Portugal and Mozambique reach agreement over dam ownship

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Portugal and Mozambique reach agreement over dam ownship

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After years of negotiation, Portugal has reached an agreement to hand over one of the biggest hydroelectric dams in Africa to Mozambique. The Cahora Bassa dam was built when Mozambique was a Portuguese colony. An argument over its control has been going on since the early 1970’s when it was completed.

The deal was signed in Lisbon between the Portuguese Finance Minister and Mozambique’s Energy Minister. Mozambique will pay Portugal 584 million euros in return for an 85% stake. The dam-operating company will also pay off 208 million euros in debt to Portugal next year.

The dam, built on the Zambezi River in Northwestern Mozambique, was completed in 1974, but it was produced no power for several years during the war in the country.Electricity generation resumed in 1998, when the power line from the site to South Africa was re-established.

The dam company has never been able to make a profit because, under a purchase agreement that was established between Portugal and South Africa in 1969, a South African energy company buys the electricity for just 20% of the local market price and sells power back to Mozambique.

With the deal reached an increase in tariffs can go ahead. The ownership agreement was vital for Mozambique, which is suffering a severe power shortage. It needs to be able to guarantee power to encourage investors into the country.