Battle lines drawn over Mozambique's Porto Dobela. (Shipping).

Plans to construct a deep-water ore port at Porto Dobela in Mozambique are at an advanced stage but controversies continue to rage both in Mozambique and in South Africa. Andrew Maiden explains what the furore is all about.

When the French company Bouygues International visited Mozambique in early February 2003, the leader of the delegation, Christian Gazaignes, told reporters at the conclusion of the visit: "we are discussing the concession to build, develop and manage a deep-water ore port for the benefit of Mozambique."

From this statement it can be concluded that the construction of the Porto Dobela deep-water ore port will be based on a BOT (Build-Operate-Transfer) principle, reducing the government's exposure to expenditure with the prospect of full ownership over time. The total investment required is projected to be more than $515m over a six-year period.

The French firm received a warm welcome from Mozambican President Joaquim Chissano as there are expectations of jobs ring-fenced for Mozambicans. The port will be pan of the extension to the Maputo corridor.

Bouygues has already been involved in construction in another part of the corridor with the operation of the toll road between Maputo and Witbank, the South African town that makes up part of the coal producing area.

Bouygues will be the principal partner in the project, with about a 60% interest in the port. The company will also manage it. Another company, Porto Dobela Developments, will take a 10% share, and the parastatal Caminhos de Ferro de Mocambique, the country's ports and railway company, will take a 30% share.

The project has been under discussion since colonial days, but hadn't t come to fruition until 1999 when the Mozambican government signed an agreement with Porto Dobela Developments and Caminhos de Ferro de Mocambique on the principles underlying the construction of a new port.

Porto Dobela Developments is registered in the Isle of Man and is run by Colin Browne, a former associate of the late Tiny Rowland who once headed the British multinational Lonrho. Another shareholder is Barry Swart, a South African who is the former managing director of First National Bank in South Africa. The other three shareholders originate from Mozambique. They include Rocha Antunes, a prominent businessman in France, and the former Mozambican Minister of Cooperation, Jacinto Veloso, who is a shareholder at Creditcoop, a bank that was declared bankrupt by the Mozambique's Ministry of Finance in December 2002.

Porto Dobela will have a steep continental shelf that will enable ships weighing up to 300,000t to dock. The proposed deep-water port and ocean terminal, about 70km south of Maputo, will also be at the heart of a special economic zone, with tax and duty free incentives for businesses.

It is predicted that employment for 2,500 people will be created during the construction phase. Once operational, the special economic zone could provide around 10,000 jobs in the first 10 years of operation.

SERIOUS ENVIRONMENTAL ISSUES RAISED

However, the project remains controversial as ecologists have been actively campaigning against it since the initial agreement was signed in 1999. There are fears that a major industrial development could destroy fragile wildlife habitats, and the port's location is at the centre of numerous eco-tourism projects. It is also on the path of a natural migration route for elephants from South Africa, a route which has been classified as a world heritage site by Unesco. Furthermore, it is adjacent to a project supported by the World Bank and the Peace Parks Foundation for a Transfrontier Park that will span southern Mozambique and South Africa.

To counter criticisms, Bouygues is planning to create a tourist zone as a buffer between the port and the areas of ecological sensitivity. The actual site for the port has been moved several kilometres south of the originally proposed location, and roads have been re-routed around the heritage sites. The railway will no longer traverse the Maputo elephant reserve, but will be laid across an already deforested area. In addition, the French company has commissioned a study from the Council for Scientific and Industrial Research of South Africa to examine the environmental impact of the project.

A key reason for the long delay in the project has been the key role that South Africa would be required to play in its future. During the apartheid years there were no prospects for mutual collaboration with Mozambique. Once apartheid was dismantled, the project resumed its place on the business agenda.

Interested parties in the development are South African coal exporters. Porto Dobela is approximately 500km nearer to South Africa's chief coal producing areas than the South African port of Richards Bay. The latter exports 80% of the country's coal, some 60m tons. It is projected that reducing the journey to a port by 500 km would save $4 per ton. Since Porto Dobela should be able to handle up to 30m tons, the savings for coal exporters could be around $120m.

The $500m required in investment could be recovered within three years of opening. Income from rail and port tariffs, and export income from an adjacent industrial free zone could reach $240m a year, according to some estimates.

Yet, doubts persist as to whether the project is feasible. The final land concession for the ports was granted in October 2002. That means that a first investment must be made by October 2005, according to Mozambican law. But Bouygues insists that they will begin work by the end of 2004.

There are questions also about the viability of a fourth international port in Mozambique. Furthermore, while Porto Dobela is likely to benefit from South Africa's coal producers, there are genuine concerns about the depletion of mines in the region of Mpumalanga. It is also expected that the port at Richards Bay will initiate countermeasures to prevent its business travelling northwards. Even President Chissano has said that "there are problems of funding that must be solved".

Despite these threats to the success of the project, the government and its partners are outwardly showing great confidence in the venture. Each side is stressing the value to Mozambique for jobs and the environment. The clock is now ticking for the consortium to fulfil its promises.