MOZAMBIQUE

Implemented by a consor�um led by:

climatefinance@afdb.org

CHALLENGES AND OPPORTUNITIES FOR PRIVATE SECTOR INVOLVEMENT IN NDC IMPLEMENTATION AND GREEN INVESTMENT

Mozambique is dealing with several climate change consequences, the most recent one being the 2019 Cyclones Idai and Kenneth, which caused unprecedented amount of damage. The country’s vulnerability to climate change is a function of its location and geography: large areas of the country are exposed to tropical cyclones, droughts (every three to four years) and river/coastal storm surge flooding.

The key NDCs mitigation priority sectors for Mozambique are electricity generation and distribution, land use, waste management and transport. In adaptation, the country prioritizes the sectors of AFOLU and water. The implementation of Mozambique’s NDCs, following the country’s roadmap, has an estimated cost of at least $11 billion, in which the private sector has a great role to play.

COUNTRY CLIMATE CHANGE CONTEXT

The main country challenges, raised by its NDCs, are insufficient financing available to climate proof in country, associated with the complexity of the criteria and procedures for accessing the international climate financial resources, low public investment and private participation in the adaptation actions, inadequate funding to maintain and upgrade data collection stations (meteorological, hydrological, hydrographical, air quality, among others); and slow payback of the investment in climate change adaptation actions.

More specifically, some of the private sector challenges are:

> Insufficient affordable capital. Access to affordable finance remains the top challenge for business deve-lopment as 75% of micro and SMEs in Mozambique are financially excluded, in particular in the rural areas.

> Limited technological capacity. The country is totally dependent on imported technology - exposure to com-modity price fluctuations.

> Uncomprehensive and unclear regulatory framework for private sector participation.

> Inadequate climate change capacity in the private and public sector.

> Extremely low access to electricity (30%), lowering the potential for entrepreneurship).

> Inadequate infrastructure (no roads connecting the different regions). Due to low road coverage, especially in rural areas, there is high logistics costs and makes the country’s productive sectors uncompetitive.

PRIVATE SECTOR CHALLENGES

PRIVATE SECTOR OPPORTUNITIES

The country presents high opportunities for green investments given its strengths in appropriate legislation for specific sectors, high vulnerability to climate change and to green fundable project ideas, comprehensive and fully detailed Nationally Determined Contributions and eligibility to all funding instruments under the UNFCCC and other multilateral sustainable development funding initiatives.

Implemented by a consor�um led by:

climatefinance@afdb.org

As to achieve the climate change and developing goals the private sector must play a bigger role. The sector is dominated by individual entrepreneurs and micro-enterprises, with few SMEs. Factory productivity is low, and value addition is limited, both in manufacturing and agriculture.

RECOMMENDATIONS

> Addressing physical infrastructure constrains that can foster productivity, competitiveness and access to markets, as well as legal and regulatory reforms, is critical to enable the progressive structural transforma-tion and diversification.

> It is also key to accelerate the country’s industrializa-tion and to reduce the business transactions costs, building on its vast natural resource potentials, in order to generate jobs, naturally in the rural areas.

> To diversify away from the current focus on capital-inten-sive projects and low-productivity subsistence agricultu-re towards a more diverse and competitive economy, while strengthening the key drivers of inclusion, such as improved quality education and health service deli-very, which could in turn improve social indicators.

> To achieve the country’s commitment to access to electricity for all by 2030.

> To maintain the macroeconomic stability considering and re-establishing confidence through improved economic governance and increased transparency. To avoid cyclical political disorders – which creates an uncertain market.

> To build capacity about climate change mechanisms and how to develop bankable projects.

> To enable access to capital and boost green invest-ments via subsidies and or tax exemptions.

PRIVATE SECTOR OPPORTUNITIES

More specifically:

> Mozambique aims at increasing the investments in the monitoring, research of climate change impacts and to increase and strengthen the national mechanisms for issuing early warnings. This means that more specific data will be available, giving a clearer picture for the pri-vate sector.

> Also, the country aims to improve the capacity for inte-grated water resources management including building climate resilient hydraulic infrastructures; to increase the effectiveness of land use and spatial planning (protection of floodplains, coastal and other areas vulne-rable to floods) - increasing the resilience of agriculture,

livestock and fisheries, guaranteeing the adequate levels of drinking water, food security and nutrition.

> The energy institutional framework is maturing with the creation of a sector regula-tor (ARENE), the progressive pha-sing-out of tariff subsidies and the new electricity law, as well as relevant reforms within the national power utility (EDM), including the separation between distribution and generation activities as well as great financial support from donors in the off-grid sector.

MOZAMBIQUE