concluded, it will be announced through the Council of Ministers or the Ministry of Mineral Resources and Energy, which is following the substantive issues with Mozal,” he explained.
Source: Diário Económico
