Confusion and Spin in Mozambique Secret Debt Saga

Debt Feasibility Study, Kidnapping Investigation, ProSavana, War

Secret Debt: Maleiane defends feasibility study that Comiche damned, but blames banks for accepting study

Economy and Finance Minister Adriano Maleiane defended the feasibility study which was used to justify the $2 billion in secret loans, speaking at a press conference 27 December. In effect, he directly challenged the parliamentary commission, headed by former finance minister Eneas Comiche, which was highly critical of “the financial projections [which] were made on the basis of unsustainable and hypothetical assumptions”. It said that in the feasibility study “there was apparently no effort to take into account the risks inherent to the country’s situation, such as its vulnerability to international commodity prices”. (O Pais Economico 30 Dec; Mozambique News Reports and Clippings 348, 11 Dec)

Maleiane admitted that the feasibility study was now out of date and the three companies are redoing their business plans. He said financing of the three companies – Ematum, Proindicus and MAM – was based on a feasibility study which, at first sight, indicated that it would be possible to pay off debt in about eight years. The study also served as a basis for funders, Credit Suisse and VTB, which are internationally renowned banks, he said. In an obvious response to Comiche, Maleiane said these are important banks and they agreed that the assumptions made sense. Thus the primary responsibility is with the banks for accepting the feasibility study.

@Verdade (11 & 13 Nov 2016) published details of the Ematum feasibility study. Half of Mozambican tuna is the high value yellowfin, and the feasibility study says Mozambique could sell yellowfin at $13.94 per kg. The FAO reported that in November 2013, near the time of the feasibility report, the Seychelles was selling yellowfin to Europe for $2.69 per kg (http://www.fao.org/3/a-bb294e.pdf), one-fifth of the value stated in the feasibility study. In October 2016 Seychelles was selling yellowfin for $2.06 per kg.

SISE points to Guebuza & Nyusi

Gregorio Leao, director-general of the security services (Servico de Informacao e Seguranca do Estado, SISE), told the parliamentary commission investigating the secret debt that “there was an inter-ministerial commission” overseeing the project funded by the $2 bn secret loans. The commission included the defence forces (FDS), SISE, and the ministries of Defence, Interior, Fishing and Transport & Communications. “At the time, some meetings were led by the Commander-in-Chief (Armando Emilio Guebuza),” he added.

Guebuza, in turn, put the stress on Nyusi as Defence Minister. In his evidence to the parliamentary commission, former president Guebuza stressed that the whole rationale behind the secret debt was military. Proindicus was the first of the three state-owned companies to be created on 8 January 2013 and it received a $622 million loan from Credit Suisse in February of that year. Guebuza told the commission: “Proindicus is a company of the Defence and Security Forces (FDS), whose main objective is the protection of the Exclusive Economic Zone of Mozambique,” as part of its responsibility to protect national sovereignty, territorial integrity and inviolability of frontiers.

Proindicus is half owned by Monte Binga and half by GIPS. Monte Binga is a Ministry of Defence company and its board is largely military men. GIPS (Gestao de Investimentos, Participacoes e Servicos) is owned by the security services (through Servicos Sociais do SISE). The chair of Proindicus is Antonio Carlos do Rosario of SISE.

do Rosario told the commission: “Initially we wanted $ 2 billion, up to $ 2.5-3 billion. If we could have obtained everything under Proindicus, we would not have had to go into other activities such as fishing. … For us Proindicus would have done everything, even yards and maintenance centres, because it was all closed and part of the defence services (FDS)”. The other two companies were created only when Credit Suisse could not provide enough money for Proindicus.

Manuel Chang stressed that the loan was to the private companies, not to the government.

Bonus cut. In many countries, including Mozambique, civil servants and many company employees are paid a Christmas bonus equivalent to one month’s salary, thus known at the “13th month”. Adriano Maleiane, Economy and Finance Minister, at a press conference 27 December, announced that the bonus would be halved for most civil servants. Higher paid staff, from heads of departments up to ministers, will receive no bonus this year. Maleiane blamed the cut in donor budget support, which in turn was a response to the secret debt.

To join the 1%

What portion of the Mozambican elite, and what portion of those in the development sector, are members of the richest 1%? Credit Suisse’s annual Global Wealth Report, published in December, shows that inequality continues to increase, and that globally the richest 1% for the first time control more than 50% of global wealth.

The report shows that to be in the richest 1% in Africa requires an individual to have assets of just $50,509 – which means almost anyone who owns a flat in the Maputo cement city is in Africa’s 1%. But to be in the global 1% a person must have assets of $744,396 – which surely includes some of the Mozambican elite. (More details in the attached pdf version of this newsletter.)

Attorney-General says police failed to investigate kidnapping accused

Charges have been dropped against Bakhir Ayoob, a man whom the police accused of being the mastermind behind the wave of kidnappings of business people that has hit Mozambican cities since 2011. But Attorney-General Beatriz Buchili was sharply critical of the Criminal Investigation Police (PIC).

“There is no justification for the case being held for three years in the PIC without an indictment, after the citizen Mahomed Bakhir Ayoob was accused of a crime with such serious and social impact. Even more serious is that citizen Mohamed Bakhir Ayoob is accused of involvement in various other crimes; some of those files are missing, and in none of them has he been accused or indicted based on concrete facts.” Furthermore, there was no investigation plan, she said. (O Pais 6 Jan)
Ayoob is the son-in-law of wealthy businessman Mohamed Bashir Suleimane (MBS), whom the United States government branded as a “drugs baron” in 2010. Ayoob’s was arrested on 21 September 2012 and held for nine days without being allowed visits from his family or his lawyer. He was interrogated, for the first and only time, by a judge, Helena Kida, who ordered him released since no evidence was presented and there was no reason for continuing to hold him in preventive detention. A fresh warrant was issued for Ayoob’s arrest in February 2013 – but by that time he had left the country, travelling first to Dubai and then to Hong Kong.

Criminal investigation is being removed from the police and moved to the attorney general’s office, under a law promulgated by the President on 6 January. The Criminal Investigation Police (Policia de Investigacao Criminal, PIC) has been one of the arms of the police and its failures to investigate important crimes had been blamed on serious corruption within the police. Parliament on 27 July 2016 created a new Criminal Investigation Service (Servico Nacional de Investigacao Criminal, SERNIC) which is not subordinate to the police, and the police are explicitly not allowed to interfere.

Sernic is instead under the Ministry of Interior and the Attorney General’s office. At the time, Renamo in parliament voted against the law, arguing that Sernic should be under the Justice Ministry and be removed entirely from Interior, which also oversees the police. It has taken President Filipe Nyusi five months to actually sign and promulgate the law.

Deputy Interior Minister Jose dos Santos Coimbra was dismissed on 4 January by President Nyusi. As is normal, no reason was given. He was first appointed in January 2015 as part of Nyusi’s new government.

Kidnapping attempts continue. Maputo police on 6 Jan presented to the press two people and two cars they said were used in a failed kidnapping 14 December of the owner of Tiger Centre, Gulam Rassul. This was the third failed attempt to kidnap him. The others were in November 2016 and August 2012. Also, police shot and killed four suspected kidnappers on 28 December. The police said seven men tried to kidnap two businessmen on Avenida do Trabalho in Maputo when the police intervened; a chase followed and there was a shootout on Rua dos Desportistas near the Maputo waterfront. And on 15 November, a 79 year old businessman of Asian origin, Norotam Ramuji, was kidnapped in the Maputo neighbourhood of Sommerschield. He is the owner of a jewellery shop, Ourivesaria Imperial.

Prosecutor murder. Three more people have been named as accused in the killing of prosecutor Marcelino Vilanculos on 11 April 2016. He was investigating the kidnappings. This brings the total accused to six, but only three are being held. One escaped from jail on 24 October, and only one of the new group of three has been found and arrested. (AIM Pt 30 Dec) Justice Minister Isac Chande said Monday that there were strong indications that the escape was facilitated by prison officials. (O Pais 10 Jan) Nine prison staff, including the prison director, Castigo Machaieie, were detained on suspicion of colluding in the escape. (AIM En 30 Dec)

2016 inflation 25%; Metical gains value

Inflation for 2016 was 25.27%, slightly lower than had been feared, according to the National Statistics Institute (INE). The inflation figure is based only on the consumer price indices of the three largest cities. Beira had considerably higher inflation at 29.13%, compared to Nampula (24.33%) and Maputo (24.62%).

The main driver of inflation was food prices, which rose by nearly 40%, and which hits the poor hardest because a bigger share of their purchases are food.

The Metical continues to regain value. Devaluation was greatest in mid-October when the exchange rate was MT 78 = $1. By mid-December it had fallen slightly to MT 74 = $1 and on 9 January if was MT 71 = $1. Similarly the rate to the South African Rand was MT 5.6 = 1 Rand in October, MT 5.4 = 1 Rand in mid-December, and MT 5.2 = Rand 1 on 9 Jan.

On 29 December President Nyusi, named Victor Pedro Gomes as deputy governor of Banco de Mocambique (BdM). Since 2014 he had been chair of the state railways company, Caminhos de Ferro de Mocambique (CFM), but before that had been a senior official in BdM.

Nampula-Maputo civil society battle over ProSavana continues

The civil society struggle over ProSavana continues. But the split between Maputo and the north was made clear in an article in the Nampula-based @Verdade (23 Dec) headlined “Civil Society Organizations of Niassa, Nampula and Zambezia ‘liberate themselves’ from Maputo thanks to ProSavana money”. But the Maputo-based “no to ProSavana” campaign in an 8 November statement accuses Japan, Brazil and Mozambique of “irregularity, secrecy, illegitimacy and obscurantism” as well as “clearly violating human rights.” It says there should be no cooperation with the project and that, in effect, northern civil society has sold out and is “acting as an arm of the ProSavana project.”

Pro-Savana was originally designed to promote Brazilian agribusiness investment in the Nacala corridor and was subject to a strong campaign by “no to ProSavana”. The crisis-ridden Brazilian government dropped out and no Brazilian farm company wanted to invest, leaving only Japan which said it would totally redesign the project to be pro-peasant. We argued here that Pro-Savana had won (Mozambique News Reports and Clippings 329, 26 June 2016, http://bit.ly/ProSav-victory), but no to ProSavana says Japan is acting in bad faith and not to be trusted. Northern civil society backed the original campaign, but in February 2016 civil society platforms from Niassa, Zambezia and Nampula joined the Civil Society Coordination Mechanism (Mecanismo de Coordenação da Sociedade Civil, MCSC) to work with the Ministry of Agriculture and Food Security (Ministério da Agricultura e Segurança Alimentar, MASA) and Japanese International Cooperation Agency (JICA).

“We have experience of many failed projects because the government thought that it alone was capable of deciding,” explained Antonio Mutoua of the MCSC. “We want to be involved in making decisions about this program of the Nacala Corridor. … We do not want to be mere spectators, we want to be included in this process.  … We want to be involved in the redesign from the start, so as to protect the rights of the communities. We think now is very good time to collaborate.”

An investigation by @Verdade (23 Dec) showed concern about land rights and none of the peasants it interviewed had been able to obtain a land title (Direito de Uso e Aproveitamento da Terra, DUAT). But it also found that “there is no evidence of any usurpation of land” forProSavana.

13 farmers have lost land in Nampula city and say they have not been offered alternative land. The land in Ratane C neighbourhood has been taken by the Ministry of Health to build a hospital and medical warehouse. The farmers claim that in 2014 the Nampula municipality promised them compensation and alternative land. The municipality says the Health Ministry has failed to hand over compensation funds, but says nothing about alternative land.

War & Negotiations

Hunguana: include Renamo demands in broader decentralisation plan

Decentralization was originally promoted by the government and is included in the 1990 constitution, but the decentralisation process has been “interrupted”, Teodato Hunguana told O Pais (5 Jan) Hunguana is highly respected elder statesman of Frelimo, and was a minister, part of the Rome negotiating team, and was a judge on the Constitutional Council. He notes, for example, that there has never been a discussion about the role of the provincial assemblies.

Pressure for decentralization is coming not only from Renamo but from inside Frelimo as well, he stresses. In reopening decentralisation discussions, the first question is what is the aim of decentralisation and “how far the concept of decentralization goes in the present state conditions.”

He continues: “It is in this context that we must discuss decentralization and include Renamo’s claims.” Once there is a consensus political agreement to decentralisation, drafting the legislation is not difficult and could be done relatively quickly.

Finally, Hunguana makes the point that peace negotiations (including those in Rome in 1990-2) always take place at two levels. Political decisions must be taken through personal contact of the leaders of the two sides, and then these are worked out in detail by the negotiating commission.

Provincial budgets have been substantially cut as a proportion of the 2017 budget, from 18.3% to 14.3%. (O Pais 9 Jan) Central spending and money for districts are increased as a proportion of the budget. More money is now allocated to districts than to provinces

And a warning from Rui Baltazar, former head of the Constitutional Council: “Do not fall for the easy illusion that by changing the Constitution, we will normalize and reconcile Mozambican society.

Improving the Constitution can help, but not more than that.” He was speaking to the Lawyers

Association (Ordem dos Advogados de Moçambique) 24 November.

debt feasibility study, kidnapping investigation, ProSavana, war

More details have been published over Renamo’s claims last week of government “provocations in violation of the cease fire”. The cease fire continues to hold, but Renamo is, in effect, demanding that government forces not enter within 3 kilometres of a Renamo base. In his statement announcing the New Year cease fire, Renamo head Afonso Dhlakama said “Renamo forces will remain in their bases.

They can patrol an area of three to four kilometres for security reasons.” (Mozambique News Reports and Clippings 351 & 353, 27 Dec & 8 Jan) Government has made no commitments of any sort, and there appears to be a growing dispute as to whether government forces can enter what Dhlakama now sees as a 3 km radius security zone around its bases.

@Verdade (10 Jan) published details of Renamo statement last week, saying that the riot police (Unidade de Intervencao Rapida, UIR), who are largely fighting this war (and not the army), are inciting violence in Sofala, Tete and Manica. Renamo claims that on Friday morning the UIR went to Mutondo, Canda, Sofala, just 2 km from a Renamo position, and also threatened a traditional leader.

On Thursday 5 January. Renamo claims that UIR members stationed at the Tazaronde School in Vunduzi, Sofala, went to the house of an influential member of Renamo, asked for his wife. When local people refused to say where she was, they took children and chickens from the same family and returned to their position in school. Later that day, another group of the UIR went to the Mussize area near a Renamo base, where the UIR burned two houses and beat two civilians.

Renamo also claims that on 3 and 4 January, the UIR set up a check point near the Macossa junction on the Chimoio-Tete road, where they illegally demanded money from drivers and pedestrians. Renamo claims other incident took place in Tete and Manica.

Teenage pregnancy increasing

Teenage pregnancy is increasing in Mozambique, according to the UN Population Fund (UNFPA)
Its Mozambique Supplement of the State of World Population Report, 2016, issued 17 December, says that the fertility rate for adolescents (number of children for every 1,000 women aged 15-19 years) has increased from 179 in 2003 to 194 in 2015. “Recent data from 2015 shows that 46% of 15-19 year old girls were mothers or were pregnant for the first time in Mozambique, 48% were married before the age of 18, 24% of maternal deaths occur among women in this age group and only 18% attend secondary school.”

“Mozambique has made a number of efforts to reduce gender inequality,” says the report, but it is highly critical of the lack of results. “Although policies such as the Gender Policy and its Implementation Strategy (2006), a National Plan of Action for the Advancement of Women (2010- 2014), National Plan for Prevention and Combating Violence Against Women and more recently the National Early Marriage Prevention Strategy (2015- 2019) are all aimed to reduce gender inequality, their provisions are only partially implemented and the impact on girls’ lives marginal. As a result millions of girls do not have adequate protection for either their rights or welfare.”

Mozambican-owned banks fail

The economic crisis last year brought down two Mozambican owned banks, Moza Banco and Nosso Banco, increasing the South African and Portuguese control of the banking system.

Moza Banco was taken over by the Bank of Mozambique (BdM) in September after its solvency ratio had fallen to below zero. BdM governor Rogerio Zandamela said on 14 December that that BdM had put more than $100 million into the bank to stabilise it and keep it operating, and that attempts would be made to sell it.

Nosso Banco, a small and largely state-owned bank, was shut down on 11 November and will be liquidated. The main shareholders are public bodies – the National Social Security Institute (INSS) with 78.6% and the electricity company EDM with 12.7%. Frelimo (via SPI) owns 4.2%, and several members of the Frelimo nomenklatura are also small shareholders, including former president Armando Guebuza, two brothers of ex-President Chissano, Teodato Hunguana, Mariano Matsinha, and Albano Silva (the husband of former prime minister Luisa Diogo).

Nosso Banco has a dubious record. Initially a key role was played by a Rwandese businessman Alfred Kalisa who has been involved in various scandals in Rwanda and DRCongo. Kalisa was said to be close to Guebuza and Rwanda President Paul Kagame, and at one point owned 40% of Nosso Banco and was chairman. And there were media reports that a major client of Nosso Banco was Momade Bachir Sulemane (MBS) who was declared a “drug baron” by the United States in 2010. Banks that deal with the United States are not allowed to deal with drug barons, and Nosso Banco was the only bank in Mozambique that did not have indirect US links. So MBS moved his money to Nosso Bank, and the only two cash machines in MBS’s Maputo Shopping Centre were from Nosso Banco.

It was created in 1999 as the Banco Mercantil e de Investimentos (Merchant & Investment Bank, BMI) as a way to make productive investments with social security funds, and changed its name to Nosso Banco (our bank) in 2015. It never became a significant player in the Mozambican financial market, and had just three branches, all of them in Maputo. The bank was in trouble in 2014 and a plan was agreed for shareholders to inject $30 mn. Accounts for 2015 showed that it ended the year with accumulated losses of $2.8 mn – a large sum for such a small bank. The new capital was never injected, and BdM stepped and closed it on 11 November.

The method of closure of the bank was criticised by local lawyers. The law requires that a liquidation committee be set up immediately, with a chair named by BdM and members representing shareholders and creditors. But the chair of a liquidation committee was named on 8 December. It is rumoured that no liquidation committee was set up when it was supposed to be, in order not to warn MBS, so he would not remove his money.

Mozambique does have a deposit insurance system, but it is limited to MT 20,000 ($280). Nosso Banco only had 5,100 individual depositors. 4,500 of these (91% of the total) had less than MT 20,000 in their accounts. Deposit insurance covers individuals but not corporate bodies. One of the largest depositors was INSS itself, with MT 2.7 bn ($38 mn) on deposit; EDM was also an important depositor.

Although the deposit guarantee fund was established by law in 2010, it regulations and the Mt 20,000 limit were only published on 21 September 2016, less than two months before Nosso Banco was closed.

Moza Banco was started by Prakash Ratilal, himself a former governor of the Bank of Mozambique, and in eight years it became the 4th largest bank, with more than 7% market share. It has a solid client base, with 93,000 individual depositors and 8,238 corporate depositors. The majority shareholder is Mocambique Capitais, which consists of about 400 Mozambican investors.

The foreign investor was initially Banco Espirito Santo (the Bank of the Holy Ghost), which collapsed in 2014, and had to be bailed out by the Portuguese central bank. Its healthy assets (including the 49 per cent holding in Moza Bank) were spun off into a new entity, Novo Banco, which was unwilling to inject new funds into Moza Banco. The central bank suspended the Moza Banco board and appointed a provisional board chaired by Joao Figueiredo, who had once run the country’s largest commercial bank, the Millennium-BIM (International Bank of Mozambique). The bank has 48 branches in the country, and BdM hopes to sell it as an operating bank.

LAM staff criticised management in a public letter, citing frequent flight delays, large number of pilots quitting, and payment of large sums for lodging of administrators. The letter says: “For the commercial and information systems administrator, LAM spent 2,940,000 meticais [$41,000] during the seven months they stayed in a hotel. The delegate in Sofala, since her appointment six months ago, lives in one of the best hotels in Beira and rents a luxury car and LAM has already spent about 2,520,000 meticais [$35,000]. The delegate in Cabo Delgado, named three months ago, also lives in one of the best hotels in Pemba, rents a luxury car and until now LAM has spent about 700,000 meticais [$10,000] ” (O Pais, 6 Jan, web only)

Gems. Mozambique has always been an important producer of semi-precious stones, and this has increased in recent years, attracting foreign traders paying in cash. To force the sales of stones through official channels, Cabo Delgado’s dynamic governor Celmira Silva announced that mining licences – to companies, associations and individuals – will only be renewed if the licence-holder can show receipts for sales. Traders also will be required to show where they sold stones.