Glance at tourism recovery

After two atypical years due to the Covid-19 pandemic, the Mozambican tourism sector is in full recovery. The resumption of domestic and international flights is reviving the travel industry, although turnout in restaurants and hotels is still low, and operators want government incentives. Covid-19 wreaked havoc in Mozambique’s tourism sector. Travel agencies, restaurants, hotels, resorts, casinos, beaches and other leisure facilities felt the effects of the restrictive measures in force within the scope of the Public Calamity Situation. Hotels and restaurants suffered the steepest drop in turnover, with a reduction of more than 95%, according to data from the private sector. The damage to corporate coffers from what the CTA calls a “very serious and profound situation” is estimated at nearly US$71 million.

The effects are still visible. The newspaper ‘O País Económico’ has learned that some restaurants in Maputo are still closed. In fact, in the country’s capital alone, more than 6,000 workers entered the unemployment statistics at the peak of the pandemic. It is against this backdrop that operators recognise that the sector is recovering, albeit slowly in some subsectors due to the severity of the impact of Covid-19 and the current challenges facing consumers’ purchasing capacity. In restaurants, for example, the level of customer affluence has not yet reached pre-pandemic levels, according to the Associação de Restauração e Catering (Restaurant and Catering Association). The president of the association, Aurélio Maússe, points out that the rise in fuel prices and the consequent rise in the price of food products had a double impact on the operation of restaurants seeking to recover from the crisis.

“First, because operating costs have increased. Then because people don’t go to restaurants, don’t spend money, because life isn’t easy. If six months ago I ate cheaper, today I eat more expensively at the restaurant, and if that’s the case I don’t go to the restaurant, I look for other alternatives… and this does not bring cash flow into the restaurant sector,” Maússe commented.

The private sector says that the suffocating effect could have been minimized if the government had taken measures such as reducing taxes and creating tax incentives. “The electricity and water bills remain the same. No hotel has received government assistance. Taxes remained the same, the only help we had was from God. We survive thanks to what we have produced over the last few years,” said Vasco Manhiça, a hotel manager in Maputo, who says that the government should exempt companies from some costs in times of crisis. Manhiça went further, stressing that “politically speaking, it is common to think that the government should give, but this is not the time to play the blame game, this is the time to look ahead”.

 “The only thing we want are these incentives. We had the scenario of a hotel with an occupancy rate of less than 1% and hotels which even had no room occupied. The Covid watchword was ‘stay at home’; staying at home is not tourism and hotels live off tourism,” he stressed. Meanwhile, the scenario remains challenging. Hotel occupancy rates are still below expectations, frustrating the appetite of operators in the subsector. Manhiça speaks of a false perception of reality, given that occupancy rates currently stand below nine percent, a change hoteliers see as a shake-up. In this context, it is believed that tourism will take some time to fully recover.

“The resumption of flights and the reopening of borders mean a small change, but tourism is still only taxiing to the runway,” said Vasco Manhiça. The subsector says it is not optimistic about the deadlines for a satisfactory recovery. “Hypothetically, we will only reach a 23% occupancy rate again at the end of 2023,” he adds. The increase in the flow of travel both domestically and internationally is notable, driving an increase in turnover of companies in the travel sector, mainly in the business tourism segment. According to the president of the CTA Tourism, Hotel and Restaurant department, at the moment there is a fever for travel. Muhamad Abdullah points out that tourism is in full recovery, because “we have already reached the peak, which exceeds pre-pandemic numbers and, at the moment, the indicators for the sector are encouraging”. So Abdullah understands that it is still possible to achieve the goals set for this year in terms of receiving tourists.

“The more restrictions that are lifted around the world, concerning, for example, the waiver of the obligation to present a Covid-19 test for those who have the vaccine up to date, demonstrates that there is this vision, on the part of the public sector, in the sense of facilitating, so the national market can accompany this wave of international recovery in the tourism sector.”

But all is not well with the government’s approach to facilitating the tourism sector. Abdullah also understands that the government must take measures to encourage the entry of tourists into the country. Apart from the need to resolve the conflict in Cabo Delgado, which is still an obstacle to the sector, the issuance of entry visas should improve, above all, with digitisation.

“There is still some ambition [for improvement on visa granting] concerning the granting [of visas]. Often, the tourist is at the mercy of the migration officer’s mood,” he explained. Abdullah does not discount the issue of infrastructure as a fundamental component of the tourism sector. “From the moment we are able to easily bring tourists into Mozambique, we create an appetite in the private sector and attract foreign investment,” he said in conclusion.

 

300 million dollars

Mozambique’s publicly owned electricity company, EDM, has mobilised about 300 million US dollars for implementation of the second phase of the programme “Energy for All” (also known as “ProEnergia”), which envisages adding to the national grid more than 320,000 new connections a year between now and 2024.

According to a report in Wednesday’s issue of the Maputo daily “Noticas”, the funds are contributions from the World Bank and from the Norwegian and Swiss governments.

According to EDM board member, Joaquim Ou-chim, the second phase of “ProEnergia” will shortly be launched. “Right now, procurement is under way, through which we intend to select the contractor, and find a company that will be responsible for guaranteeing the supply of electrical equipment”, he said. Ou-chim added that EDM expects to start the work as soon as the selection has been concluded. New consumers will be connected to the national grid continually, in order to meet the goal of guaranteeing universal access to electricity by 2030.

The first phase of ProEnergia will end within the next three months, and has allowed the connection of many households living near the grid. “In this second phase”, said Ou-Chim, “we shall step up connections, but also focus on expanding the grid”. In the first phase of ProEnergia, about 307,000 households benefitted from access to electricity within the grid, and 3,000 households from isolated systems outside the grid. To date, about 39 per cent of the population has access to electricity from the EDM grid.

SA National visits SADC Mission in Mozambique

On 21 June 2022, the Chief of the South African National Defence Force, General Rudzani Maphwanya and his delegation, which comprised of Major General Ntakaleleni Sigudu and the Republic of South Africa Defence Attaché, Colonel Patronella Bongisiwe Nkambule, visited the SADC Mission In Mozambique (SAMIM) Forces, over the period 21 to 23 June 2022. The Head of Mission, Professor Ambassador Mpho Molomo and SAMIM Force Commander, Major General Xolani Mankayi welcomed him. The Chief paid a courtesy call to the Commander of the Botswana Defence Force, Lt General Placid Diratsagae Segokgo, who was also in Cabo Delgado province, concluding his official visit.

The delegation then proceeded to the SAMIM Force Headquarters, whereby the Head of Mission and the Force Commander gave a briefing on the general security situation in Cabo Delgado province. The SAMIM staff members gave the Chief a detailed security situation and operational update presentation highlighting on successes and shortcomings of the mission. In his remarks, Chief of the South African National Defence Force said that the purpose of his visit in Mozambique was to meet SAMIM leadership and to also visit the Commander in Chief of Forças Armadas de Defesa de Moçambique (FADM).

“I am here as the chair of the Chiefs of the Defence Forces after South Africa took over the SADC Chair of Troika organ,” the General said. As the mission is transitioning from scenario 6 to scenario 5, the Chief indicated that he would raise all the challenges with his counterparts and encourage them to capacitate the mission with more combat capabilities. Furthermore, he congratulated SAMIM for all successes and urged them to continue working together with FADM and Rwanda Security Forces. General Maphwanya concluded his visit by paying a courtesy call to the FADM Chief of General Staff, General Joaquim Mangrasse at the Naval base, in Pemba.

 

5% this year, 8.4% next

Bank lending in Mozambique grew by 2.7% last year and is set to grow by 5.0% this year and 8.4%   next,       thanks to improved macroeconomic conditions and financial support from the International Monetary Fund, according to Fitch Solutions, an economic consultancy.

“We forecast [growth in] loans to customers of banks in Mozambique to accelerate from 2.7 percent in 2021 to 5 percent in 2022, mainly due to improved business conditions and the financial adjustment programme of the International Monetary Fund,” reads a note from Fitch on the country’s banking sector.

According to the report, which was sent to clients and which Lusa has seen, analysts at the Hong Kong branch of the consultancy – part of the same group as financial ratings agency Fitch Ratings – the forecasts represent “a downward revision from the previous forecast of 8 percent growth for this year, reflecting the increase in borrowing costs due to the tightening of monetary policy to contain inflation.”

The latest data from the Bank of Mozambique shows 6.4% growth in bank loans in March, against 7.5% in March 2021. That, according to Fitch Solutions, reflects high starting values and also high inflation, which is limiting credit applications. Inflation was 7.9% in March, up from 5.8% in the same month a year earlier, but loan growth is still set to rise compared to 2021 essentially for two reasons: first, better business conditions, which will encourage corporate borrowing, and the IMF’s financial adjustment programme, which is providing $456 million (€432 million), giving banks more scope to lend to the private sector. On the first factor, Fitch Solutions analysts write that “improved business conditions are already showing up in indicators on business activity, and the easing of restrictions to combat the Covid-19 pandemic, as well as increased consumer spending, will boost sales and economic sentiment, encouraging companies to borrow more to increase investment.”

On the other hand, they conclude, the Extended Credit Facility (ECF) – the first since Mozambique’s ‘hidden debts’ scandal broke in 2016, prompting the country to default and lose access to finance from international institutions – will give domestic banks more scope to lend to private customers, as the state will no longer need to turn to them for financing. Still, the rise in bank lending foreseen in Mozambique this year and next represents a downward revision from the previous forecasts from the consultancy’s analysts in Hong Kong.

“Although we previously expected the Bank of Mozambique to maintain the benchmark interest rate at 13.25 percent in 2022, the central bank implemented an increase in March to 15.25 percent as a result of inflationary pressures originating from the Russia-Ukraine war and tropical storms and cyclones,” they write, forecasting an acceleration in inflation from 5.6% last year to 8% this. That, in turn, they argue, will limit consumer spending, keeping the country from achieving the average rise in the value of loans that it saw between 2012 and 2021, at 11.4%.

 

HCB evaluates new energy sources

Cahora Bassa Hydroelectric (HCB) is developing a study to identify investment opportunities in the generation, transport and commercialization of clean energy, Moisés Machava, the company’s executive director, revealed during the Energy and Industry Summit held in Maputo last week (22-23 June). According to Machava, the aim is to assess the possibility of installing photovoltaic plants at various points in the Cabora Bassa reservoir, where their efficiency can be increased by cooling provided by the dam water.

The same study examines the possibility of building wind power plants, mini- and medium-sized hydro pumping plants and other technically and economically viable opportunities are being considered, he said. In his explanation, Moisés Machava emphasised that HCB would only proceed with investments if and when it was sure that they were “clean energy projects that are technically and economically viable”.

“We will try to look at the demands, potentialities, existing infrastructures – as in which possibilities we have for developing or updating the existing ones, always bearing in mind the need for them to be viable”.

HCB is being assisted in carrying out the study by a consultancy specialising in the field, whose name was not revealed to ‘Domingo’. The results of the study will be made known during this year as progress is made. Machava said that Cahora Bassa was committed to maintaining its current power generation system and keeping all the components associated with the generation and transport of energy robust, but, at the same time, “we think that in the future, in a short, medium and long term perspective, we must participate in the development of new clean energy sources”.

He added that the possibility of investing in alternative power sources would complement other efforts to be made for the development of the Mphanda Nkuwa dam project, in which, together with Electricidade de Moçambique (EDM), HCB has a mandate issued by the government.

In another development, Machava said that HCB continued to be an extremely important player in the energy sector in the country, and would maintain its collaboration in the elaboration and discussion of instruments that are being prepared under the coordination of the Energy Regulatory Authority (ARENE). He underlined that this strategic company [HCB] would continue to play a role in the production, transport and sale of electricity from the Cahora Bassa Dam, within the scope of the attributions assigned to it by the concession contract, strategic orientation and its statutes.

“We supply energy to the country through EDM, both for firm energy, which corresponds to the average energy that can be produced in a critical period with the worst scarcity conditions, and for non-firm energy, as we do for South Africa. and Zimbabwe through contracts,” he said.

He said that this was how HCB contributed to the national industry through the supply of reliability, quality electrical energy, “always looking for the company to be healthy, sustainable and compliant with all its tax obligations, paying taxes, concession fees and dividends to shareholders”.

Regarding the distribution of dividends, Machava stressed that, with the Mozambican state its main shareholder, with an 85% share, the company would continue to distribute dividends with an increasing rather than decreasing frequency.

“The company must continue to operate in a way that protects its strength and sustainability so that it continues to comply with all its obligations to shareholders, suppliers, tax authorities and social responsibility [beneficiaries],” he concluded.

Crisis

The real estate market is turning around after having seen a reduction in demand due to the crises that the country has recently faced both in terms of health, due to the Covid-19 pandemic, and of a financial nature. Real estate agents interviewed by Domingo say that, since January this year, they have seen an increase in demand both for houses to rent and for purchase in several areas in Maputo and Matola cities, the urban areas showing the greatest dynamism in terms of real estate business.

They also mention that prices were in some cases again fixed in US dollars, as was the case before the crisis. In the case of leases, owners are beginning to opt for foreign tenants because they understand that they take better care of the properties, and also for nationals with small families. A survey carried out by Domingo found that properties for sale are available at prices up to 60 million meticais [around US$939.300], depending on the location and finishes.

House rentals range from 38,000 to as much as 185,000 meticais [US$594.00 to US$2,896.00], especially in the centre of Maputo city. Out in the suburbs, you can find a little bit of everything, and for all budgets.