The World Bank and the International Monetary Fund (IMF) agreed on 25 September that Mozambique has qualified for the completion point of the "enhanced" version of the HIPC (Heavily Indebted Poor Countries) debt relief initiative. However, despite this latest debt relief, Mozambique will still be paying back over a million dollars a week in debt service, which is more than the health budget ($56 million against $35 million).
Addressing a press conference on 26 September, Finance Minister Luisa Diogo said that "enhanced HIPC", on top of the initial version of HIPC, for which Mozambique qualified in 1999, wiped $4.3 billion off Mozambique's debt stock.
The debt stock had stood at about $6 billion at the start of 1999, and has now fallen to $1.6 billion in nominal terms, or to $750 million in net present value terms. The debt cancellation under enhanced HIPC alone is $600 million (or $306 million in net present value terms).
Diogo said that the debt service ratio (debt servicing as a percentage of exports of goods and services) had now fallen from 26 per cent to just four per cent. Debt servicing as a percentage of the state's fiscal revenues had fallen from 30 per cent to 10 per cent.
The World Bank's calculation is that the debt-stock-to exports ratio will remain well below the target ceiling of 150 per cent over the next two decades (averaging 77 per cent up to 2010, and falling to an average of 44 per cent in the 2011-2020 period).
Diogo said that, without HIPC, debt servicing in 2000 would have been an intolerable $171.9 million. With HIPC (including the enhanced version, even though it had not reached the completion point), this figure fell to $56 million.
In fact, Mozambique only paid $26 million to creditors in 2000, because many of them implemented moratoria on debt payments after the catastrophic flooding of February that year. Thus $30 million of debt servicing was suspended, and the government does not yet know whether this suspension will be transformed into a definitive cancellation. Diogo was optimistic that creditors will not insist on this $30 million.
But this year there are no new moratoria, and Diogo said that debt servicing is expected to reach around $56 million, which really will have to be paid. She pointed out that this figure is more than the entire health budget of $35 million.
The government would therefore continue to negotiate further debt relief with each of its creditors on a bilateral basis. Such negotiations with creditors were a "permanent" feature of government strategy, said Diogo.
The key condition Mozambique had to fulfil to reach the enhanced HIPC completion point was to draft a Poverty Reduction Strategy Paper acceptable to the Bretton Woods institutions. This condition was met when, in April, the government approved the Action Plan for the Reduction of Absolute Poverty (PARPA). PARPA is a document that stresses not only improvements in the key social services (education, health and water supply), but also investment in basic economic infrastructure (roads, bridges and the energy and telecommunications systems).
Diogo stressed that poverty could not be overcome without "macro-economic stability". She added that the success of PARPA would be measured by strict indicators that will be closely monitored.
A press release from the World Bank was generally enthusiastic about government policy, particularly the restrictive monetary measures which have checked inflation this year, and stabilised the exchange rate of the metical.
The World Bank also believed the government had enhanced "efficiency, transparency and accountability" in public sector management - but criticised slow progress in legal reform. Diogo insisted the government was responding to the requests from the courts and the attorney-general's office for additional resources, and would also see what resources the Ministry of the Interior required to improve policing.
Whilst progress is being made at reducing foreign debt, Diogo warned that the Mozambican government is seriously worried about its increasing levels of domestic indebtedness.
Domestic debt has risen sharply, with the government issuing treasury bonds, bearing high interest rates (over 22 per cent), to bale out the two privatised commercial banks, the BCM and Austral.
Domestic debt servicing rose from 15 billion meticais in 2000 to 196 billion (about $9 million at current exchange rates) in the 2001 budget - a rise of 1,200 per cent. The sole cause for this rise was the need to find money to recapitalise the two banks, both of which had made huge losses caused essentially by mountains of non-performing loans.
The treasury bonds issued in late 2000 and early 2001 amounted to the equivalent of about $80 million. But now the government needs to find yet more money to clean up the Austral Bank before it can be sold (almost certainly to the Amalgamated Banks of South Africa, ABSA).
A report in "Metical" on 24 September put the amount needed for the Austral financial clean up at $80 million.
The newly formed anti-corruption NGO, "Ethics Mozambique", has proposed a "witness protection scheme" to guarantee the safety of victims and witnesses to corruption or violent crime who decide to denounce those responsible.
At a Maputo seminar on 28 September, Jovito Nunes, who led the team that drew up a detailed report on corruption for "Ethics Mozambique", remarked that a climate of fear "is systematically created by the authors of corruption".
The witness protection programme proposed could hire private security services, help threatened individuals change their addresses, and even send them abroad on scholarships for a few years, Nunes suggested.
He also proposed blacklisting companies involved in corruption. This would involve informing all development agencies and other donors, as well as Mozambican professional associations, of the names of companies known to have committed corrupt acts, in the hope that they would no longer be offered contracts.
There should also be a campaign to inform citizens of their rights and of the law. Nunes argued that one factor favouring the spread of corruption was a generalised ignorance of the law among the public.
A further powerful factor in corruption was "networks of influence", said Nunes, which could involve, for example, former ministers. Such people sometimes had more influence than the current ministers, and distort tenders.
Some of the national directors who spoke to Nunes and his team dismissed public tenders as "farcical" because the winner was pre-determined by high level lobbies.
Lawyer Celia Menezes warned of the "powerful mafias" inside the police force. "That's why people are afraid and don't denounce corruption", she said.
Menezes thought Mozambique should emulate the South African example and set up an elite anti-corruption unit that would work within the police, but would not be answerable to police commanders.
The spokesman for the Interior Ministry, Nataniel Macamo, accepted criticism of the way in which the police are recruited. The problem is that one clause in the existing law says that all policemen must have done their military service.
Salomao Moyana, editor of the independent weekly "Savana", said the government "lacks the political will to combat corruption", and noted that Mozambique is the only country in southern Africa which lacks a National Anti-Corruption Strategy.
Transport Ministry official Dionisio Quelhas (who is also an opposition member of parliament) said that, on a recent visit to Botswana, he had found prominent notices in the airport warning visitors not to try bribing immigration staff. It would be a simple matter to put such notices in Maputo airport too, he said.
Summarising the meeting, prominent academic Lourenco do Rosario, one of the founders of "Ethics Mozambique", said that permanent pressure on those who hold political power was needed, so that they would feel impelled to act against corruption.
The struggle had to be carried to those state institutions that currently lack credibility (such as the police and the courts) so that they would feel the need to modify their public image.
Safe channels of communication should be set up, Rosario added, whereby people could denounce corruption, and feel that they were not endangering their lives or their jobs when they did so.
A new company, committed to developing tourism in the northern region of Mozambique, along the Nacala Development Corridor, which links the port of Nacala to the Malawian border, was launched in Nacala on 18 September.
The "Sociedade do Desenvolvimento do Turismo do Indico" (INTUR) has two shareholders, namely the Tourism Development Company (PROMOTUR), of the ENACOMO group, specialised in the building and management of hotels and in running safaris, and the publicly owned port and railway company, CFM.
Of the initial share capital of 22 billion meticais (about $1 million), PROMOTUR is contributing 14 billion, giving it a 65 per cent shareholding. CFM holds the remaining 35 per cent, but this structure may be altered when the planned projects are carried out.
INTUR is launching its activities with two international class hotels, namely the Omuhipiti hotel, on Mozambique Island (the country's first capital, under colonial rule), and the Maiaia hotel, in Nacala.
The company is also planning to invest a further $5 million during the next five years in swimming pools, conference centres, nautical sporting centres, and also for the expansion of the Omuhipiti hotel.
The construction of a 500 kilometre gas pipeline from Pande, in the southern province of Inhambane to Secunda in South Africa is to start early in 2002.
Arsenio Mabote, national director for coal and hydrocarbons in the Ministry of Mineral Resources and Energy, told AIM the seismic prospection along the pipeline route is being undertaken by a Chinese company, BGP.
It is hoped that the gas from the Inhambane fields will reach South Africa in 2003 or 2004.
Still under discussion are the detailed agreements for the sale and transport of the gas between the South African company, SASOL, which holds the rights to the Inhambane fields, and its partners, namely the publicly owned Mozambican Hydrocarbon Company, ENH, and IGas, a subsidiary of the South African Central Energy Fund.
Apart from use of the gas in SASOL's own plants in Secunda, some will be sold for use in Maputo, notably by the Maputo Iron and Steel Project (MISP), a projected factory, owned by the US company Enron, that will produce two million tonnes of steel slabs a year.
The South African government has proposed a partnership with SASOL, and Mozambique in order to establish a joint-company that will operate as the owner of the pipeline.
Corruption in Mozambique's fourth largest bank, the Austral Bank, may have involved the Malaysian Southern Bank Berhard (SBB), as well as its Mozambican partners in the Invester group, according to a report in "Metical" on 27 September.
"Metical" writer Joseph Hanlon, continuing his series of articles on bank scandals, notes that when Austral was run by SBB/Invester the main records were kept, not in Mozambique, but on SBB's computer in Malaysia.
The SBB/Invester consortium pulled out of the bank abruptly in April, after refusing to recapitalise it, and handed back all their shares in Austral to the Mozambican state.
But the records were still in Kuala Lumpur, and in the early months of 2001 the Bank of Mozambique had no access to them. (It is not entirely clear whether the central bank has secured access now, since it was refusing to cooperate with Hanlon in his investigations.) The results of keeping the records in Kuala Lumpur is that it became impossible to carry out a full reconciliation, to ascertain the real state of Austral. This naturally led to fears that Malaysian interests may have helped themselves to Austral money.
One former banking official, who is not named, gave the following scathing indictment of the Austral management to Hanlon: "The Austral Bank was run politically. There were bad loans, letters of credit without cover, transfers of money to ministers, and many favours to people. Decisions were taken by officials outside their mandates and which violated rules and procedures, and perhaps the law." Worse still, in both Austral and the second privatised bank, the BCM, the boards of directors could not plausibly plead ignorance.
The Malaysians were determined to blame the collapse of Austral on their Mozambican partners. Malaysian staff of the bank circulated an anonymous document entitled "Reasons for Southern Bank Pull Out From Mozambique", in which they claimed "Mozambicans have poor repayment culture. In particular the elite. If you deny them the loans, you are damned. If you give them the loans, you are also damned, because they don't repay".
It attached a list of non-performing loans given to politically well connected people - including companies allegedly linked to the three owners of Invester, former industry minister Octavio Muthemba, Jamu Hassan, and Alvaro Massinga.
After the decision to reprivatise, rather than liquidate, Austral was taken, the Central Bank advertised for buyers. There were two bids - from the Amalgamated Banks of South Africa (ABSA), and from the Mozambican Commercial and Investment Bank (BCI), in which the main shareholder is the Portuguese state bank, the Caixa Geral de Depositos (CGD).
Hanlon writes that the Mozambican government was divided as to which bid should be preferred, but eventually plumped for ABSA, largely to prevent any further dominance of the banking sector by Portuguese interests.
But neither ABSA nor the BCI wanted to be saddled with Austral's bad loans. What they offered was to take over the physical assets, the staff and the deposits, but not the credit portfolio - or at least, not the non-performing loans.
Hanlon writes that "Those who robbed the bank, through fraud and bad loans, clearly hoped for closure of the bank, or the same deal as was done over BCM. Draw a curtain over the past, fill the hole, and begin anew". But the provisional Austral board, under the chairmanship of the dynamic young economist Antonio Siba-Siba Macuacua, who had previously been head of the Bank of Mozambique's banking supervision department, had other ideas. Siba-Siba was pursuing the bad debtors - including, according to Hanlon, some names that were not on the list of over 1,270 debtors published in the daily paper "Noticias" in June.
Siba-Siba's persistence clearly alarmed some of those who had looted Austral, and on 11 August he was dragged out of his office and thrown down a 15 storey stairwell.
This did not prevent ABSA officials from coming to Maputo two days later to start the "due diligence" audit of the Austral accounts.
Hanlon notes that "Siba-Siba and ABSA found evidence of corruption a high levels in the bank, and there were rumours of possible criminal prosecutions'.
The Mozambican government on 19 September pledged to destroy all its stocks of anti-personnel land mines by 2003, as part of the implementation of the Ottawa Convention outlawing these weapons.
The pledge was given by Deputy Defence Minister Henrique Banze, who was speaking at a ceremony in the district of Moamba, about 60 kilometres northwest of Maputo, where 500 land mines were destroyed.
The military's estimate is that between 12,000 and 14,000 a year will be destroyed. Assuming a two year programme, that gives a total number of around 25,000 land mines still in stock.
Demining operations have been under way for almost a decade, and have proved painfully slow. So far they have removed and destroyed about 76,000 mines. 5,000 of these were removed last year from around electricity pylons in the south of the country (these were the minefields placed in desperate attempts to stop the apartheid-backed rebels from blowing up pylons during the war of destabilisation).
The Mozambican customs service on 21 September announced that anti-smuggling operations on the roads between Maputo and South Africa and Swaziland in mid August had succeeded in recovering about two billion meticais (about $91,000) for the state in duties and taxes.
Between 13 and 19 August mobile customs teams launched a series of raids against smugglers bringing contraband in from Swaziland and South Africa.
Among the goods they had seized were 579 crates of whisky (each containing a dozen 750 millilitre bottles), 580 crates of wine (each containing 10 one litre boxes), 1,067 crates of fruit juice, and 887 crates of cooking oil.
In Tete province, customs mounted a joint operation with the police which resulted in the seizure of 334 sacks of smuggled sugar, 222 crates of beer, nine crates of spirits, and 31 containers of paint.
Duties, taxes and fines on these smuggled goods is expected to amount to over 500 million meticais.
Mozambique expects to maintain this year an export quota to the United States of between 13,000 and 14,000 tonnes of sugar.
The director of the National Sugar Institute (INA), Arnaldo Ribeiro, told AIM on 26 September that last year Mozambique exported 13,297 tonnes of sugar to the US. This earned the country $4.3 million. The income from this year's quota is expected to be similar. About a week ago the US announced its overall quota for sugar imports, but did not break this figure down by country. But Ribeiro thought there was no reason to expect any cut in Mozambique's share of the quota.
Mozambique also hopes that as from this year it will be able to export sugar to Europe, under a European Union initiative aimed at opening European markets to the least developed countries.
Mozambique, Malawi, Zambia and Tanzania should all benefit from this initiative - but not necessarily for sugar, at least not immediately. For the protection given to European beet sugar producers means that the liberalisation of EU sugar imports will only take place gradually.
According to Ribeiro, negotiations between the European Union and those sugar producers covered by the new initiative to fix a quota for each country are "at a very advanced stage".
The 2001 sugar harvest began at the Mafambisse plantation, in Sofala province, in July, and at the three other functioning sugar companies (Marromeu also in Sofala, and Xinavane and Maragra in Maputo province) in August.
Ribeiro believed that the target for this year of 105,000 tonnes of sugar from
the four mills would be reached. In theory that means that Mozambique will be
virtually self-sufficient in sugar.
The Mozambican and British governments signed an agreement on 19 September under which Britain is to grant Mozambique £24 million (about $35 million) for health activities.
The purpose of the grant is to reduce maternal mortality and the impact of the AIDS epidemic, within the context of the government's anti-poverty strategy, and the implementation of the National Strategic Plan against AIDS.
The money will be spent on activities undertaken by the Health and Education Ministries, the National Council Against AIDS, and NGOs, aimed at improving obstetric services, making young people aware of the dangers of AIDS, monitoring the AIDS epidemic and supporting vulnerable groups. Some of the aid will also go towards "institutional development".
The South Africa-based Anglo-American Corporation has sold off its shares in the Mocita cashew processing factory in the southern Mozambican town of Xai-Xai, according to a report in "Noticias" on 20 September.
Anglo-American sold the shares to the Mocita managers, as part of its strategy to concentrate on its core mining activities, and dispose of other assets.
Like the vast majority of Mozambican cashew plants, Mocita is currently at a standstill. It closed its doors in April, because of lack of raw material, making about 1,500 workers redundant. This was a severe blow for Xai-Xai, since Mocita was far and away the largest factory in the town.
Mocita is one of the most modern of Mozambican cashew plants: after a long period of closure, it reopened in 1996 after investing about $13 million in rehabilitation and new equipment.
The Mozambican agriculture and public works ministries are attempting to raise funds for the rehabilitation of the Chipembe dam, in the northern province of Cabo Delgado, reports "Noticias" on 28 September.
The dam was built between 1977 and 1983, but fell into abandonment because of the war of destabilisation, and is now suffering serious erosion.
The national director of agricultural hydraulics, Nelson Melo, told reporters that the costs of rehabilitation, on the cheapest scheme available, are estimated at 1.5 billion meticais (about $68,000).
He explained that for this plan the idea is to involve local business people, operating in that region, to help build protection structures to check the erosion. Melo said that it is urgent to start the work before the onset of the rainy season.
The initial project for Chipembe, in the late 1970s, was to use the dam to irrigate an area of 2,000 hectares.
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