Mozambique Seeks to Terminate 50-Year Hydropower Pact with South Africa

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Mozambique is planning to halt its five-decade-long supply of hydropower to South Africa’s state-owned electricity utility, a move that poses challenges for both economies and threatens the viability of Africa’s second-largest aluminum smelter.

According to a draft of Mozambique’s energy transition strategy seen by Bloomberg, the country intends to reclaim the 1,150 megawatts of power it currently exports to South Africa from its Cahora Bassa plant for its domestic consumption.

The government outlined its immediate hydro priority as the repatriation of electricity from Hidroelectrica de Cahora Bassa, slated to cease exporting to South Africa by December 31, 2030, as stated in the strategy document. However, Mozambique’s energy ministry did not respond to requests for comment regarding this decision.

This decision poses challenges for South Africa, which is grappling with power cuts hindering economic growth, and for South32 Ltd., the operator of Mozal aluminum smelter near Maputo, Mozambique’s capital. Mozal relies on electricity purchased from South African utility Eskom Holdings, requiring about 900 MW for its aluminum production, marketed as sustainably produced.

However, Mozal cannot directly access power from Cahora Bassa due to Mozambique’s decentralized grid. Instead, electricity from the 2,075 MW plant is transmitted 1,400 km to Eskom in South Africa, which then supplies Mozal. This arrangement, in place since 1979, has faced disruptions during violent storms, exacerbating power cuts in South Africa.

Mozambique aims to utilize its renewable energy resources in industrial parks to enhance the value of its production of “green minerals” like lithium and graphite.

Eskom stated it was unaware of Mozambique’s intention not to renew the contract. If the contract expires, Eskom may need to source power elsewhere, while South32 will seek alternative renewable energy sources to avoid European Union taxes on exports, imposed under the bloc’s carbon border adjustment mechanism targeting carbon-intensive goods.