CIP CALLS FOR IMMEDIATE ACTION

Mozambique’s main anti-corruption NGO, the Centre for Public Integrity (CIP), has demanded that the Attorney-General’s Office (PGR) should, in the wake of the independent audit undertaken by the company Kroll Associates, act immediately to bring to justice those responsible for the scandal of the country’s “hidden debts”.Three security related companies, Ematum (Mozambique Tuna Company), Proindicus and MAM (Mozambique Asset Management), took out loans of over two billion US dollars from the banks Credit Suisse and VTB of Russia in 2013 and 2014. The loans were illicitly guaranteed by the government of the time, in violation of the ceilings on guarantees set in the budget law, and also in violation of the Mozambican constitution which states that only the Mozambican parliament, the Assembly of the Republic, can authorise such debt.

Kroll audited the three companies, and the executive summary of the audit report, released by the PGR last Saturday, is a damning indictment of financial abuses, mismanagement and incompetence.In a Wednesday press release, CIP argues that, although the report does not name the officials complicit in the loans and guarantees, “it provides enough information with legal relevance for the PGR to take immediate action to hold those involved criminally responsible in what is the largest financial scandal in the existence of Mozambique as a state”.

Among the report’s finding, CIP points to the unexplained fate of 500 million dollars (or a quarter of the total lent). This sum was part of the 850 million dollar loan to Ematum, and it was supposedly spent on maritime security equipment. But Kroll could find no sign of any such military equipment.

“The Ministry of Finance has not been able to confirm to Kroll any details of the maritime security equipment that was effectively included in the USD 500 million allocation, nor if the transfer of responsibility has actually been complete”, the report noted.One of the report’s key sources, referred to only as “Person A” (but who is clearly Antonio do Rosario, the chairperson of all three companies), also claimed to Kroll that the money had been used for military purposes. However, the contractor, the Lebanon-based group Privinvest, insists that it does not supply military equipment, and the report says Privinvest “categorically stated to Kroll that the assets delivered to EMATUM were per the agreed supply contract and specifically that no weapons were provided”.

“Until the inconsistencies are resolved, and satisfactory documentation is provided, at least USD 500 million of expenditure of a potentially sensitive nature remains unaudited and unexplained”, Kroll remarked.CIP also points to evidence in the report of “the diversion of 713 million dollars (more than a third of the total value of the loans) in schemes to over-invoice assets”. Unable to obtain a detailed breakdown of the invoices provided by the three companies, Kroll called on an independent expert to value the boats, aircraft and other goods purchased with the loans. A comparison of the invoiced amount and the independent valuation showed a discrepancy of 713 million dollars.

CIP noted that 10 per cent of the value of the loans – about 200 million dollars – went on bank charges and fees to other agents who supposedly intermediated in the loans.Furthermore, CIP accuses, there was no sign of any real cooperation by the government in the audit. Throughout the report Kroll complained of inadequate information, and this failure to assist the auditors extended from the three companies themselves to the Finance Ministry and to the State Security and Intelligence Service (SISE), which is the dominant force in the shareholding structure of the three companies.CIP found it strange that the PGR has not yet taken any visible action to hold anyone involved in the loans responsible for the financial abuses reported. For, although the summary was only published on Saturday, the PGR has been in possession of the full audit since 12 May, and the PGR opened preliminary investigations over a year ago.CIP calls for immediate action which should include “the preventive detention of those who may interfere in the investigations under way”, as well as the preventive seizure of their assets.

It also urged the PGR to take action against all those bodies who failed to cooperate fully with the audit. CIP points out that this lack of cooperation is, in itself, a criminal offence.In the first place this means the management of the three companies themselves. Kroll declared that the companies only provided “limited financial data, including incomplete trial balances and bank statements for certain periods, and incomplete supporting documentation, such as loan facility agreements and supplier contracts. As a result, it became apparent that a significant amount of the information originally envisaged to be held by the Mozambique Companies in Mozambique was not available”.

“The main challenge in completing the Independent Audit was the lack of documentation available from the Mozambique Companies”, the report said. “Kroll spent a considerable amount of time requesting and liaising with representatives of the Mozambique Companies to obtain documentation and information that was, in some cases, either ultimately incomplete or not provided at all.”CIP insists that “the Mozambican state should not pay the debts contracted by the three companies, since the money in no way benefitted the State”. Furthermore, the guarantees, since they were issued in violation of the Constitution should be regarded as “null and void, so that they cannot be invoked to justify the State paying off the debts”.

Parliament will not debate luxury cars

The purchase of 17 luxury cars continues to stir Mozambican politics, with opposition groups calling for a debate on the issue, but there is no indication that this could happen in the near future. On the streets, in cafes and on social networks, this is one of the most talked-about themes: the purchase of 17 Mercedes-Benz cars for members of the Parliamentary Standing Committee at a cost to the state of about three-and-a-half million euros. It is egregious and even offensive, members of the public told DW Africa – not least because Mozambique is currently experiencing one of the worst economic and financial crises in its history, following the suspension in 2016 of international aid with the disclosure of state-guaranteed debts contracted by three companies without parliament’s knowledge.

“It is luxury in the midst of misery,” Helenio Ferreira said. “The country is afflicted, it is in crisis, and a small group using the name of the people is going to ride in luxury cars.”

Hélia Isabel asked: “Where is the justice in assigning Mercedes to some people while others are suffering transportation problems?”

Parliamentary opposition groups the Mozambican National Resistance (Renamo) and the Mozambique Democratic Movement (MDM) want the Standing Committee to discuss the issue, and deny any involvement in the decision to award the luxury vehicles. But DW Africa has learned that any debate on the matter cannot take place before July, as MPs are working in their constituencies and the body has no meeting convened before then. Meanwhile, MDM spokesman Venâncio Mondlane is collecting signatures from deputies petitioning against the cars, but so far only nine of the 250 deputies have been supportive.

Do the Mercedes justify themselves?

Renamo spokesman and deputy António Muchanga says that the problem of the luxury cars is spurious. “There is no room for either the Assembly of the Republic or the Speaker [Verónica Macamo] to choose the brands of protocol vehicles for parliament.” Muchanga says that after more than 12 years without new vehicles, it is quite “lawful” to renew Parliament’s fleet, “as at other ministries and state institutions”. “It was the government and not the assembly,” which decided to buy the Mercedes, he adds. “Why do you not question the three vehicles that the Supreme Court judges have, which ministers have, and only question those of the deputies?” he asks.Earlier this month, National Budget Director Rogério Nkomo similarly said he thought it “legitimate for the members of the Assembly of the Republic to be transported by official cars of that level”, as is the case with members of other organs of state sovereignty. Nkomo also noted that the decision to purchase predated the 2016 crisis.

President Nyusi visits the United States

Mozambican President Filipe Nyusi declared in Washington on Wednesday that Mozambique “is back on the path to economic growth and development”, showing clear signs of overcoming the obstacles it has faced recently.He was speaking at the opening of the 11th US-Africa Business Summit, which is convened every two years by the Corporate Council on Africa. This is a trade association set up in 1993 to promote business and investment between the US and African countries.  “Today we can say that Mozambique is back as a country with a prospering economy”, said Nyusi. This was not merely because of recent discoveries of vast reserves of mineral resources, particularly natural gas, in which American companies are playing an important role. Nyusi stressed that the opportunities in Mozambique cover many other areas, including agriculture, electricity generation and distribution, and the production and sale of industrial and consumer goods.

“Thus Mozambique is back, back to transform into wealth the enormous potential and countless business opportunities that it offers”, said the President, as he invited US businesses to invest.   As a signal of the trust that Mozambique now enjoys internationally, Nyusi pointed to the official launch, on 1 June, of the project to produce liquefied natural gas on a floating platform above the Coral South gas field in the Rovuma Basin, about 50 kilometres from the coast of the northern province of Cabo Delgado.The operator of this project is the Italian energy company, ENI, heading a consortium which also includes the China National Petroleum Corporation (CBPB), KOGAS of South Korea, GALP of Portugal and Mozambique’s own National Hydrocarbon Company (ENH). The total cost of the project is put at eight billion US dollars (in addition to the 2.8 billion already spent on exploration and other preliminary work). The floating LNG project “is a great vote of confidence in Mozambique and in our government”, declared Nyusi. “Hence our statement: Mozambique is back, and foreign investment is safe”.He recognized that Mozambique still faces challenges arising from the recent economic crisis, but he believed it was possible to overcome them through the re-establishment of effective peace and political stability. This was a process, Nyusi added, in which he hoped the country could count on the support of all its friends, particularly the United States.

“The Mozambican people and the business community are awaiting with great expectation the evolution of the hydrocarbon projects in the Rovuma Basin, particularly the exploitation of natural gas”, Nyusi declared.He considered the United States as a strategic partner in this area, and believed that American investment could help make Mozambique one of the largest producers of natural gas in the world. An American company, Anadarko, is the operator of Rovuma Basin Area One, and plans to set up LNG plants onshore, on the Afungi Peninsula, in Palma district. The giant US energy corporation, ExxonMobil, has agreed to purchase a large share in Area Four from ENI, and it too will set up onshore LNG plants. Nyusi believed that, in the coming years, the United States will become the largest single investor in Mozambique. “These are investments that transform the structure of the Mozambican economy”, he said, “and they mark a sharply positive turn in the history of Mozambique’s relations with the US”.

Mozambique natural gas

The Centre for Public Integrity (CPI), a Mozambican non-governmental organisation whose mission is to monitor the public administration, thinks that there is a certain level of uncertainty with regards to expectations of revenue from natural gas.The not-for-profit body is also critical of the lack of transparency in the extractive sector. “Revenue expectations for the state of about $18 billion within 30 years may well be realised, but it may also not,” the CPI says in a report published on Monday. “Everything depends on the price at which the gas will be sold.”Last week, the Italian firm Eni and its partners (Portuguese-based energy group Galp, the Japanese conglomerate Mitsui, Chinese energy giant CNPC and State-controlled ENH) finally signed off on a US$7 billion investment in a project to export natural gas from Mozambique in Area 4 of the Rovuma basin. During a ceremony in the capital Maputo, last Thursday, they also formally approved the construction of a floating liquefied natural gas (FLNG) plant with a capacity of about 3.4 million tons a year.While raising uncertainty about the management of those gas resources and the country’s exposure to price fluctuations, the CPI recognised the benefits of such projects for the country, especially in terms of job creation, making of Mozambique one of the major leading exporters of LNG in the world behind Algeria and Nigeria.

However, the CPI underscores a lack of transparency, noting that the price of the gas which British Petroleum has recently agreed to pay the Eni-led consortium is not known by the public. Moreover, the Mozambican government has indicated that the revenues will first be allocated to pay for the capital invested in the project before entering the state’s coffers as tax revenues. Of the $8 billion needed for gas extraction and liquefaction, 60 percent was sourced from a network of 15 banks with loans being rated by at least five rating agencies.The CPI is also concerned with cost management, as it is not rare to observe far higher costs than expected during the execution of an investment. This, combined with the risk of selling the natural resources at a price below the current market price, constitute significant risks for the state in its revenue management.

Advantages in Chinese currency transactions

Millennium Bim bank has launched a Chinese currency transaction service that offers a number of advantages, a press release sent to Club of Mozambique says. Customers who import Chinese products and services will now be able to make their payments in Chinese currency.This measure aims to facilitate business and trade between the Millennium Bim clients and their Chinese suppliers, at a time when China is becoming one of Mozambique’s main economic partners.

This service was created under the China International Payment System (CIPS) and customers who wish to benefit from it have to comply with the documentation requirements of the Chinese authorities. These transactions do not have a transfer limit, but do require that beneficiary companies have accounts based in Chinese territory.The service responds to a growing market need, and Millennium Bim’s offer of the new service demonstrates its interest in and concern for its clients.The service joins a suite of services that Millennium Bim has created for companies, including a recently launched business credit card which guarantees better management of the company’s accounts, including employees’ expenses.Millennium Bim’s objective is to remain at the forefront of innovation, providing its customers the best services with the best conditions.

Lichinga start again next week

Freight rail services between Nacala-Porto, Nampula, Cuamba and Lichinga resume next week, thanks to an understanding reached between the government, entrepreneurs and the Northern Development Corridor company (CDN).

The news was announced yesterday by President Filipe Nyusi at a rally in the village of Maleme, Sanga district, marking the beginning of his three-day working visit to Niassa province.High prices charged by the Northern Development Corridor (CDN) had meant that only passenger services were operating on the Lichinga line, forcing entrepreneurs to use road transport between Cuamba and Lichinga, which is costly due to poor road conditions.

As for rail transport, the CDN was charging the equivalent of US$75.53 per tonne between Nacala Porto in Nampula province, and the city of Lichinga in Niassa province, a distance of about 795 kilometres.Truck drivers were charging US$50 per ton on the same route.

After negotiations, the rail price has been set at US$47.54 per tonne.A total of 15 wagons of 35 tonnes each will be mobilised in the first phase, the number expected to rise gradually depending on demand, according to Niassa Provincial Director of Transport and Communications António Mateus.At the end of 2016, President Nyusi re-inaugurated the262-kilometre Cuamba-Lichinga railroad after several years out of service due to disrepair. After operations on this section restarted, business people and the population in general had hoped that life in Niassa, characterised by high prices for even essential products, would improve, but transportation costs prevent this.

“We promise to do everything to develop Niassa. One of the big problems, when we started our term in office, was to extend rail freight services to Lichinga. This means of transportation already reaches the city, but just carrying passengers,” Nyusi said at the rally.As part of the effort to improve roads in the area, President Nyusi will today break ground for the construction of the N13 between Cuamba and Lichinga.

Sweden has full confidence in PGR’s work ....

The Swedish embassy in Maputo yesterday expressed confidence in the way the Attorney General of the Republic of Mozambique (PGR) is dealing with the results of the audit of hidden debts, advocating the release of the document as soon as possible.The Swedish embassy funded the audit required by a group of international partners to resume support to the Mozambican state, after the disclosure, a year ago, of hidden debts amounting to US$1.4 billion.  “The audit report on public debt] is in the hands of the authorities, I think they are going to publish it. We have a very good collaboration with the PGR and we have full confidence in their work,” Andreas Perez Fransius, economic and commercial attache at the Swedish embassy, told Lusa.

Regarding the results of the audit, he continued, the justice system in Mozambique must act as in other sovereign states, taking the appropriate measures to the case.    “It would be inconvenient for me to comment on what measures to take, I trust them to take this process to the end,” he said.Fransius argued that the PGR should inform the Mozambican public of the results of the report as soon as they finish evaluating the document.     “This report is now in the hands of the PGR, which is making its assessment to see if the terms of reference have been met. The next step will be taken by the attorney general who will share this information with the Mozambican public,” Fransius added.The British branch of the North American research firm Kroll last month delivered to the Attorney General’s Office of Mozambique its audit of the so-called hidden debts endorsed by the former Mozambican government between 2013 and 2015.The audit was paid for by the Swedish government and came as a result of pressure from international financial institutions and major donors to the Mozambican state budget following the disclosure, in April last year, of debts of US$1.4 billion contracted by publicly-owned companies linked to maritime security with the endorsement of the Mozambican government.The discovery of the debts led the main donors and the international financial institutions to suspend aid to the country, subjecting the resumption of support to the conducting of an audit.

Mozambique is less peaceful than ten years ago

Mozambique has lost 10 places in the ranking of the Global Peace Index (GPI) conceived and published by the Institute of Economics and Peace (IEP), based in Autralia. It now ranks 78^th from 68^th last year, behind Swaziland and before Benin.TheIEP is an independent, non-partisan, non-profit think-tank dedicated to shifting the world’s focus to peace as a positive, achievable, and tangible measure of human well-being and progress. Its GPI comprises 23 indicators of the violence or fear of violence, these being originally selected with the assistance of the expert panel in 2007 and have been reviewed by the expert panel on an annual basis.

Looking back over a ten year period to 2008, Mozambique now features at the bottom of the 10 most at risk countries in 2008. The report also shows a list of 20 countries that fell into conflict after 2008. These are all countries that did not have battle deaths in 2008, but subsequently experienced more than 25 battle deaths in any given year. Of these 20 countries, two are in the top 10 countries most at risk, including Syria, Mozambique, Angola, Cameroon and Yemen.In mid-2013, after more than twenty years of peace, rebel group Renamo insurgency was renewed in the central and northern regions of the country. Former Mozambican president Armando Guebuza and the leader of Renamo, Afonso Dhlakama, signed in September 2014 the Accord on Cessation of Hostilities, which brought the military hostilities to a halt before the general election that took place in October that same year.

Those elections were unfortunately followed by a new political crisis, bringing Mozambique back into violence, after Renamo said it did not recognize the validity of the election results, demanding the control of six provinces (Nampula, Niassa,Tete, Zambezia, Sofala, and Manica) where they claim to have won a majority.Globally, the Sub-Saharan continent’s average score has deteriorated again this year, though its global position in the GPI, ahead of Russia and Eurasia, remains unchanged. Ethiopia suffered the biggest decline, both in the region and globally, as violent demonstrations, partly driven by rising ethnic tensions, led the government to introduce a six-month state of emergency in October 2016.In Lesotho, political tensions have remained at a high level, in the wake of an attempted military coup in 2014, and political instability has been exacerbated by the recent collapse of the ruling coalition. In Burundi, the number and duration of internal conflicts and the likelihood of violent demonstrations remain a major drag on the country’s score.

“What began as a series of protests against the controversial re-election of the president in 2015 has evolved into a loosely organized resistance movement, with the targeted assassination by rebel groups of senior government and military officials”, recalls the IEP in its report.Finally, the IEP underscores that if the Positive Peace deficit model (PPDM) had been used as a forecasting tool for allocating peacebuilding funding, the ten most ‘at risk’ countries in 2008 would have been allocated a peacebuilding amount totaling $47.3 billion over the next ten years (in constant 2014 dollars) calculated at the unit-cost rate ($27 per capita per year), between 2008 and 2017. As a reminder, the PPDM provides a reasonable assessment of countries at risk of deteriorations in peace and compared to other models it provides a more accurate predictive capacity.

Will Trump’s coal controversy help Mozambique?

US coal producers welcomed President Trump’s decision on Thursday to pull his country out of the Paris climate deal, fulfilling his campaign promises to favour his ‘America First’ agenda by securing more local jobs in the industrial and manufacturing sectors.Criticism from other business executives immediately followed the announcement, these saying that such a move would hurt US companies’ ability to work abroad and inhibit innovation. “Climate change is real”, thus tweeted General Electric’s CEO, Jeff Immelt, cited by BBC, adding that the industry must now lead and not depend on government.For his part, Tesla boss Elon Musk confirmed he would quit two seats on White House advisory groups, also invoking the reality of climate change. “Leaving Paris is not good for America or the world”, he said, while Walt Disney chief executive Robert Iglar explained that he too would quit an advisory role.Several other major companies, including Morgan Stanley, Unilever, Intel and big tech firms, such as Apple, had opposed withdrawal, saying it would have spurred energy innovation in the US, among other benefits. 

Energy companies, including Exxon Mobil and Chevron, had also pressed the administration to remain in the pact.Under the deal, the US, which accounts for about 15% of global greenhouse gas emission, had committed to a 26% to 28% reduction from 2005 levels by 2025. The US also promised $3 billion in aid to a United Nations fund to help poorer countries to tackle climate change problems.In his announcement on Thursday, Mr Trump said the deal, which involved voluntary commitments, put the US at a disadvantage. He said he would be willing to renegotiate under different terms. “The rest of the world applauded when we signed the Paris Agreement — they went wild; they were so happy — for the simple reason that it put our country, the United States of America, which we all love, at a very, very big economic disadvantage” Donald Trump said. “They don’t put America first.”

It remains to be seen what impact such a decision will have on Mozambique, one of the most attractive markets in sub-Saharan Africa, according to BMI Research’s Mozambique Operational Risk Report, cited by the specialized information platform World Coal. Its key exports markets are, as expected, Asian countries (India, Taiwan, China and Japan).Coal production in the Moatize Basin, in the province of Tete, expanded in 2016, also benefiting from the conclusion in March 2016 of the Tete-Nacala rail link. With its rail-seaport coal terminal infrastructure now capable of handling 22 million tonnes per year, production and exports are set to reach new records in 2017, according to the African Development Bank.