The leaders of three southern African nations have signed an agreement to move forward with a rail and port project designed to help landlocked Botswana export its vast coal reserves through a Mozambican port. However, securing the necessary funding remains a challenge.
Feasibility Study Financing
Mozambique’s Transport and Communications Minister, Mateus Magal, announced on Friday at the signing ceremony, which was broadcast on state television, that the African Development Bank has agreed to fund a feasibility study for the project at a cost of approximately $4 million.
Project Scope
The project entails upgrading existing railway lines that traverse Mozambique, Zimbabwe, and Botswana, as well as constructing new connections. It also includes the development of a new deep-water port south of Mozambique’s capital, Maputo, near a national park inhabited by elephants and cheetahs.
Addressing Stranded Assets
Botswana possesses around 212 billion tons of coal reserves, according to the World Energy Council. The nation is keen to find markets for its coal before global efforts to transition to renewable energy render these reserves stranded assets.
Financial Hurdles
Despite the project’s potential, it faces significant obstacles. Financing for new coal projects has become increasingly difficult to obtain as banks distance themselves from the dirtiest fossil fuel.
Example from Mozambique
In Mozambique, Ncondezi Energy Ltd. had planned a 300-megawatt coal power plant in the country’s center. The company signed a construction contract with China Machinery Engineering Corp. in September 2021, expecting Chinese financing to follow. However, the funding did not materialize.
The same month, President Xi Jinping declared that China would cease funding foreign coal projects. After months of uncertainty, Ncondezi ultimately abandoned the coal project and reinvented itself as a solar power developer, rebranding as Solgenics Ltd. last year.