MOZAMBIQUE’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE As for water resources, the country’s enormous potential has been only partially tapped. The main challenge is how to handle the wide range of conflicting water uses within an environmentally conscious framework. The current irrigation area can be expanded significantly with good economic returns. Management of national water resources should be done so as to increase the yield from existing and planned dams to augment water supply. Finally, Mozambique’s hydropower potential is substantial and can be expanded up to 13,000 megawatts (MW), mainly and mostly around the Zambezi watershed.

Addressing Mozambique’s public infrastructure needs will require sustained spending of more than $1.7 billion per year within the next decade, or the equivalent of 26 percent of the gross domestic product (GDP); this is among the highest in the southern region. This is based on achieving an illustrative set of infrastructure targets, and considers only public infrastructure needs without taking into account the private infrastructure needs of the concessions associated with coal, iron ore, and aluminum. Close to 70 percent of these needs are derived from capital needs, and the highest annual price tag is associated with the power sector.

When all sources of spending are taken into account, Mozambique spent an annual average of about $664 million on infrastructure during the late 2000s. That is equivalent to about 10 percent of its GDP, a relatively high share compared with other African countries, though still only about half of the share that the estimated needs would require. Around two-thirds of total infrastructure spending is investment. Transport absorbs the largest share of that spending and water, information and communication technology (ICT) and power represents similar level of spending. The public sector (through taxes and user fees) and official development assistance are the largest source of investment, followed distantly by private funds.

A total of $204 million is lost annually to inefficiencies, mainly because of the misalignment between tariffs and costs in the power and water-supply sectors. Only by pursuing an investment agenda that takes into account regional dynamics and positions Mozambique as a key power exporter is there potential for reducing marginal costs of power below the existing tariff and therefore eliminating this inefficiency.

Assessing spending needs against existing spending and potential efficiency gains leaves an annual funding gap of $822 million per year, or 12.5 percent of GDP, most of it associated with water and sanitation and power. Mozambique will likely need more than a decade to reach the illustrative infrastructure targets outlined in this report. Under business-as-usual assumptions for spending and efficiency, it would take over 50 years for the country to reach these goals. Yet with a combination of increased financing, improved efficiency, and cost-reducing innovations, it should be possible to reduce that time to 20 years.

# The continental perspective

The Africa Infrastructure Country Diagnostic (AICD) has gathered and analyzed extensive data on infrastructure in more than 40 Sub-Saharan countries, including Mozambique. The results have been presented in reports covering different areas of infrastructure—ICT, irrigation, power, transport, water and sanitation—and different policy areas, including investment needs, fiscal costs, and sector performance.

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