CHIPANDE DEFENDS EMATUM LOAN

Former Defence Minister Alberto Chipande has come to the defence of the 850 million US dollar loan that the Mozambican Tuna Company (EMATUM) contracted on the Eurobond market in mid-2013.In an interview on Monday with Radio Mozambique, Chipande, who enjoys great prestige as the man who fired the first shots in Mozambique’s war for independence, claimed that the EMATUM debt is sustainable.He believed that the creation of EMATUM was part of “the strategies for the economic liberation of Mozambique”, and that the loan also contributed to the defence of Mozambican territorial waters.The stated purpose of the loans was to purchase 24 fishing vessels and six patrol boats from a shipyard in the French port of Cherbourg.Chipande stressed the need to defend Mozambique’s maritime borders. “This all has to be defended”, he declared. “We Mozambicans have to seek all possible means to survive as a sovereign country”.Previously tuna fishing in Mozambican waters was undertaken almost exclusively by foreign vessels, and the only benefit Mozambique derived was the payment of licence fees. It is hoped that the EMATUM loan will be the basis for a thriving Mozambican tuna fishing and processing industry.Chipande argued that people should ignore accusations that some of the EMATUM money was being stolen. “What was stolen?”, he asked. “The government decided to resort to indebtedness, and nowadays money is not given away. We had to give an undertaking and so we gave that undertaking”.The State needed tuna fishing boats and patrol vessels, and so “the debt is sustainable for the interests defined by the state”.But among the voices raised querying the sustainability of the debt are the consultancy company Ernst & Young, which audited the EMATUM accounts, the Minister of Economy and Finance, Adriano Maleiane, and former Prime Minister Luisa Diogo.The EMATUM accounts for 2013 and 2014, published in May, painted a bleak picture of the company’s finances. The accounts showed that in 2014 EMATUM made a loss of over 850.5 million meticais (about 24.9 million US dollars). The accumulated losses, from 2013 up to December 2014 were 1.17 billion meticais. EMATUM’s own funds were thus deeply in the red, at minus 1.16 billion meticais.This situation clearly worried Ernst & Young. In its audit report, it pointed out that the continuity of EMATUM’s operations “is strongly dependent on a capital structure duly supported by the shareholders and/or by financial institutions, as well as on profitable operations in the future”.Speaking in the country’s parliament, the Assembly of the Republic, on 18 June, Maleiane revealed that the loan carries the very high interest rate of LIBOR (London Inter-Bank Offered Rate) plus 6.5 per cent. It is repayable over seven years, with a two year grace period which is about to expire.Maleiane certainly did not believe the EMATUM debt was sustainable and wanted to re-negotiate it. The debt had been split in two – the fishing assets, valued at 350 million dollars, were now the responsibility of EMATUM itself, while the state would repay the other 500 million dollars.“Seven years is a short period to repay 500 million dollars, even with a two year grace period”, said Maleiane, “particularly at a high interest rate. We are trying to negotiate a longer repayment period and a lower interest rate, and our partners, including the IMF, agree with us”.

Luisa Diogo, interviewed by the independent weekly “Savana”, expressed serious concern at the country’s level of indebtedness and particularly the EMATUM debt.“Something went wrong in the EMATUM study, in structuring the debt at such a high level, because it’s not a small debt. There was a failure in structuring the debt”, said Diogo.“When we accept a debt, we must always bear in mind what are the sources for paying it”, she said. “We must always pose the worst scenario, which is when the company is unable to pay. For a company to pay a particular sum, it must be structured in a particular way, and know how much it has to produce, if the debt is to be paid”.Diogo said that if, for example, a company has to pay 200 million dollars a year in debt servicing “then it must produce at least 700 to 800 million dollars a year”. Yet the most optimistic forecast (from the government) is that when the EMATUM fleet is fully operational, its fishing activities will bring in revenue of only 196 million dollars a year.Furthermore, there has still been no detailed explanation of what the loan is being spent on. The initial estimate of how much the 30 boats built n Cherbourg would cost, according to the French press, was 200 million euros (about 220 million dollars). So what is the purpose of the remaining 630 million dollars of the loan?Speaking in parliament in late 2013, the then Fisheries Minister, Victor Borges, said the money was for such items as radars, satellite communications, on-shore installations, transfer of technology, licence fees, training, and running costs and the payment of interest on the loan for the first year.But he gave no detailed breakdown of these costs, failing to tell parliament how much money was to spent on each of these items. Until such an itemized breakdown is made available, suspicions that there is something illegitimate about the EMATUM loan will continue to haunt the government.