The Mepanda Unkua Project – a planned regulation of the Zambezi River in Mozambique

Results from a study trip, June 23 – July 18, 2003

By Christian Hillmann and Leif Tore Trædal

Osterhausgt 27, N-0183 Oslo, Norway, e-mail: fivas@fivas.org, www.fivas.org , Tlf: (+47) 22 98 93 25, Fax: (+47) 22 98 93 01

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Table of contents

List of Acronyms..............................................................................................................................3 1. Introduction ..................................................................................................................................4

1.1. The Cahora Bassa Dam ......................................................................................................4 1.2. Objective ..............................................................................................................................6

2. Methods........................................................................................................................................7 3. The Mepanda Unkua Dam Project ...............................................................................................8

3.1 The Mepanda Unkua area ...................................................................................................8 3.2. Important actors: UTIP, NORAD and Norconsult..........................................................8 3.3. Possible social and environmental impacts of the project ...............................................9

4. Findings and Discussions ...........................................................................................................14 4.1. Mepanda Unkua and the World Commission on Dams ................................................14 4.2. NORAD support to UTIP - addressing poverty? ...........................................................16 4.3. CDM Funding ....................................................................................................................17

5. Conclusions and Recommendations...........................................................................................18 Appendix 1: List of interviews and meetings.................................................................................19

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List of Acronyms DNE Department of Energy in Mozambique EIA Environmental Impact Assessment FIVAS Association for International Water and Forest Studies HCB Hidroelectrica de Cahora Bassa IRN International Rivers Network MICOA Environmental Impact Assessment Department of Mozambique NGO Non-Governmental Organisation NORAD Norwegian Agency for Development Co-operation NVE Norwegian Water Resources and Energy Directorate UTIP Technical Unit for Implementation of Hydropower Projects WCD World Commission on Dams

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1. Introduction This report concerns the Mepanda Unkua project, a planned large-scale regulation of the Zambezi River in the Province of Tete in Mozambique. Large-scale dams can potentially provide multiple benefits in terms of power supply, flood control and irrigation for agriculture, but they also frequently cause serious damage to the environment and people. The World Commission on Dams (WCD) recognises that it is too often the poor people affected by river regulations who have to pay the price in terms of loss of resources and livelihoods, and lack of fair and adequate compensation. The rationale behind the Mepanda Unkua project is the perceived high development potential of the Zambezi River for the economic development of Mozambique. The Zambezi River is the fourth largest river in Africa, originating in Angola 2.660 km from the coast of Mozambique, where its water flow has grown into a massive 22.000 m3/s. On its journey to the ocean the water passes the mighty Victoria Falls, before it makes the north-south border between Zimbabwe and Zambia for approximately 1.000 km. Further downstream it is regulated by the huge Kariba Dam, before the river reaches Cahora Bassa in the Province of Tete in Mozambique (See Figure 1). Zambezi is not only unique in terms of high hydropower development potentials, but also in terms of its high number of important ecosystems and habitats, including wetlands, riverine woodlands, dry forests, savannahs, and aquatic ecosystems. The planned project must be understood in the context where energy and river regulation are a symbols of national progress and development. The great Cahora Bassa Dam is one of the largest hydropower constructions in the world. 1.1. The Cahora Bassa Dam The Portuguese Colonial Government constructed the Cahora Bassa Dam (See Figure 1), which was finished in 1974. When completed, Cahora Bassa was the fifth largest dam construction in the world, and considering the situation of the country at that time; this is an interesting aspect in the history of the country:

That one of the world’s greatest civil engineering projects should have been undertaken in the dying days of colonialism in one of the remotest and most backward regions of Africa is an astonishing aspect of Mozambican, indeed of African history. 1

As the country became independent in 1974, the Marxist-Leninist party Frelimo took control of a country devastated by warfare. Inspired by other communist countries, industrialisation became the main focus of the new government, and Cahora Bassa became the country’s pride and a symbol of progress. Even today the Cahora Bassa decorates the 100 000 Metical2 bank note, symbolising prosperity and development. 1 Newitt, M. 1994: A History of Mozambique (pp. 528). Wittwaterstand University Press, South Africa. 2 Metical is the Mozambican currency; $US 1 equals approximately 21000 Metical.

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Today the Zambezi River is considered as an engine for the development of the Mozambican economy, in fact the whole region sees the river as having a great potential for the development of Southern Africa. Mozambique had long been controlled by a brutal Portuguese regime when the huge Cahora Bassa Dam was built. Cahora Bassa was developed to provide energy for the whole South African region, but it was also a hope that the basin could function strategically in the war of liberation, as a barrier in the way of the Frelimo guerrilla3. As Mozambique gained independence in 1974, the power station at Cahora Bassa also started producing energy. Only seven months later the young state was thrown into a civil war between the Frelimo Government and Renamo rebels. Renamo launched series of terrorist attacks against power lines, which had severe effects on the energy production from Cahora Bassa. During the 15 years of civil war, Cahora Bassa did not produce any energy, which in turn led to an enormous debt on the Portuguese company HCB; even today the company has a debt of 3 billion USD. A peace agreement between Frelimo and Renamo was achieved in 1992, which in turn led to a more stable

and predictable economic climate, and since then Mozambique has had a yearly economic growth of approximately 8%. In order to continue this growth the government of Mozambique wants to increase the energy production, primarily for export of energy to the international energy market in southern Africa, but also to make the country more attractive for investments in energy demanding industries. The Mepanda Unkua is considered as an important element in reaching all these goals. Nevertheless, there are critical voices both in Mozambique and elsewhere claiming that the costs of the project will be too high, in terms of negative environmental and social consequences.

3 Newitt, M. 1994: A History of Mozambique. Wittwaterstand University Press, South Africa.

Figure 1: The large Cahora Bassa Dam.

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1.2. Objective The Association for International Water and Forest Studies (FIVAS)4carried out a fieldwork in Maputo and the project area in the period of June-July 2003. The main objective of the study was to procure first hand information about the Mepanda Unkua project and the impacted area, in order to get a better understanding of the consequences the project may have to the environment and to groups of people who in different ways will be affected by the project. The principal objective of the fieldwork was to visit the Mepanda Unkua area and the community from where people have to move in case of a realisation of the project. FIVAS also wanted to investigate the Norwegian activities and involvements in the project, to put a focus on Norwegian intentions and responsibilities in the project.

4 The Association for International Water and Forest Studies (FIVAS) is an independent organisation working to obtain and disseminate information about the impacts of large dams and hydropower projects in the Third World, particularly where Norwegian interests are involved.

Figure 2: Location of Mepanda Unkua (Source: www.irn.org).

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2. Methods The study was carried out in two phases: First, information was collected through interviews with different stakeholders in the project. Norconsult, a Norwegian private company advising the Mozambican government on the development of the project, was the first institution that was contacted for an interview, as a preparation for the visit to Mozambique. Among the most important interviews made in Mozambique were: two interviews with representatives of the Technical Unit for Implementation of Hydropower Projects (UTIP), which is a government institution responsible for the development of the Mepanda Unkua project under the Energy Department (DNE); one meeting with a representative of NORAD at the Norwegian embassy in Maputo; and a meeting with Livaningo, an NGO which disseminates information about the environmental and social consequences of the project. In addition we performed an interview with a biologist, Dr. Arlindo Chilundo, at the University of Eduardo Mondlande, who for several years has been working with biological and social consequences of dam constructions in the river basin of Zambezi. (See Appendix 1 for more details on FIVAS’ activities during the study trip to Mozambique). Second, a minor fieldwork in the project area was carried out on July 3-11, 2003 in the Province of Tete and in Mepanda Unkua. The fieldwork comprised visits to different areas and interviews with potentially affected groups in Mepanda Unkua. The interviews were conducted with the aim of getting first-hand knowledge about the lives and livelihoods of the affected people and to assess the process of information sharing in the project. In addition, visits were made to Cahora Bassa Dam and Songo (the resettlement village established in relation to the construction of the Cahora Bassa), which also included talks with Hidroelectrica de Cahora Bassa (HCB), the company that currently operates this dam. The report is also based on a wide survey of technical, ecological, historical and cultural literature. The following chapter must be seen as important background information for the report. Nevertheless, this part is based both on literature reviews and information gained through interviews during the fieldwork. The chapters presents characteristics of the affected area, main actors involved, and potential social and environmental consequences of the project.

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3. The Mepanda Unkua Dam Project 3.1 The Mepanda Unkua area Mepanda Unkua is a very isolated area; neither extensive road networks nor other communication networks to this area are developed. The projected damsite is located at Mepanda Unkua 70 km upstream of Tete city, and the resulting reservoir will stretch out 60 km upstream to the foot of Cahora Bassa and cover an area of approximately 100 km2. The reservoir will also extend about 18 km upstream the Luia River, an unregulated river that drains a catchment of approximately 28 000 km2. The dam wall will have a height of 101 m, being 445 m wide. The spillway is planned to let infrequent major floods pass.

People in Mepanda Unkua rely mainly on agriculture for their livelihoods, performing a shifting cultivation and growing annual crops like sorghum, millet and maize. The soils are sandy and shallow, and unreliable rains make agriculture difficult for the people living here. Many households supplement agriculture with fishing, herding, bush cropping and hunting. Hollowed logs function as fishing boats, and nets are used to catch the fish. Livestock animals are mainly goats; farmers have 1-15 animals, kept either for food (milk and meat) or as a source of cash income when selling animals in local markets. Many farmers (according to the EIA5 approximately 40 % of the population) also cultivate lowland fields along the riverbanks of the Zambezi during the dry winter season (May – November), growing crops like tomatoes, onions, spring onions, lettuce, carrots, etc. The proximity to the river makes these farm plots reliable during the dry season and right before harvest of highland fields in April-May. At the time that FIVAS visited Mepanda Unkua, there was a drought in the area, which made agricultural production difficult and livelihood insecure for the population, thus the lowland field production of vegetables along the river represented the only source of food for people in a difficult time.

3.2. Important actors: UTIP, NORAD and Norconsult The feasibility study of the project was commissioned by UTIP (Technical Unit for Implementation of Hydropower Projects). UTIP’s main objective is to implement technical studies on - and follow up - the construction of hydropower projects on the Zambezi River. According to the Director of UTIP, Nazario I. Meguigy, the role of UTIP is to secure the interests of Mozambique in the process of developing the river: 5 UTIP 2002: Mepanda Uncua and Cahora Bassa North Project Feasibility Study, Environmental Impact Assessment, Technical Unit for the Implementation of Hydropower Projects (UTIP).

Figure 3: Woman cultivating dry season fields along the Zambezi.

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“The construction of the Cahora Bassa Dam was a bad deal for Mozambique, and we [UTIP] want to secure that this does not happen again.”6 The Norwegian Development Agency (NORAD) has over a period of three years supported UTIP with 22 mill. NOK (approximately 3 mill. USD) earmarked for capacity building. The funding was to be used for consultancy services and running costs.7 The main goal of NORAD’s support to the Mozambican energy sector is “to improve the management of the energy sector to advance sustainable social and economic development in Mozambique”8. The agreement between UTIP and NORAD has now expired and is currently (2003) being renegotiated9. In a tender between Norwegian companies in 1999, Norconsult won the contract for NORAD consultancy assistance to UTIP, and has since then been key in advising the institution on financial and technical matters. According to one of their representatives in Mozambique, Norconsult has been a multidisciplinary consultant on environment, technical support, capacity building, finance and law10. Thus, the support from external consultants is quite extensive. The Auditor General of Norway11 points out in a report that because UTIP still seems to be dependent on external support from foreign consultants it is a fragile institution. 3.3. Possible social and environmental impacts of the project Naturally, the building of a 1 348 megawatt (MW) dam with the following planned regulation will affect both communities and the environment in Mepanda Unkua area. For the people in Mepanda Unkua whose livelihoods rely upon a risky production environment, the planned project represents an additional factor of insecurity. Displacement of people will also have social impacts that are difficult to estimate. People will be cut off from the traditional social networks and local markets. This will have consequences also for the remaining households that do not have to move as a consequence of the construction scheme. At the same time the construction of the dam is meant to have positive trickle-down effects in the affected local communities. According to UTIP, possible skilled and unskilled local labour force will be used to the greatest extent possible in the construction of the dam. Second, the construction will imply that infrastructure in terms of roads and power grids will be developed, facilitating other economic activities in the area.12 In the following we will discuss some important aspects related to the building of the Mepanda Unkua dam and possible social and environmental consequences that should be taken into account.

6 Interview with Nazario I. Meguigy (Director) and Sergio J. Elisio (Engineer), UTIP, 15.07.2003. 7 Interview with Einar Ellefsen, Responsible for NORAD’s energy cooperation with the Government of Mozambique. 8 NORAD 2003: Om bistand. www.norad.no/ombistand/oversikt, accessed 29.08.2003. 9 Interview with Einar Ellefsen, Responsible for NORAD’s energy cooperation with the Government of Mozambique, 24.06.2003. 10 Interview with Odd Ystgård, Norconsult, 07.05.2003. 11 Riksrevisjonen 2003: Effektiviteten av norsk bistand til Mosambik, Utkast til hovedanalyserapport 15.08.2003, Riksrevisjonen, Forvaltningsrevisjonsavdelingen II, Seksjon F 2.4. 12 UTIP 2002: Mepanda Uncua and Cahora Bassa North Project Feasibility Study, Environmental Impact Assessment, Technical Unit for the Implementation of Hydropower Projects (UTIP).

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Box 1: The Clean Development Mechanism (CDM) The CDM was a result of the Kyoto Protocol under the UN Framework Convention on Climate Change, and is often described as the surprise of the negotiations. The idea behind the CDM is that the industrialised countries can comply with their own quantified emissions limitations by investing in projects in countries that are not committed to reducing emissions, and in this way contribute to sustainable development in these countries. The International Rivers Network (IRN) and CDM Watch have, on the basis of the World Commission on Dams Framework and CDM criteria, suggested guidelines for CDM and dam projects: 1) Large-scale hydroelectric projects should not be granted

CDM funding. 2) An important principle of CDM is that emissions

reductions must be additional to what would occur without the project. Thus, dam projects that would occur without the CDM funding do not comply with the CDM criteria.

3) The most conservative projections for emissions reductions should be applied in the evaluation of the projects.

4) Sensitivity analysis should be adopted to secure that the developers do not exaggerate the energy effects and understate the costs of the project.

Source: IRN and CDM Watch, 2002: Why Big Hydro is Ruining the Clean Development Mechanism. http://www.irn.org/programs/greenhouse/021025.dammingthecdm.pdf

Options assessment and electricity supply According to a feasibility study made by UTIP, several possible alternatives were considered for the regulation of the Zambezi River13. Cahora Bassa North, Boroma and Cambwe Foz were the other alternatives considered, but the Mepanda Unkua was found to be the best solution.14 The study says that without the Mepanda Unkua the outflush from Cahora Bassa would cause

devastating effects on the environment. Fish species that spawn in the dry season would suffer because such an outflush would carry the fish eggs down the river. The study also says that the Mepanda Unkua will be a "buffer" for the increased periodic outflow of water from Cahora Bassa after a construction in the North Bank.15 This is the main reason why Mepanda Unkua is considered as being a better alternative than Cahora Bassa North. Currently, one of the main challenges for the developers is to get investors into the Mepanda Unkua project. According to Norconsult16, the Mepanda Unkua Project is one of the energy projects with the highest revenue potentials in the whole South-African region; the costs of dealing with the negative impacts of the project are small considering the total costs of the project. Because the river is already regulated upstream of Mepanda Unkua, the project is described as an economically and

13UTIP 2002: Mepanda Uncua and Cahora Bassa North Project Feasibility Study, Environmental Impact Assessment, Technical Unit for the Implementation of Hydropower Projects (UTIP). 14 According to the study the Cahora Bassa North would probably be the economically best alternative, both in terms of economic costs and in energy returns, but the environmental costs for this alternative have been considered as being too high. 15 Interview with Dr. Arlindo Chilundo, University of Eduardo Mundlande, 15.07.2003. 16 Interview with Odd Ystgård, Norconsult, 07.05.2003.

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environmentally cheap investment for Mozambique. Still, because of political and economic uncertainties, it is currently (2003) difficult to find investors. The project has a total budget of $US 2.5 bill, and the scale of the project makes it likely that only a large investor or an assembly of investors will be interested. According to UTIP representatives, the Clean Development Mechanism (CDM) is being considered as a potential financial source17 (See Box 1 for a description of the CDM). The construction period is estimated to be 6-7 years, and a private company (or consortium of companies) will carry through the project and also operate the dam for 25 years. The construction work and operation will be opened for tender internationally. After the initial 25-year period the ownership of the dam will be transferred to Mozambique. In the meantime, the dam is meant to benefit Mozambique in terms of taxes, stock dividends and royalties from the use of Mozambican water resources18. According to Livaningo, Mozambique has several other options for producing more energy; investments in small-scale decentralised energy projects, like solar, wind and gas, may offer better alternatives for the rural areas in the country19. This could to a higher degree help achieving the national goal of 14 % of the population having electricity in 2015, and in addition it would offer a better option concerning the environmental and social impacts of implementation. Anne K. Helgestad of the Norwegian Water Resources and Energy Directorate (NVE), stated that the problem with energy in Mozambique is not that of availability but rather of access to electricity: the country produces enough electricity, but the problem is that people do not get access to this electricity due to infrastructure problems. 20 As a consequence, energy prices are too high, particularly in rural areas, but also for poor people urban areas. In fact the energy tariffs in Mozambique are at the same level as in Norway, while the salary level is only a fraction of Norwegian standards 21 22. The high energy prices are partly a result of a price agreement from the 1970s between Mozambique and South Africa. During the history of Cahora Bassa, the major part of the power produced has been sold to South-Africa. The agreement was renegotiated in 1984 during the civil war, and the price was fixed at 4 cent of a Rand per kWh, which today, because of the drop in value of the Rand, provides South-Africa with almost free energy. Mozambique on the other hand, has to buy back their energy from South Africa at market prices. Portugal is willing to transfer the ownership of the dam to Mozambique when the loan is paid back, which according to HCB, will take at least 20 years with full production of energy. Mozambique now finds it reasonable that the dam be transferred back to them for free, as a compensation for being

17 Interview with Arístides Baloi (Geographer) and António Chicachama (Engineer), UTIP, 26.06.2003. 18 Riksrevisjonen 2003: Effektiviteten av norsk bistand til Mosambik, Utkast til hovedanalyserapport 15.08.2003, Riksrevisjonen, Forvaltningsrevisjonsavdelingen II, Seksjon F 2.4. 19 Livaningo 2003: Mepanda Uncua. A bad deal for Mozambique? Is a new dam wise development choice? Livaningo: Por um ambiente São, Maputo, Mozambique. 20 Interview with Anne Kronen Helgestad, NVE Representative in Mozambique, 31.06.2003. 21 According to UNDP Development Index has Norway a GNP per capita of 29.620 USD, whereas Mozambique’s GNP per capita was calculated to be 1.140 22 Riksrevisjonen 2003: Effektiviteten av norsk bistand til Mosambik, Utkast til hovedanalyserapport 15.08.2003, Riksrevisjonen, Forvaltningsrevisjonsavdelingen II, Seksjon F 2.4.

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exploited by Portugal for centuries. The Mepanda Unkua plan may in fact be a way of pushing the Portuguese to transfer the control of Cahora Bassa back to Mozambique23. Thus, there might be political reasons why further development of Cahora Bassa is not considered as being the best solution. A further development of Cahora Bassa will be the responsibility of HCB, who does not want to invest in improvement of the spillways or the North Bank as long as the future is so uncertain. Within the near future, the dam might have to be transferred back to Mozambique, and to HCB it would not be a good investment to upgrade the dam right before a change in ownership. Displacement According to the feasibility study of Mepanda Unkua, 260 households involving 1 401 people will have to move as a consequence of the planned regulation; these people have been registered and listed manually, and mapped out by aerial photographing24. The developers will be responsible for compensating lost land and livelihoods for these people. According to the Environmental Impact Assessment, 1 040 ha of highland and 33 ha of lowland agriculture areas will be lost as a direct consequence of the dam construction. In addition, rangeland for livestock and bushland for hunting and gathering will disappear. The project’s Terms of Reference states that the people who have to move “…should be the long term beneficiaries of the project…”25. No detailed scheme on how this will be done has yet been developed; only options assessments have been done26. This includes only the people living in the reservoir area, and people that have to move because of power line and road constructions are not included in these figures. Environmental impacts The environmental effects of the project are hard to estimate, but some of them are mentioned in the Feasibility Study. Since the Mepanda Unkua will operate as a run-of-the-river dam, the reservoir will appear as a slow flowing river. The daily fluctuations downstream at Tete will be approximately 0,3-0,6 m. Potentially this can have negative impacts on fishing, cultivation along the river and other human activities, such as bathing, washing of clothes and transport on the river. 27 Regulating Zambezi downstream of Cahora Bassa implies that another tributary, the Luia River will be regulated. This will further reduce downstream wetland soil fertility, potentially having negative impacts on the prawn fisheries.28

23 Interview with Dr. Arlindo Chilundo, University of Eduardo Mundlande, 15.07.2003. 24 UTIP 2002: Mepanda Uncua and Cahora Bassa North Project Feasibility Study, Environmental Impact Assessment, Technical Unit for the Implementation of Hydropower Projects (UTIP). 25 UTIP 2002: Project Background, in Mepanda Uncua and Cahora Bassa North Project Feasibility Study, Environmental Impact Assessment, Technical Unit for the Implementation of Hydropower Projects (UTIP): pp. 12. 26 UTIP 2002: Impact on Population and Resettlement, in Mepanda Uncua and Cahora Bassa North Project Feasibility Study, Environmental Impact Assessment, Technical Unit for the Implementation of Hydropower Projects (UTIP). 27 UTIP 2002: Mepanda Uncua and Cahora Bassa North Project Feasibility Study, Environmental Impact Assessment, Technical Unit for the Implementation of Hydropower Projects (UTIP). 28 UTIP 2002: Mepanda Uncua and Cahora Bassa North Project Feasibility Study, Environmental Impact Assessment, Technical Unit for the Implementation of Hydropower Projects (UTIP).

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Among other potentially negative impacts of the Mepanda Unkua are poor water quality downstream caused by the construction activities, and destruction of the African Mottled Eel migration route.29 The Cahora Bassa dam had major negative consequences for the environment and for the people in the area. Whether a new dam downstream will further worsen the situation or alleviate some of the adverse impacts of Cahora Bassa is today an open question. Already in the 1980s some were arguing in favour of a rehabilitation of the Zambezi flood regime by starting flood releases from the Cahora Bassa. According to the feasibility study, a construction of the Mepanda Unkua will reduce the feasibility of such a rehabilitation.30 In the following chapter, aspects of the Mepanda Unkua Project will be discussed in relation to compliance with WCD standards, contribution to poverty reduction in Mozambique and CDM financing. The WCD addresses several important issues in relation to construction of large dams, and the chapter will therefore concentrate on the relation between Mepanda Unkua and WCD recommendations.

29 UTIP 2002: Mepanda Uncua and Cahora Bassa North Project Feasibility Study, Environmental Impact Assessment, Technical Unit for the Implementation of Hydropower Projects (UTIP). 30 UTIP 2002: Mepanda Uncua and Cahora Bassa North Project Feasibility Study, Environmental Impact Assessment, Technical Unit for the Implementation of Hydropower Projects (UTIP).

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4. Findings and Discussions 4.1. Mepanda Unkua and the World Commission on Dams According to the Feasibility Study of the Project, the World Commission on Dams’ (WCD) Framework31 (see Box 2 for more details) is supposed to be the principal set of guidelines in the development and planning of the project. Comparing the project to the WCD framework, however, there seem to be flaws in important stages in the decision-making process, particularly related to public acceptance and information sharing, as well as options and needs assessments.

A. Public acceptance According to the WCD Framework, "Public acceptance of key decisions is essential for equitable and sustainable water and energy resources development. Acceptance emerges from recognising rights, addressing risks, and safeguarding the entitlements of all groups of affected people, particularly indigenous and tribal peoples, women and other vulnerable groups"32. In the WCD report it is stated that good hydropower projects should ensure that certain elements are in place in order to make due consideration of local and indigenous people’s concerns: • Recognition of rights and assessment of risks is the basis for the identification and inclusion of stakeholders in decision-making on energy and water resources development • Access to information, legal and other support is available to all stakeholders, particularly indigenous and tribal peoples, women and other vulnerable groups, to enable their informed participation in decision-making processes • Demonstrable public acceptance of all key decisions is achieved through agreements negotiated in an open and transparent process conducted in good faith and with the informed participation of all stakeholders 31 WCD: Dams and Development, A New Framework for Decision-Making, The Report of the World Commission on Dams. www.dams.org/report/execsumm.htm, accessed 22.02.2003. 32 WCD: Dams and Development, A New Framework for Decision-Making, The Report of the World Commission on Dams. www.dams.org/report/execsumm.htm, accessed 22.02.2003.

Box 2: The World Commission on Dams (WCD) The WCD recognises that at the heart of the dams debate are issues of equity, governance, justice and power. The main goal of the commission was to develop “…a rationale and framework that responds to critical needs and offers scope for progress that no single perspective can offer on its own”. Seven strategic priorities are recognised that should guide and provide a practical way forward for decision-making:

1. Gaining public acceptance 2. Comprehensive options assessment 3. Addressing existing dams 4. Sustaining rivers and livelihoods 5. Recognising entitlements and sharing benefits 6. Ensuring compliance 7. Sharing rivers for peace, development and security

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• Decisions on projects affecting indigenous and tribal peoples are guided by their free, prior and informed consent, achieved through formal and informal representative bodies. According to UTIP, several public hearings have been held at different stages in the project planning. Based on the visit to the area it appears that this information has not been fully comprehended by, or - even worse - been given to the affected people at all. Today there seems to be an enormous knowledge gap between the developers and the local affected people. Generally people do not know much about the project and its consequences, and the consequences they are aware of are generally the positive ones like compensation and job opportunities. The local people have generally not been involved in the planning and decision-making process. Particularly affected people living downstream have been neglected in the whole process. Today essential agreements are not in place for the signing of a construction contract with potential investors. The issue of compensation is, according to UTIP, "something a potential investor has to negotiate with the locals"33. UTIP representatives claim that their institution will ensure a proper compensation for the people who will be relocated. There seems to be a need for capacity building among the villagers on the issue of dealing with and negotiating over compensations, and this must be secured before the final stages and a tender of the project. It became clear during the study that the people living in the area only to a limited degree have the capacity to participate in decision-making processes at any level. Livaningo and a local organisation, VIDA34, have started a capacity-building project for the affected people, which hopefully will help them assess and defend their rights and participate in the decision-making process in a more equal way. It might be difficult to involve local people at all stages of the project planning, but the information given in this project does not comply with WCD standards. All aspects and consequences of the project for the affected people have not been clearly shown. In addition, the effects on communities and the environment downstream are not yet fully investigated. WCD35 states that this is often a problem related to the construction of large dams, as “…the failure to account for the consequences of large dams for downstream livelihoods have led to the impoverishment and suffering of millions, giving rise to growing opposition to dams by affected communities worldwide.“ The downstream environment in lower Zambezi was badly affected by the construction of the Cahora Bassa. According to studies made, a rehabilitation of the downstream environment is still possible by releasing tailor made environmental floods.36 With the construction of Mepanda Unkua, and particularly if this is followed by a development of the Cahora Bassa North, a rehabilitation of the downstream environment and livelihoods will be difficult.

33 Interview with Nazario I. Meguigy (Director) and Sergio J. Elisio (Engineer), UTIP, 15.07.2003. 34 VIDA (meaning "life" in Portuguese) is a local organisation working with health and environmental education, focussing on local communities in the Province of Tete. 35 WCD: Dams and Development, A New Framework for Decision-Making, The Report of the World Commission on Dams. www.dams.org/report/execsumm.htm, accessed 22.02.2003. 36 Interview with Dr. Arlindo Chilundo, University of Eduardo Mundlande, 15.07.2003.

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B. Comprehensive Options assessment - validating the needs and addressing existing dams The planning of the Mepanda Unkua hydropower project has raised discussions concerning the need for the project. It is clear that today there is no acute need for more energy in the Mozambican domestic market37. The capacity of the Mepanda Unkua will be 1 348 MW, and considering the current domestic demand for energy of 200-250 MW, it becomes obvious that the energy gains from this project are not designed according to the current domestic energy consumption level. According the Feasibility Study, if the planned industrial development of the country is to succeed, Mozambique is in need of 2700 MW additional capacity38, an important argument for realising the project. These numbers are uncertain, and probably based on optimistic prognosis of the national industrial development in the country. In addition, it is stated that South Africa in the future (from 2007) will have an energy deficit. Other neighbouring countries like Zimbabwe and Malawi are also countries in need of energy.39 Seen both from a national and a regional point of view, the dam might have some positive effects for the energy supply. But whether the project will contribute to alleviating poverty in the country and address the question of equity, is still an open question (this will be discussed further in section 5.2). There are no indications that Mepanda Unkua will make a direct contribution to increasing the supply of energy to marginal areas of the country. Considering the selection of alternatives (mentioned above), the choice of Mepanda Unkua project is questionable. The average production of Cahora Bassa is currently far below installed capacity (about 30 % in June 200340). The power potential of Cahora Bassa could also be doubled if the station is upgraded. Even the EIA considers a spillway enlargement of the existing Cahora Bassa as being the best alternative. This could also lead to a partial restoration of the natural flood conditions downstream during the wet season. Still, it should be noted that in the international debate the potential positive effects of tailor made floods are controversial41. As an upgrading of the existing Cahora Bassa is the responsibility of the owners of the dam, it was not considered as a viable alternative42. Thus, both the need assessment and the selection of the Mepanda Unkua among other alternatives are questionable according to WCD standards. 4.2. NORAD support to UTIP - addressing poverty? The developers claim that the Mepanda Unkua hydropower dam will increase the national income and by that contribute to alleviating poverty in the country. The general objective of all NORAD activity is also to contribute to the international work in combating poverty. The main goals are durable improvements in economic, social and political conditions for the populations in developing countries, with a special focus on helping the poorest segments of the

37 Interview with Anne Kronen Helgestad, NVE Representative in Mozambique, 31.06.2003. 38 UTIP 2002: Mepanda Uncua and Cahora Bassa North Project Feasibility Study, Environmental Impact Assessment, Technical Unit for the Implementation of Hydropower Projects (UTIP). 39 Interview with Einar Ellefsen, Responsible for NORAD’s energy cooperation with the Government of Mozambique, 24.06.2003. 40 According to HCB officials this was due to ongoing maintanance work. 41 Concerns about environmental flows are presented in e.g. McCully, 2001: Silenced Rivers. Zed Books. See www.irn.org 42 UTIP 2002: Mepanda Uncua and Cahora Bassa North Project Feasibility Study, Environmental Impact Assessment, Technical Unit for the Implementation of Hydropower Projects (UTIP).

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populations43. In a recent preliminary report from The Auditor General44 it is pointed out that the grant document from NORAD to UTIP does not say anything about how the Mepanda Unkua Project will contribute directly or indirectly to alleviating poverty in Mozambique. Economic growth in itself does not reduce poverty, and as the report states, how the income from the energy production will benefit the poorest segments of the population will in turn depend on “the social profile of future national budgets”. The report suggests that the Mepanda Unkua contribution to alleviating poverty in Mozambique is highly uncertain. 4.3. CDM Funding Currently the main problem faced by UTIP is to find potential investors to the project. As it is stated both by the planners and consultants in UTIP that the project is highly economically viable, we find it very unlikely that the project will comply with the criteria for CDM projects. An inherent paradox of the CDM is that the more cost-effective, the more uncertain the additionality45. Another factor making Mepanda Unkua even less suitable for CDM is the highly uncertain projections in domestic reductions in emissions of greenhouse gases as a consequence of the project; because the project is planned as a capital generating project for the country by exporting electricity to neighbouring countries in the region, the domestic energy gain from the project is at best moderate.

43 NORAD 2003: Om bistand. www.norad.no/ombistand/oversikt, accessed 29.08.2003. 44 Riksrevisjonen 2003: Effektiviteten av norsk bistand til Mosambik, Utkast til hovedanalyserapport 15.08.2003, Riksrevisjonen, Forvaltningsrevisjonsavdelingen II, Seksjon F 2.4. 45 Grubb, M., Vrolijk, C. and Brack, D. 1999: The Kyoto Protocol. A Guide and Assessment. The Royal Institutre of International Affairs, Energy and Environmental Programme, London.

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5. Conclusions and Recommendations The findings from the study enable FIVAS to make some conclusions and recommendations for a further development of Mepanda Unkua and the energy sector in Mozambique:

• Demand side management, supply efficiency and decentralised energy alternatives may offer better alternatives for improving energy services for all segments of the population in Mozambique, and should be investigated further with the support of international donors.

• Extensive capacity-building and inclusion of all stakeholders in the decision-making process is essential for fulfilling the guidelines for good practice developed by the World Commission on Dams, claimed by UTIP to be among their most important guiding principles in the planning process of the Mepanda Unkua project.

• Capacity-building among affected groups should be carried through or encouraged and supported by the implementers (UTIP).

• Even though an important principle in NORAD’s co-operation is the recipient country’s responsibility, support from NORAD to UTIP as a governmental institution should be revised. The social profile of the Mepanda Unkua project should be changed to the benefit of the affected groups in the impacted area and the poor segments of the population in Mozambique.

• CDM funding should not be granted to this project, as it is considered as being amongst the most economic viable energy projects in the whole region, and therefore does not fulfil the additionality criteria of the CDM. In addition, the project’s contribution to domestic reduction of GHG gases and sustainable development is highly uncertain.

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Appendix 1: List of interviews and meetings May 7th Odd Ystgård, Norconsult June 24th Einar Ellefsen, NORAD Anabela Lemos and and Maurício Sulila, Livaningo June 26th Arístides Baloi (Geographer, UTIP) and António Chicachama (Engineer, UTIP) June 31st Anne Kronen Helgestad, Norges Vassdrags og Energiverk (NVE) July 3rd – 11th Fieldwork in Tete Province July 12th Anabela Lemos and Lucia Scodanibbio, Livaningo July 15th Nazario I. Meguigy (Director, UTIP) and Sergio J. Elisio (Engineer, UTIP) Dr. Arlindo Chilundo, University of Eduardo Mondlande July 17th Lote Simione Maueia, Head of Environmental Impact Assessment Department (MICOA)