Maputo could be a mega-ship port

The Port of Maputo in Mozambique has excellent development potential. It is located along the east coast of Southern Africa, to the north of the Ports of Durban and Richards Bay. It is one of several ports that connect via road and railway line to South Africa’s mega-metropolis of Johannesburg that is still Africa’s leading financial hub.Roads and railway lines from ports of Maputo, Durban, Richards Bay, East London and Port Elizabeth cross over and pass through tunnels of the extensive and high elevations of Dragon Mountain (Drakensberg). Maputo offers the shortest railway distance to Johannesburg and so could be further developed at lowest cost.

Challenge at Durban

While South Africa has plans to expand Africa’s busiest container port, the Port of Durban, there has been much public opposition from groups of Durban residents to future port expansion. Durban has also experienced the ongoing problem of silt/sand build up at the port entrance that has a nominal depth of 12.8 meters (42 feet). This may be its natural depth caused the combination of the south flowing ocean current and wave action that stirs up sand to the north of the northward pointing entrance to the port. 

The entrance to the 20 meter (66 foot) deep Richards Bay is perpendicular to the ocean current.The overland connection between Durban and Johannesburg operates near capacity and upgrading the railway line with its multiplicity of tunnels is both a costly and formidable undertaking. While some containers from overseas may arrive near Port Elizabeth, the overland distance to Johannesburg is extensive.It may cost less to upgrade and develop the railway line between Maputo and Johannesburg to double track than to redevelop the Durban – Johannesburg line. There may even be scope to explore the possible future operation of super-wide railway container technology that straddles over double track railway lines, to increase the number of containers trains carry.

Unexpected Mega Ships

When expansion of the Panama Canal was first evaluated, the largest container ships entering service carried some 12,000 TEU and were to be later dubbed neo-Panamax ships. At the time, South Africa evaluated the logistics of developing a transshipment port for neo-Panamax ships near Port Elizabeth, where ships sailing to and from East Africa, West Africa, South America and Asia would converge. Then the unexpected happened when Maersk began to explore the possibility of a container ship built to a much larger scale than the neo-Panamax ships and capable of sailing through the Suez Canal between Europe and Asia.The superior economics of the larger container ship made the concept attractive on the trans-Pacific services between Asia and the west coast of North America. Several major ports internationally were dredged and modified to berth the mega-ships and articles appeared suggesting that such ships could operate the South America –Asia service, sailing via Southern Africa. Plans were subsequently announced to dredge Port of Santos and the develop Port of Pecem located on the northern outskirts of Fortaleza, Brazil that could serve as a transshipment port for smaller ships that could connect to South American and Africa ports.

Revising the Logistics

The development of South American ports for mega-size container ships creates and uncertain future for South Africa’s transshipment port for neo-Panamax size of container ships. Mega-size ships that sail via Southern Africa between South America and Asia can be built to a larger size than Suezmax container ships, perhaps up to 26,000 or 27,000 TEU and even extend the range of operation between South America and Western Europe.One option is that future mega-ships that sail the Western Europe – Brazil – Asia service sail by South African ports while another option would be to investigate future prospects at Port of Maputo.South Africa’s second largest city is Cape Town which is the closest South African port to the sea route that mega-size container ships would sail between Asia and South America. Sections of Table Bay just outside the port area are 15.6 meters (51 feet) deep. The combination of dredging Table Bay and either extending the present breakwater or building a new breakwater could provide a deep water zone for mega-ships. Deep dredging a section of the port plus some port reconstruction could provide a quay to berth mega-size container ships that would undergo partial unloading and partial loading at Cape Town.

Options for Maputo

Sections of Port of Maputo were dredged from 9.8 meters (32 feet) to over 14 meters (46 feet). However, unlike Port of Durban that has no river flowing into the port area, several rivers flow into Maputo Bay and could carry sand/silt into the port. There may be future need to install deflector barriers along some sections of some rivers to redirect the silt toward the river banks, from where local industries may excavate the silt for use in construction or sent to farms. 

A rock breakwater northeast of the port area may be able to deflect the sand laden ocean current toward ocean.At present, the DP Ports container terminal is 300 meters (984 feet) in length. The combination of lengthening the quay to over 400 meters (1,312 feet) and dredging the channel between the container terminal and deeper water at Maputo Bay would enhance prospects for mega-size container ships to call at Port of Maputo while sailing between South America and Asia. These ships would undergo a partial unloading and reloading of containers to/from the Greater Johannesburg area.Further development of the Port of Maputo could make it suitable for transshipment of containers involving smaller ships that would connect to Kenyan and Tanzanian ports.

Conclusions

There has been public opposition at Durban to expanding Africa’s busiest container terminal. The overland connection between Durban and Johannesburg is operating at capacity, with a massive projected future increase in container traffic along this link.Within the next few years, mega-size container ships will sail between Asia and South America, with a possible port of call in Southern Africa. Port of Maputo has prospects for future expansion and future development of the container terminal to berth larger ships after the quay is extended and navigation channel dredged to greater depth.Port of Maputo could require future breakwaters to limit future silt build up.The comparatively short railway line between Maputo and the Pretoria – Johannesburg area would cost less to upgrade than the railway lines extending inland from Durban, East London and Port Elizabeth.While Cape Town has potential for future development to berth mega-size container ships, perhaps such development would occur after development of Port of Maputo.

Why China needs Mozambique

Some Portuguese-speaking African countries are expected to be stars of GDP growth on the continent in 2017, while others will continue to be flat, according to the most recent economic forecasts from international institutions, Macau Hub reported.The World Bank assesses the Mozambican economy as the most dynamic in the Portuguese-speaking world, growing 5.2 percent in 2017 and 6.6 percent in 2018 – although these forecasts are down 2.5 percent and 1.7 percent from earlier ones.

The U.N. outlook for Mozambique is even stronger. Mozambique and Sao Tome and Principe are expected to record 5.5 percent GDP growth increases, according to the U.N’s “World Economic Situation and Prospects 2017,” Macau Hub reported.

Lusophone Africa includes Angola, Cape Verde, Guinea-Bissau, Mozambique, São Tomé and Príncipe, and Equatorial Guinea.

Guinea-Bissau is expected to record 4 percent growth and Cape Verde’s economy is expected to grow 3.5 percent. Angola is expected to see GDP growth of 1.2 percent in 2017 and 0.9 percent in 2018 and 2019.

The Chinese Ministry of Foreign Affairs has repeatedly highlighted the unique compatibility of Portuguese-speaking countries with China’s ambitious “Belt and Road” initiative, Asia Times reported in October.At the 2016 Macau Forum, China reinforced its commitment to lusophone countries — especially Africa — promising a US$290 million loan package with special conditions to Angola, Mozambique, Guinea Bissau, and Cape Verde and East Timor, Africa Review reported.Macau is a semi-autonomous region on China’s south coast, across the Pearl River Delta from Hong Kong. It was a Portuguese territory until 1999.

Sub-Saharan Africa is expected to see overall economic growth in 2017 of 2.9 percent, according to the World Bank. Angola’s economic growth fell from 5.4 percent in 2014 to 3 percent in 2015 and 0.4 percent in 2016, according to World Bank. U.N. GDP forecasts are more favorable for the Angolan economy — 1.8 percent growth in 2017 and 2.8 percent in 2018, Macauhub reported.

Angola is the one-time poster child of China’s Africa expansion, said Jon Connars, an independent U.S. risk analyst and researcher, in an Oct. 28 Asia Times column. The Angola-China relationship was once so close that it gave rise to the so-called “Angola model” of economic development. Luanda’s skyline is dotted with Chinese-built skyscrapers, and it often tops the list of world’s most expensive cities. But the glamour ends at the waterfront Connars said.After Angola’s civil war ended, China came through with a lifesaving US$2 billion, oil-backed credit line to help Angola rebuild. Under Beijing’s patronage, Angola became Africa’s No. 2 oil producer and China’s No. 1 supplier of crude. After oil prices crashed, Angola could no longer service its US$25 billion debt to China. Since the loans were supposed to be paid in oil, most of the country’s crude production now goes toward debt repayment, leaving little to finance economic development. Spending has decreased by 40 percent and cuts to water sanitation and waste collection helped put Angola sixth from the bottom of the World Bank’s index of inequality, Asia Times reported. Unlike Angola, Mozambique’s foreign debt and accompanying economic problems cannot be traced back to Chinese loans. Instead they are the result of Chinese illegal fishing in its waters, Connars said.

By a recent count, 129 out of the 130 vessels operating in Mozambique’s territorial waters were registered in the Middle Kingdom and the country is losing US$35 million every year to the practice. This is alarming for the financial security of a country that IMF ranks 179th out of 185 in terms of GDP per capita. The World Food Program estimates that 34 percent of households are “food insecure and face perpetual hunger.”To stop the bleeding, Mozambique bought several patrol boats through the state backed EMATUM agency, which got the government in hot water with international creditors who deem the acquisition too expensive for its finances.There is a haunting disconnect between the priorities of Mozambique (where a third of its citizenry suffer from poverty) and China (which scours a 1,500 mile, poorly monitored coastline to essentially poach food resources desperately needed by the local population).African leaders are becoming more dubious of China’s intentions, whether because they are drowning in debt and unable to maintain venal political structures (like Angola) or because their countries are actively undermined by Chinese economic interests (like Mozambique).

Interference?

The Turkish delegation visiting Mozambique could ask the Maputo authorities to take action against schools set up by the Muslim cleric Fetullah Gulen, the Anadolu news agency says.Gulen network schools include the Willow International School, with facilities in Maputo and Matola, where students are mostly children of the local upper middle class.

President Recep Tayyip Erdogan, who heads the delegation visiting Mozambique, accuses Fetullah Gulen of having mentored the failed coup in July 2015, and his government has placed Gulen and his organizations on the terrorist list.

A request for Gulen’s extradition was rejected by the US authorities. Maputo authorities have already been warned about the supposed risks posed by the Gulen network, and Turkish sources believe that “they will make the necessary assessment”, promising to “continue our fight on this issue”.

The Gulen network has hundreds of schools worldwide. Eighty have already been closed or have seen control transferred since the attempted coup attempt. Turkey last year launched the Maarif Foundation to create schools and education centers abroad.Turkish ambassador Zeynep Kiziltan says that in addition to areas such as energy, agriculture and tourism, her country intends to cooperate with Mozambique in Education, Culture and Health.

REFUSE TO RENEGOTIATE DEBT

Some of Mozambique’s creditors, far from accepting the government’s offer to renegotiate unpayable debts, are claiming that the government played foul when it defaulted on an interest payment of almost 60 million US dollars last week.The complaints come from creditors who purchased bonds initially issued by the Mozambique Tuna Company (Ematum) in 2013. The bonds were for 850 million US dollars, and were issued via European banks, notably Credit Suisse and VTB of Russia. The bonds were snapped up by investors who asked no questions about the ability of Ematum, a new and untested company, to repay. The bonds came with a Mozambican government guarantee, and nobody asked whether this guarantee was valid. 

In fact, if Credit Suisse and VTB had done any due diligence they would have discovered at once that the government guarantee was illegal. A parliamentary commission of inquiry, which reported last November, pointed out that the guarantee violated the budget laws (of 2013 and 2014), and the Mozambican Constitution (which says that it is the exclusive power of the country’s parliament, the Assembly of the Republic, to authorize the government “to contract or grant loans, to make other credit operations, and to establish the ceiling for state guarantees”.)The original repayment terms on the bonds were extremely tough – the money was to be repaid over seven years, with a two year grace period, and at an interest rate of LIBOR (London Inter-Bank Offered Rate) plus 6.5 per cent. 

It was soon clear that Ematum was quite incapable of repaying anything, and so the burden fell on the government. The Ematum bonds were converted into sovereign government bonds with a longer repayment time, but at a higher interest rate, under a deal reached with bondholders in April 2016. What remained of the Ematum bonds were swapped for government bonds maturing in 2023. The interest rate, however, shot up to 10.5 per cent.But Ematum was just one of three quasi-state companies which, on the basis of illicit government guarantees, had borrowed huge sums of money, mostly from Credit Suisse and VTB. The previous Mozambican government, headed by President Armando Guebuza, had kept the other loans, to the security-related companies Proindicus and MAM, secret, and they amounted to over 1.1 billion dollars. None of the companies was making any profits, and the state had no money to make the payments on schedule.The government alerted the creditors to the country’s financial situation in October, and urged them to renegotiate.

But apparently the bondholders did not believe the government. Cited by the Bloomberg news service, Charles Blitzer, a Washington-based consultant who is advising the majority of the bondholders, insisted, against all the evidence, that the government can pay.
“The non-payment of Wednesday was a strategic default and was not driven by the inability to make the payment,” said Blitzer. “This strategy we think is not conducive to moving forward, not just with us but more broadly. It’s not conducive to restoring confidence from future lenders and investors.”The International Monetary Fund (IMF) disagrees with Blitzer. The IMF resident representative in Maputo, Ari Aisen, pointed out last Thursday that there was nothing surprising about the default on the interest payment. “The government’s position seems to be consistent from the start, when the Minister Economy and Finance Minister Adriano Maleiane) went to London and indicated the fiscal difficulties the country is facing”, he said. “So it seems natural that Mozambique has not been able to make this payment”.

At the London meeting with creditors on 25 October, Maleiane had indicated in great detail the financial crisis facing the country, and why it will be impossible to pay anything to the Ematum, Proindicus and MAM creditors at any time in 2017.But instead of working on a renegotiation, the bondholders have dug their heels in and insisted on payment. Blitzer did tell Bloomberg that the bondholders would be willing to hold “preliminary talks”, if the government approaches them. But the government has appointed advisers to deal with the creditors. They are the London law firm White and Case and the financial advisory and asset management firm, Lazard Freres.In a statement issued a week ago, the Ministry of Economy and Finance urged the bondholders to liaise with Lazard Freres and White and Case to establish “a constructive and collaborative dialogue”. According to the Bloomberg report, the bondholders will not talk about debt restructuring until the independent audit of Ematum, Proindicus and MAM is published, and until Mozambique reaches a new programme with the IMF.But the IMF has already made it clear that no new programme is possible until Mozambique brings its debt down to sustainable levels, and that will only be possible through debt restructuring.Hence the longer the creditors refuse to talk about restructuring, the longer they will have to wait to receive any payment at all.Meanwhile pressure is building up from Mozambican civil society, backed up by supporters abroad, to declare the three loans as null and void, because of the illegality of the government guarantees.

RECAPITALISE MOZA BANCO

The shareholders of Moza Banco, Mozambique’s fourth largest commercial bank, but which has been run by a provisional board of directors appointed by the central bank since last September, decided on Monday to recapitalize the bank.According to a press statement from the bank, recapitalization was the sole point on the agenda of the general meeting of shareholders. The shareholders approved an increase in capital of 8.17 billion meticais (about 117 million US dollars, at current exchange rates).
The Bank of Mozambique intervened on 30 September because Moza Banco’s financial situation was becoming unsustainable. According to the director of banking supervision of the central bank, Joana Matsombe, Moza Banco’s solvency ratio had gone negative. Although banks must not allow their solvency ratio to fall below eight per cent, in Moza Banco’s case the ratio was less than zero. “For this reason, the financial situation of the bank had deteriorated, and it was incapable of meeting its obligations”, Matsombe said. “When this happens, in any financial institution, the central bank has to intervene”.Moza Banco continued to trade normally, but the central bank had to guarantee this by injecting about eight billion meticais. Not only did Moza Banco continue to meet its obligations to clients and creditors, but over the past three months it has opened several new branches. Moza Banco is the only commercial bank where Mozambicans hold a majority of shares. The Mozambican shareholder, with 51 pr cent, is Mocambique Capitais, which consists of about 400 Mozambican investors.The foreign investor was initially the Espirito Santo Bank (BES) of Portugal. But after BES came near collapse in 2014, and had to be bailed out by the Portuguese central bank, its healthy assets (including the 49 per cent holding in Moza Banco) were spun off into a new entity, Novo Banco. But it seems that in 2016 Novo Banco was unable or unwilling to inject new funds into Moza Banco.That now appears to have changed, and the general meeting of shareholders on Monday insisted that they are willing to recapitalize the bank. This follows an independent diagnosis and review of the bank’s financial statements that was delivered to the shareholders on 23 December. The Bank of Mozambique had warned that, if the shareholders were unable or unwilling to recapitalize Moza Banco, then it would have to be sold off. Its network of around 120 branches and its modern facilities would certainly have made it an attractive purchase for other banks operating in Mozambique.The capital increase announced by the shareholders is almost the same as the amount which the Bank of Mozambique injected to keep Moza Banco running, and that eight billion meticais will have to be returned to the central bank.

MUSTANG RESOURCES SENDS MOZAMBICAN

The Australian mining company Mustang Resources on Friday announced that it has sent rubies from its concession in Montepuez in the northern Mozambican province of Cabo Delgado to the United States for cutting.The company sent its first commercial batch of 6,221 carats of rubies and corundum to the US to gain expert opinion on marketing strategy – particularly on whether it should sell its rubies in rough or cut form.According to the company’s managing director, Christiaan Jordaan, “this shipment will play a vital role in helping us to place market values on our rubies as well as growing awareness and understanding of our world-class stones amongst customers. As a result, we will be better placed to estimate the revenue we can generate from our rapidly growing production profile.” Among the rubies sent are what Mustang calls five “special stones” which include “two rare 24 carat rubies”. These stones will be cut by the designer Meg Berry.Mustang also announced that it has moved its processing plant closer to its key ruby deposit, resulting in a tripling of its processing rate.The Montepuez Ruby Project consists of three licenses covering 15,800 hectares directly adjacent to the world’s largest ruby deposit which is mined by the London-based company Gemfields. So far, Gemfields has held seven auctions of Montepuez rubies which have netted a total of 225.7 million US dollars.Mustang also has a majority interest in two diamond exploration licences along the Save River, in central Mozambique, downstream from the Murowa and Marange diamond fields in Zimbabwe. In addition, Mustang holds the rights to a graphite resource near the world class graphite deposits discovered by Syrah Resources and Triton Minerals.Following the announcement, the share price of Mustang rose sharply on the Australian stock exchange from 2.7 to 5 Australian cents.

MINISTER CRITICISES CORRUPT IMMIGRATION STAFF

Mozambican Interior Minister Jaime Monteiro has accused some staff of the immigration services in the northern province of Cabo Delgado of facilitating the entry of illegal immigrants, reports Monday’s issue of the Maputo daily “Noticias”. Speaking at a meeting with immigration managers in the province, Monteiro said he has in his possession letters from citizens and other forms of denunciation, alerting him to the involvement of immigration officials in illegal schemes.He condemned the recent involvement of an immigration official and a member of the Frontier Guard in allowing 19 immigrants to enter the country illegally in exchange for money, and promised to take harsh measures against such behavior.“All those who embark on illicit activities and lack of discipline at the expense of the State will be severely punished”, he warned. “My assessment of how the immigration service works in Cabo Delgado is negative, and I am demanding that measures be taken to reverse the current scenario”.The province has recently seen an increase in illegal immigration, particularly of Ethiopian citizens. The provincial director of immigration, Alfredo Cardoso, said he believed this inflow of migrants was related to the recent closure of refugee camps in neighbouring Tanzania.

Could Christine Lagarde be a model for Manuel Chang?

If Mozambique is going to renounce the government guarantee on most of the $2 bn in secret debt, it will need to argue that the then Finance Minister Manuel Chang acted unconstitutionally and illegally is signing the guarantee. And it would help Mozambique's case if Chang were to be charged and eventually convicted for his action. Two recent international cases show that senior figures can be convicted of serious crimes and not be punished, and that this is acceptable to the international community. The simplest way forward would be for Chang to plead guilty, avoiding a long trial, and a plea bargain could be agreed (technically not allowed in Mozambique) or President Filipe Nyusi could agree in advance to pardon Chang under article 159 of the constitution.Christine Lagarde, Managing Director of the International Monetary Fund (IMF), was found guilty on 19 December of “negligence with public money” in approving a Euros 400 million payout of taxpayers’ money to controversial French businessman Bernard Tapie; she was the French finance minister at the time and acted against the advice of experts. Tapie has since been ordered to repay the money. Although clearly a serious crime relating to a very large amount of money, the special court decided she should not be punished and that the conviction would not constitute a criminal record. Within hours of the court’s decision, the IMF executive board convened a special meeting which gave Lagarde its full support. (Guardian UK 19 Dec)

The other case is less well known. On 18 November the former director-general of the Portuguese spy agency (Servico de Informacoes Estrategicas de Defesa, SIED), Jorge Silva Carvalho, was convicted in a secret trial of violation of state secrecy, aggravated invasion of privacy and abuse of power. He was given a suspended sentence of four and a half years in prison, and thus walked free. After leaving SIED he was hired by Ongoing, one of the largest private companies in Portugal, and was convicted of giving Ongoing secret SIED documents. He was also convicted of invasion of privacy for commissioning secret investigations of the head of the company that owns the newspaper Expresso after it published details of the provision of secret documents. (AIM Pt 18 Nov)In both cases, very senior officials committed serious crimes, but went free. Clearly neither the IMF nor Portugal (and thus the donor community) could object to Chang pleading guilty and then going free. But a guilty plea by Chang would add considerable weight to Mozambique refusing to recognise the government guarantee of the secret loans.