14,000 IDPs

Close to 14,000 displaced residents have already returned to Mocímboa da Praia, after having left the district in search of safety following terrorist attacks, Notícias reports, citing District Secretary João Saraiva, who said that people continue to arrive, especially from neighbouring Palma district. Saraiva highlighted the villages of Awasse and Diaca, where around 7,000 and 6,000 people have returned, respectively. “But we also have the Quelimane and Maputo villages, on the Mocímboa da Praia-Palma road, where people are arriving every day,” he said.

The permanent secretary said that in the district headquarters, in addition to employees guaranteeing basic services, there were also members of the public, some of them hired by the companies rehabilitating and cleaning the town. Before the terrorist attacks, Mocímboa da Praia boasted 713 civil servants, with Education and Health sectors predominating, but, after the terrorist attacks, almost all state employees fled the district.

“After security was re-established, thanks to the work of the Defence and Security Forces, with the support of SADC and Rwandan troops, officials were urged to return to the district in order to guarantee the functioning of basic services,” Saraiva said. But the mass return is challenging for the district government, and the authorities are working to rapidly re-establish basic services and support residents in organising villages themselves.

Saraiva stressed, however, that there are still areas people are afraid to return to, such as Mbau administrative post, where the terrorists had once set up important bases. “We don’t have people in Mbau yet,” he confessed.Another challenge indicated by the permanent secretary is the roads connecting parts of the district which, having been neglected for three years, are in also need of rehabilitation.

 

 

conditions for resumption of TotalEnergies-led Mozambique LNG project

A verification team is working in Cabo Delgado with a view to ascertaining the necessary safety conditions for the resumption of the TotalEnergies-led Rovuma Basin liquified natural  gas project. The guarantee was given on Thursday by Minister of Mineral Resources and Energy, Carlos Zacarias, who added that the government wanted to see operations resume as soon as possible.

“The security situation in the area where the TotalEnergies and ExxonMobil projects will be implemented has, in our view, improved a lot. Naturally, before resuming activities, there will be a lot of scrutiny on the part of the companies carrying out the investments,” Minister Zacarias said in Vilankulo district, Inhambane province. The minister was in Inhambane province to monitor the government’s Five Year Program (PQG), specifically in the area of oil and gas, energy and mines.

Carlos Zacarias said that, although the government considered that the conditions for the resumption of the project were improving, it was up to the company to verify if, from its point of view ,the environment to recommence activities was in place. The restoration of security in the district of Palma has permitted the return of some of the residents and the resumption of some economic activities. According to Minister Zacarias, in the same way that the population was gradually returning following the improvement of security conditions, economic enterprises could also do so. The minister noted that it was not just the TotaEnergies project that had been suspended, but also many others, such as the roads under construction in various locations.

In April last year, the multinational Total announced the withdrawal of all personnel from its LNG project in Afungi. The Mozambique LNG offshore project, valued at around US$20 billion, aims to extract about 13.12 million tonnes of recoverable gas over 25 years and generate profits of US$60.8 billion, half of which will go to the Mozambican state. Total E&P Mozambique Area 1 Limited, a wholly-owned subsidiary of Total SE, operates the Mozambique LNG project, with a 26.5% equity interest, together with ENH Rovuma Area 1, S.A. (15%), Mitsui E&P Mozambique Area 1 Limited (20%), ONGC Videsh Rovuma Limited (10%), Beas Rovuma Energy Mozambique Limited (10%), BPRL Ventures Mozambique B.V. (10%), and PTTEP Mozambique Area 1 Limited (8.5%).

 

 

 

 

 

Nyusi denies role of religion in Cabo Delgado conflict

Mozambican President, Filipe Nyusi, said on Saturday that religious institutions have been playing an important role in consolidating peace and denied that inter-religious conflict has played any role in the terrorism that has been plaguing parts of the northern province od Cabo Delgado since 2017.

“A great effort is being made to push the country towards inter-religious conflicts, as in the case of Cabo Delgado”, he said. “But this is not what is happening on the ground. There is no inter-religious conflict in the northern districts of Cabo Delgado. There is terrorism”. The president, who was speaking on Saturday during the inauguration of a chapel of the Old Apostolic Church of Mozambique, in the southern city of Matola, stressed that the government will continue to make efforts to strengthen social cohesion and consolidate real and lasting peace. “There has been an attempt, by a certain group of Mozambicans, to link terrorism to an alleged inter-religious conflict, and this could jeopardize national unity”, said Nyusi.

Nyusi also condemned some heinous crimes that have shocked the country, such as the recent tragedy in Maluana, in Maputo province, where alleged thieves were buried alive. “One of the situations that shocked me the most and that requires collective reflection was what happened in Maputo province, where human beings were buried by fellow human beings while still alive. Nothing justifies taking the law into one’s own hands”, Nyusi appealed.

The President highlighted the active role of the Old Apostolic Church and all religious congregations in the country in promoting the spirit and culture of peace and reconciliation. “Religion should instil in citizens respect for human life, respect for the elderly, respect for other people’s heritage, rules that are contained in the sacred books and the laws of men”, he stressed. For his part, the leader of the Old Apostolic Church in Mozambique, Apostle Jaime César Matsombe, delivered to the President a donation consisting of 400 zinc plates, 200 blankets, and a wide range of school material for the victims of terrorism in Cabo Delgado.

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.

Prices as fuel costs soar

The Mozambican Federation of Road Transport Carriers Associations (Fematro) will propose to the government a hike in travel prices, aiming to ensure the sustainability of the activity, due to the cost of fuel, the president of the association told Lusa on Tuesday.“There is no other option: with more of these increases in fuel prices,” announced on Monday, “we will propose to the government the readjustment of travel prices,” said Castigo Nhamane. 

Nhamane considered the public transport activity in Mozambique “unsustainable”, as the prices currently in force do not cover the costs of the operation.“We are in this activity because of our commitment to public service and because we cannot unilaterally decree increases, but several operators have been parking their cars, worsening the transport crisis, because fewer vehicles are circulating,” Castigo Nhamane said. The president of Fematro noted that the sector’s business people are also confronted with the rise in costs of other essential components for the viability of the activity, mainly parts and accessories, as well as recent readjustments in fuel prices. “To avoid the increase in the cost of passage, we have been proposing other mitigation measures to the government, but there has been no response,” he stressed.

On Monday, Mozambique’s Energy Regulatory Authority (Arene) announced an increase in fuel prices, with an increase in all petroleum products starting today. Petrol rises from 77.39 meticals (€1.13) to 83.30 meticais (€1.22) per litre, diesel rises from 70.97 meticais (€1.00) to 78.48 meticais (€1.15) per litre and domestic gas also scheduled to rise, from 80.49 meticais (€1.18) to 85.53 (€1.25) per kilo, according to the new table presented at a press conference by Arene.Light oil also goes up from 50.16 meticais (€0.73) to 77.48 meticais (€1.13) per litre.

According to Arene’s president, Paulo António da Graça, the Mozambican government sought to avoid a readjustment that would put pressure on citizens, temporarily dropping the tax on fuel to avoid a drastic rise. “The application of these measures allowed a reduction of the real increases, aiming to minimise the impact on the final consumer. Looking, for example, at diesel, which is a primordial product for our economy, an effort was made so that the adjustments were not made based on real prices, where we would have an increase of around 13 meticais [€0.19],” Paulo António da Graça said.

 

Mozambican economy

The Mozambican economy is prone to risks and uncertainties caused by the terrorism that has been plaguing the northern province of Cabo Delgado, a possible increase in Covid-19 infections, natural disasters and the intensification of the Russian attack against Ukraine, leading to rising global food and fuel prices. The IMF resident representative in Mozambique, Alexis Cirkel, gave this overview on Thursday in Maputo, when he presented the IMF Regional Economic Outlook for Sub-Saharan Africa. At least one of Cirkel’s concerns seems misplaced: far from accelerating, the number of Covid-19 infections has sharply declined in recent weeks, and there is no likelihood that the government will decree any form of lockdown. The mass vaccination campaign against Covid-19 has reached over 92 per cent of all Mozambicans over the age of 18, so that, even if the country is hit by a fifth wave of the pandemic, few people are likely to be hospitalised, let alone die. Under the new programme recently negotiated between the Mozambican government and the IMF, Cirkel said, about 470 million will become available to provide financial assistance for reforms and policies implemented by the Mozambican government. He warned that “reforms” must remain a priority, especially the diversification of the economy and investment in human capital.

 “The IMF programme with the government of Mozambique aims to support some of the necessary reforms, such as strengthening sustainable macro-economic stability consistent with inclusive and sustainable growth leading to the reduction of poverty and inequality”, he stressed. Cirkel said that Mozambique will suffer indirectly from the Russian invasion of Ukraine, largely because the war will provoke increased fuel and grain prices. Both Russia and Ukraine are major wheat producers, but the Russian blockade of the Ukrainian Black Sea ports has dramatically cut Ukrainian grain exports. The price of the wheat imported by Mozambique has already risen this year, and Cirkel noted that in several provinces, bakers are increasing the price of wheat. But Cirkel believed the main risks to the Mozambican economy were the terrorist violence in Cabo Delgado, and natural disasters. “Terrorism increases fiscal pressures”, he said, “delays the natural gas projects, and increases poverty and inequality”. As for the IMF’s macro-economic forecasts, Cirkel said he expected the GDP to grow by 3.8 per cent this year, rising to five per cent in 2023 and 8.3 per cent in 2024. The IMF believes that Mozambican inflation will reach nine per cent this year, falling to seven per cent in 2023.

Rwanda-Mozambique business forum

 

Over 50 business operators from Rwanda’s different sectors arrived in the Mozambican capital Maputo on Monday for the Rwanda-Mozambique business forum. “We are looking for potential partnerships in different investment areas and our traders are ready to expand and explore more opportunities here,” said Robert Bafakulera the Chairman Private Sector Federation-Rwanda . Excitement as our members showcase #MadeInRwanda products in #Mozambique. They’re part of Rwanda-Mozambique business Forum that kicked off today. This is a great platform to expand their market base and get partnerships with their counterparts.

Last year, Gil Bires, Director General of Mozambique’s investment and export promotion agency APIEX invited Rwandan business operators to explore the vast investment opportunities in his country. “We are open. There is a window for opportunity that the Rwandan private sector can take advantage of. And they are most welcome. We have a very attractive regulation on investment which is friendly for foreign direct investments,” Gil Bires said. Mozambique has untapped opportunities in domains such as agriculture especially in production of cereals, fruits, flowers, and vegetables, for both the local and export markets.

Other lucrative investment areas include energy, infrastructure, manufacturing, mineral resources, and fisheries and aquaculture. According to Bires Mozambique has a lucrative oil and gas sector but agriculture, manufacturing, tourism, infrastructure and energy are, presently, Maputo’s priority investment sectors even if “we are open to other investments.”

Mozambican investment law grants certain tax and customs benefits depending on the amount, location and sector of investment activity. Mozambique has an area of 799, 390 square kilometres and a population of about 24 million people. In Mozambique, land belongs to the state which means that it is easy for those that want to invest in agriculture to have access to land. Rwanda and Mozambique diplomatic ties have for the past two years flourished and the leaders of these two countries have signed a list of treaties. I Maputo muri Mozambique hateraniye inama ihuje abashoramari 54 bo mu Rwanda na bagenzi babo bo muri icyo gihugu, aho barebera hamwe amahirwe y’ishoramari aboneka mu bihugu byombi. Last year, Rwanda airlifted a 1,000-person contingent of the Rwanda Defence Force (RDF) and the Rwanda National Police (RNP) to troubled Cabo Delgado Province. The Rwandan contingent was deployed to support efforts to restore Mozambican state authority by conducting combat and security operations, as well as stabilisation and security-sector reform (SSR). Rwanda’s contingent of 1,000 soldiers is the biggest foreign force in resource-rich Cabo Delgado, which is the site of a $20 billion (€17 billion) liquefied natural gas project operated by French energy giant Total. But the area has also seen numerous attacks carried out by Islamist jihadis. The violence has uprooted more than 800,000 people.

IHL

We are delighted to announce that Mozambique has taken an important step forwards in implementing and promoting international humanitarian law (IHL). The Mozambique government established the Interministerial Commission on Human Rights and International Humanitarian Law through a presidential decree on 28 April 2022. The commission is a government body dedicated to coordinating and monitoring the implementation of human rights and IHL in Mozambique through reports, statements and the drafting of recommendations. The new commission is the culmination of years of dialogue between the ICRC and the Mozambique government. The process began back in 2006 when Mozambique started taking part in the regional annual events for southern Africa on IHL implementation, and it was further consolidated in 2017 when the ICRC opened a mission in Maputo.

The new commission is presided over by Mozambique’s prime minister, with the minister of justice taking on the role of vice-president .  The commission is supported by a technical commission and secretariat.

The commission’s work includes analysing and identifying the main international treaties for signature, ratification and/or accession by the state, identifying opportunities for training and capacity-building, implementing activities that promote human rights and IHL with the authorities and the public, and monitoring the progress of action plans on human rights and IHL issues. We congratulate Mozambique for taking this important step in implementing IHL and meeting its obligations.

1,500 MW

The African Development Bank has signed an agreement with Gabinete de Implementação do Projecto Hidroeléctrico de Mphanda Nkuwa, an implementing entity, to provide advisory services for the development of the $4.5 billion 1,500 MW Mphanda Nkuwa Hydro Power Project in Mozambique. The agreement was signed Tuesday on the side-lines of the Bank’s Annual Meetings, which are taking place in Accra from 23-27 May. The agreement was signed by Mr Carlos Yum, Director of Gabinete de Implementação do Projecto Hidroeléctrico de Mphanda Nkuwa and Dr. Kevin Kariuki, African Development Bank Vice President for Power, Energy Climate and Green Growth.

President Filipe Nyusi of Mozambique and African Development Bank President Dr. Akinwumi Adesina witnessed the signing. Gabinete de Implementação do Projecto Hidroeléctrico de Mphanda Nkuwa is part of the Mozambique government’s Ministry of Natural Resources and Energy. The project entails development of a hydropower plant to be located on the Zambezi River in the Marara District of the country’s Tete Province. The plant will be 60 km downstream from Cahora Bassa dam and 70 km upstream from Tete city. A transmission system comprising 1,300 km of 550kV high voltage DC transmission line between Cataxia and Maputo will also be constructed. The Mphanda Nkuwa project is expected to reach financial close by end-2024; commissioning is anticipated in 2031.

 “The partnership with African Development Bank further strengthens the capacity of our implementing agency to develop the Mphanda Nkuwa project. The African Development Bank will ensure that world class environmental, social and governance and associated standards are adhered to during the development, and that the project is attractive to reputable developers, financiers and investors to ensure competitive and least-cost power for Mozambique and the region,” said Mr. Yum.

The agreement consolidates the Bank’s role as Africa’s premier development finance institution, and as a trusted partner and provider of advisory services and assistance in the development of transformative projects. Continued expansion of Mozambique’s generation capacity is required to meet growing domestic demand and drive economic and social development. In addition, the southern Africa region offers market opportunities that Mozambique is well placed to meet as a supplier of competitively produced energy. Mphanda Nkuwa is projected to have one of the lowest electricity production costs in the region.

“The project reinforces our efforts to combat climate change in a region that is desperately short of power but equally in need of transformation and a just energy transition. It is also a great privilege to lead the Bank’s team that will be executing this advisory mandate. We are honoured to be chosen by Mozambique to partner on this important project,” said Dr. Kariuki.

The project builds on earlier success in attracting private investment into the country, including several independent power producers (IPPs). These include the 175 MW Central Térmica de Ressano Garcia, the 120 MW Central Térmica de Gigawatt, the 40 MW Mocuba solar plant, the 40 MW Metoro solar plant and, most recently, the 450 MW Temane Power Project. Mphanda Nkuwa project is included in Mozambique’s National Energy Sector Master Plan 2018-2043 as a national priority, as well as a priority investment for the Southern Africa Power Pool Plan. 

The project enhances private sector competitiveness through infrastructure development and regional energy trading. It is also aligned with the Bank’s 10-Year Strategy, as well as the “Light Up and Power Africa High-5 strategic priority.

Amepetrol

 The Mozambican Association of Oil Companies (AMEPETROL) claims that the country has a sufficient amount of fuel to meet demand. The pronouncement follows some news items suggesting a possible fuel shortage in the country’s oil companies. Amepetrol secretary general Ricardo Cumbe explained to consumers that this is incorrect. “We don’t have any problems with stocks at the moment. There was a situation of misinformation on social networks, and the information being circulated did not correspond to the truth. Consumers should not panic. Continue to lead life in a normal way; do not become agitated,” he advised.

ALSO READ: Mozambique: Amepetrol calls for new fuel price hike – Watch

Cumbe clarified that the difficulties recently presented by the association referring to the mismatch between the price of imported fuel and that charged in the country were a matter of record, but that the issue was already the subject of contacts with the government. Prime Minister Agostinho Maleiane recently ruled out the possibility of state subsidies to some subsectors, including fuel, as a way of addressing the rise in prices caused by the war in Ukraine.

 

US$456 million

The IMF Board approved a SDR 340.8 million (about US$456 million) ECF arrangement for the Republic of Mozambique, with SDR 68.16 million (about US$91 million) available for immediate disbursement. The three-year arrangement will help support the economic recovery and policies to reduce public debt and financing vulnerabilities, creating space for priority investments in human capital, climate adaptation and infrastructure. The program supports the authorities’ ambitious reform agenda, with key policy actions focusing on establishing a sovereign wealth fund to transparently manage LNG wealth, mobilizing additional tax revenue, and strengthening public financial management and governance.

Washington, DC – On May 9, 2022, the Executive Board concluded the 2022 Article IV consultation [1] and approved a new three-year arrangement under the Extended Credit Facility for the Republic of Mozambique for SDR 340.8 million (about US$456 million), or 150 percent of the country’s quota. The Board’s approval allows for an immediate disbursement equivalent to US$91 million, or SDR 68.16 million.

A moderate recovery is taking hold. After a real GDP contraction of -1.2 percent in 2020—the first in 30 years—growth resumed in 2021 and is now becoming more broad-based. While COVID cases and deaths have been below regional averages, three large waves of infections in 2021 and 2022 moderated the strength of the recovery. After initial supply constraints, vaccine rollout intensified in late 2021, with 46 percent of the population having received at least one shot (42 percent fully vaccinated by end-March 2022). Poverty has increased from a poverty headcount ratio of 61.9 percent in 2019 to an estimated 63.3 percent in 2020 as a result of the crisis, albeit mitigated by welfare and social protection measures undertaken with international support. The war in Ukraine is pushing up fuel and food prices. Inflation rose to 6.7 percent year-on-year in March 2022 mainly due to rising global prices but also the impact of tropical storms on local food prices. In response, the Bank of Mozambique raised its policy rate 200 basis points in March 2022.

The authorities are implementing an extensive reform agenda, including strengthening the management of state-owned enterprises and their debts, improving fiscal risk management and debt transparency, and strengthening public financial management and the anti-corruption framework. The reform agenda supported by the program includes further governance reforms, buttressing the anti-money laundering framework, and creating a sovereign wealth fund. Medium-term prospects are positive; growth excluding extractive industries is expected to rise to about 4.0 percent per year, with higher overall growth rates related to large liquefied natural gas (LNG) projects that are set to begin production later in 2022. Following the Executive Board discussion, Mr. Bo Li, Deputy Managing Director and Acting Chair, made the following statement:

“Mozambique has managed the COVID pandemic relatively well, maintaining macroeconomic stability and reform momentum even as the country has weathered a series of shocks, culminating with the effects of the war in Ukraine. With policy space now limited, sustaining the economic recovery underway and tackling debt vulnerabilities are priorities. The new three-year ECF arrangement of 150 percent of quota (SDR 340.8 million or about US$ 456 million) aims to buttress the economic recovery and policies to reduce public debt and financing vulnerabilities, along with creating fiscal space for priority investments in human capital, climate adaptation and infrastructure. It is also expected to catalyse additional financing by development partners.

“Fiscal policies appropriately envisage a moderate pace of adjustment that balances sustaining economic activity with reducing debt and financing vulnerabilities. Maintaining space for social protection spending on the most vulnerable households is an important objective of the authorities’ program. The authorities’ commitment to establishing a sovereign wealth fund to transparently manage LNG wealth should be complemented with a framework to weather the impact of commodity price volatility on the budget. Continued progress on reforms supporting the efficient and transparent management of public resources is important.

“The prudent monetary policy stance is warranted given rising inflationary pressures. The Bank of Mozambique’s pursuit of adopting an inflation targeting regime is commendable. Continued efforts are needed to further strengthen financial sector supervision, promote financial inclusion, and address weaknesses in the AML/CFT framework. The program will support the authorities’ ambitious structural reform agenda. Further progress on governance and reforms reducing vulnerabilities to corruption are important to improve the business environment and foster a durable and inclusive reduction in imbalances. Given Mozambique’s high vulnerability to natural disasters focusing on building climate resilience will also be critical.”

 

 

Public debt interest increased in 2021

The Mozambican state spent more money on debt interest rates in 2021 than it did in the previous year. The 2021 report by the Ministry of Economy and Finance indicates that public debt grew last year. On a positive note, the debt to gross domestic product (GDP) rate fell. It is, in fact, further proof that the recent increases in interest rates have also affected the state, which also has debts with national banks. Mozambique spent more money on public debt interest last year than in the previous year, the 2021 Public Debt Report, produced and published by the Ministry of Economy and Finance, reveals.

From 2020 to 2021, the amount that the state spent on interest rates grew, because the weighted average increased from 4.7% to 5.6%. Note that this is a direct result of the worsening trend in the benchmark MIMO interest rate in Mozambique. Last year, the average rate of external debt was 2.2%, while that of internal debt was 15.6%. Naturally, in nominal terms, the value of the external debt turns out to be higher, because the stock is three times higher.

The growth in the cost of public debt takes place in a context in which Mozambique has postponed the payment of instalments equivalent to US$175.6 million on loans from some of the country’s largest creditors, such as China, Japan and Portugal, as well as from Belgium, France, South Korea South and Spain. This is in light of Mozambique’s accession to the Debt Service Suspension Initiative of the Paris Club and G20 countries.But there is also good news: the debt sustainability index has improved substantially. In 2020, Mozambique’s public debt represented 92.2% of all the country’s wealth, but in 2021, it represented only 78.6%.

The government’s target is 60% by 2025.However, the reduction in the weight of public debt in relation to GDP does not mean a drop in the stock of credits. In fact, what happened was that, in 2020, the first year of Covid-19, Mozambique had an economic decrease of 1.3 percent and, in 2021, our economy grew by 2.1%.

Mozambique’s public debt, in fact, went from US$12.9 billion in 2020 to US$13.9 billion in 2021. Of these US$13.9 billion, US$10.4 billion relates to external debt, and US$3.5 billion to what is owed domestically.

 

 

Russia-Ukraine crisis affect supply of fuels

Fuel merchants in Mozambique are already feeling the effect of the military crisis in Ukraine and Russia. The Mozambican Association of Fuel Companies (Amepetrol) said on Saturday (26-02) that there may be difficulties in replenishing fuel stocks in the near future. The price of a barrel of oil continues to rise, having now reached US$105. The rise has been precipitated by the Russian invasion of Ukraine. Ricardo Cumbe, secretary general of the Mozambican Association of Fuel Companies, says the situation is already worrying fuel suppliers in Mozambique.

“The conflict between Russia and Ukraine is already being felt in the country. We are talking principally about fuels, but there are other commodities that Mozambique depends on for imports,” Cumbe says.

The association fears that the situation will interfere with the replenishment of fuel stock in the national market and complicate the fulfilment of contract between fuel suppliers and the government.

“A good part of the operators did not manage to import in the light of the contract, which provided for bringing 215,000 tons of fuel to the country. This order may not come in the magnitude that is desired, given the inability of operators to issue collateral to sustain the merchandise,” he explained.The Mozambican Association of Fuel Companies foresees an increase in the price of fuel and, consequently, of other products, but offers some solutions.

 “The rise in prices is not a projection, but a reality, since prices in the market are already increasing significantly. What is not happening yet is the situation making itself felt in the consumer’s pocket, as the fuel companies are bearing the costs,” Cumbe said.

“One of the measures that we learned during the pandemic is the deferment of tax payments, which we, as a sector, feel that we are already having some difficulties in making, as our cash-flow, that is, revenues, are already in the red,” he explains. Amepetrol says it will continue to supply fuel into the country as long as possible, despite the concerns.

$1.2bn for Afreximbank in boost to African

 

·         Peter Blenkinsop, CEO of FNB Mozambique, said “This transaction demonstrates the international and African market capability and expertise that FNB Mozambique is able to call on through its association with the FirstRand Group, and this is fully available to Mozambican entities.”

RMB acted as global coordinator, bookrunner and mandated lead arranger for African Export Import Bank, or Afreximbank, in securing a USD1.2 billion (R18bn), 3-year Syndicated Term Loan Facility. Rand Merchant Bank (RMB) is the corporate and investment banking arm of FirstRand Bank Limited – of which FNB Mozambique is also a division. Afreximbank is a Pan-African multilateral financial institution that finances and promotes intra-and extra-African trade. The proceeds from the Term Loan Facility will be used mainly to refinance existing facilities and general corporate purposes. Suresh Chaytoo- Sector Head Banks and DFI’s at RMB said: “We are really pleased to be part of a significant effort by Afreximbank to boost its mandate across Africa with this transaction. It is encouraging the support that this fund raise received internationally, which is a testament to the credit quality and sound risk management at Afreximbank.”

RMB was the only African bank appointed as global coordinator which underlines its commitment to supporting and sustaining the Africa loan market. RMB has a long-standing relationship with Afreximbank spanning ten years. RMB also worked with First Abu Dhabi Bank PJSC and Standard Chartered Bank as joint global coordinators, bookrunners and mandated lead arrangers on the facility. Launched to a limited group of relationship banks at a launch amount of US$600 million equivalent, the Facility was more than 2.3x oversubscribed allowing for Afreximbank to subsequently upsize the amount to US$1.2 billion while also scaling back the banks on the deal. 

This successful transaction, launched against the backdrop of volatility that resulted from the announcement of the Omicron variant of COVID-19, is testament to the strength of Afreximbank’s investor relationships and the high regard and confidence that the market has for the Bank’s financial strength, and its importance to the continent. Peter Blenkinsop, CEO of FNB Mozambique, said “This transaction demonstrates the international and African market capability and expertise that FNB Mozambique is able to call on through its association with the FirstRand Group, and this is fully available to Mozambican entities.” Afreximbank has a rich history of intervening in support of African countries in times of crisis. Through the Pandemic Trade Impact Mitigation Facility (PATIMFA) launched in April 2020, the Bank has disbursed more than US$7.5 billion to help member countries manage the adverse impact of financial, economic, and health shocks caused by the COVID-19 pandemic.

“Credit to the economy will grow this year”

Credit to the economy is expected to grow this year, prompted by an improvement in economic activity compared to last year, increasing Covid-19 immunization both globally and nationally, and the reopening of various economic sectors.

Government forecasts based on data provided by the Bank of Mozambique and cited by ‘Notícias’ indicate that, last year, credit to the economy reached 288,841 million meticais, an increase of 8.80% compared to the previous year. This year, the amount could reach 331,301 million meticais, representing a 14.70% growth. The government also says that, with a view to contributing to the country’s macroeconomic stability, reflected by the achievement of the single-digit inflation target, the Bank of Mozambique will this year continue to prioritise the implementation of a prudent monetary policy, based on the calibration of its monetary policy, with the emphasis on the alignment of its benchmark MIMO interest rate with macroeconomic fundamentals.

In the foreign exchange market, the monetary authority will take into account the need to ensure an adequate level of gross international reserves (GRI) to cover approximately six months of imports of goods and services, as well as to limit excessive exchange rate volatility against the main and commercial currencies of the country, especially when this is not due to macroeconomic fundamentals.  With regard to the balance of payments, government forecasts point to a possible deterioration of the current account deficit, resulting from the worsening of the goods account balance.

The increase in the goods account deficit is the result of the notable increase in imports, especially large projects, reflecting the implementation of the Coral Sul-FLNG project, in the Rovuma Basin.

With regard to exports, growth of around US$1,024 million is expected, essentially reflecting the increase in large projects (US$979 million), thanks to the gradual recovery of external demand and the prices of goods on the international market. As for foreign direct investment (FDI), the government anticipates a net inflow of US$3,189 million this year, a reduction of US$535 million compared to last year’s projection. The drop in FDI this year is largely explained by changes in the course of projects in the northern part of the country.