A detailed feasibility study on the potential of the biofuels industry in Mozambique has recently been completed, representing a significant advance in the country’s energy transition strategy in the context of the 'Economic Acceleration Measures Package' (PAE). This study, produced in collaboration with the International Finance Corporation (IFC), not only aims to assess technical and economic viability, but also sets out to carry out an exhaustive analysis of the environmental and social implications of developing biofuels, as strategic alternatives to imported fossil fuels, promoting the use of renewable energy sources and moving towards a sustainable, long-term model of energy development. This effort covers both the analysis of current and future production capacities and the investigation of the impacts on the agricultural value chain, the socio-economic effects on rural communities and the environmental benefits arising from the potential expansion of the biofuels industry.
Renewing the potential of biofuels
Mozambique’s efforts to establish a biofuels industry date back to the early 2000s, but those initial initiatives faced significant structural challenges, such as the complexity of land-rights issues, competition with food production, and concerns about environmental sustainability. These challenges emerged largely owing to the lack of a consolidated regulatory framework, as well as insufficient investment in technology and in building the capacity of smallholders, elements essential to the sustainable development of the biofuels value chain. However, with the introduction of Decree 61/2023, which makes it compulsory to blend domestically produced biofuels with imported fossil fuels, Mozambique is signalling a renewal and strengthening of its commitment to the development of this strategic industry. This decree represents not only an evolution in the regulatory framework, but also reflects a more integrated vision, aligned with national objectives of energy security and mitigation of the effects of climate change. The study reaffirms the potential of bioethanol and biodiesel as substantial contributions to the diversification of Mozambique’s energy mix, reducing dependence on imported fossil fuels and positioning the country as a potential regional leader in renewable energy.
In addition, the study emphasises the importance of comprehensive and coherent public policies that sustain the sustainability of biofuel production, taking into account the specificities of the local context, including biodiversity conservation, sustainable management of water resources and efficient use of agricultural land. Coordination between different sectors of the economy, namely agriculture, industry and technological innovation, is seen as crucial to ensuring the success of the development of this emerging sector.
Agricultural capacity and investment opportunities
One of Mozambique’s main strategic advantages in developing the biofuels industry lies in its considerable agricultural capacity. With more than 80 million hectares of arable land, of which a very small fraction is currently under cultivation, Mozambique offers favourable conditions for the agricultural expansion needed to develop biofuels. The study identifies sugar cane and cassava as particularly promising raw materials for bioethanol production, while oilseeds, such as soya and sunflower, are considered essential for biodiesel production. This picture points to the urgent need for robust and structured investment in expanding agricultural capacity and modernising existing infrastructure. Such development requires building an investment pipeline that enables strategic partnerships between smallholders, local companies and international investors, ensuring not only the sustainability of the value chain, but also the economic return needed to drive the sector.
Developing Mozambique’s agricultural capacity also requires substantial initiatives to improve farming practices, water resource management, and access to credit and technical assistance for smallholders. The study proposes the implementation of capacity-building programmes aimed at farmers and cooperatives, with a view to optimising productivity and ensuring sustainable agricultural practices. These initiatives are seen as fundamental to ensuring that farmers can participate competitively in the supply of raw materials for biofuel production, minimising the risks of deforestation and guaranteeing environmental integrity. In addition, opportunities are outlined for establishing public-private partnerships that can facilitate access to modern processing, logistics and distribution technologies, elements essential to the international competitiveness of the Mozambican biofuels industry.
Another relevant aspect is Mozambique’s attractiveness to foreign investors interested in diversifying their portfolios in the renewable energy sector. The vast availability of arable land, combined with a favourable climate and low production costs, makes Mozambique a potentially lucrative and competitive market for developing biofuels. However, the study warns that to attract and retain these investments, it is imperative to develop a favourable business environment, including tax incentives, attractive financing policies and clear regulation that offers legal certainty and stability to investors.
Infrastructure and regulatory framework
Analysis of the fuel infrastructure and the regulatory framework currently in force in Mozambique reveals that, although the country has a logistical base for storing and distributing fuels, integrating biofuels into the energy mix will require substantial investment in dedicated infrastructure. It is therefore recommended that biofuel production units be strategically located in areas with easy access to the main consumption centres, particularly in the southern and central regions, so as to minimise logistics costs and maximise the efficiency of the distribution process.
In addition, the study underlines the need to modernise transport infrastructure and develop a robust logistics network, capable of supporting the expansion of the biofuels industry. This includes improving existing roads and railways, developing new storage facilities and building production units that meet international standards of sustainability and energy efficiency. Harmonising the national regulatory framework with international standards is likewise highlighted as essential to the sector’s competitiveness, facilitating access to international markets and integrating Mozambique into global biofuels value chains.
Economic and social impact
The biofuels industry has the potential to generate significant economic and social impacts in Mozambique, especially in rural areas, where agriculture is the main source of livelihood. The study projects that the development of this sector could create thousands of direct and indirect jobs, benefiting in particular the smallholders involved in producing the raw materials. Moreover, the expansion of the biofuels industry would contribute positively to Mozambique’s balance of payments, by reducing dependence on fossil fuel imports and improving energy security.
The potential impact on the transformation of rural communities is also significant, as the biofuels industry fosters social inclusion and improves living conditions through job creation and the diversification of economic activities. Production and processing operations can trigger the development of social infrastructure, including schools, clinics and water supply systems, promoting the well-being of rural communities. In addition, the study identifies biofuels as a potential tool for promoting gender equality, creating opportunities for women’s involvement and leadership at different stages of the production chain.
The environmental benefits inherent in replacing fossil fuels with biofuels are also highlighted, since such a replacement can lead to a significant reduction in greenhouse gas emissions, in line with Mozambique’s commitments on mitigating the effects of climate change. Environmental sustainability is thus a central concern of the study, which recommends the implementation of sustainable natural resource management practices and the adoption of clean technologies aimed at minimising adverse environmental impacts.
The biofuels sector in Mozambique represents a unique opportunity to promote sustainable economic growth, energy security and inclusive rural development. The biofuels market feasibility study offers a detailed roadmap for investment in and development of the sector, signalling a firm government commitment to promoting a diversified and sustainable energy market. Active participation by stakeholders from the energy, agriculture and investment sectors is encouraged, so that the emerging strategic opportunities can be fully explored. Regional integration strategies and the promotion of partnerships between the public and private sectors are identified as critical factors for the long-term success of this sector, contributing not only to economic growth, but also to the structural transformation of the country towards a greener, more resilient and more equitable economy.
