Mozambique: Public Debt Now U.S $11.64 Billion Dollars

Maputo – Mozambique’s total public debt stood at 11.64 billion US dollars, as of 31 December 2015, Prime Minister Carlos Agostinho do Rosario announced on Thursday.

Speaking at a Maputo press conference called to explain the country’s current economic situation, he said that the overwhelming majority of the debt, 9.89 billion dollars, was foreign debt. The confirmed domestic debt was 1.75 billion dollars, while a sum of 233 million dollars was still being reconciled.

From the figures released by Rosario it is clear that the foreign debt ballooned enormously under the previous government, led by President Armando Guebuza. The Guebuza government guaranteed loans taken out by three publicly-owned companies in 2013-2014 amounting to just over two billion dollars. That is over 17 per cent of the total foreign debt.

Of these three companies, the only one known to the Mozambican public, or to the International Monetary Fund (IMF), prior to this month was the Mozambique Tuna Company (EMATUM), which issued bonds for 850 million dollars in 2013, fully guaranteed by the government.

The two large undisclosed loans were to companies called Proindicus (622 million dollars) and Mozambique Assets Management (535 million dollars).

Rosario said that the purpose of Proindicus “is to provide security services to hydrocarbon companies, to protect maritime traffic and vessels and to provide search and rescue services in Mozambican territorial waters”.

As for Mozambique Assets Management (MAM), its purpose was to provide maintenance and repair services to Proindicus and other companies, so that they did not send foreign currency out of the country in order to purchase these services.

Proindicus is owned by the same three public concerns that own EMATUM – the Institute for the Management of State Holdings (IGEPE), the public fishing company Emopesca, and GIPS (Investments, Holdings and Services Management). Although the latter is a limited company, it is mostly owned by the social services of the State Intelligence and Security Agency (SISE).

As for MAM, Finance Minister Adriano Maleiane told the press conference that it is 98 per cent owned by GIPS, one per cent by EMATUM and one per cent by Proindicus.

Maleiane said that the Proindicus loan is to be repaid in the next five years at an interest rate of 3.75 per cent. The first payment is due in May, and that is for just 24 million dollars. But over the five year period, the repayments will be running at an average of 119 million dollars a year.

As for MAM, the repayment period is four years at an interest rate of 7.7 per cent. As with Proindicus, the first payment falls due in May. But it is for 124 million dollars.

Maleiane said MAM “is looking for a solution for the first payment”. It was “trying to find the resources”. But if it failed, then the state would have to pay.

“The State has issued guarantees and these are to be honoured if the companies cannot honour their payments”, he admitted.

Rosario divided these debts into public and commercial components. “We want to make it clear that the State will pay the public interest part of the debts, while the commercial component must be paid by the respective companies”.

Proindicus and MAM are supposed to run at a profit by selling their services to oil and gas companies and other maritime enterprises – this had not happened so far, Rosario said, because it had taken longer than expected for the main hydrocarbon prospection companies, the American Anadarko and ENI of Italy, to reach their final investment decisions.

“It was assumed that by now Anadarko and ENI would be operating”, he said. That would go towards covering the commercial part of the debt. But currently there was no revenue coming in from Anadarko or ENI paying for the services that could be provided by Proindicus and MAM.

One of the aims of MAM is to set up a floating dock to repair vessels at sea. Maleiane believed that other private companies could take a stake in this dock.

He denied that MAM had anything to do with the Logistical Base being set up in Pemba, capital of the northern province of Cabo Delgado, to provide services for the oil and gas industry. MAM was not linked to the public company Ports of Cabo Delgado (PCD), which has the lease on the Pemba base.

Yet, according to government spokesperson and Deputy Health Minister Mouzinho Saide on Tuesday, MAM will operate a shipyard in Pemba. Not only is there no new shipyard other than the Logistical Base, but the whole Cabo Delgado coast, from Palma (the nearest district to the natural gas discoveries in the Rovuma Basin) to Pemba has been leased to PCD.

Rosario admitted that the information on the Proindicus and MAM debts “should have been shared in good time with the Mozambican people and with the international cooperation partners, including the IMF and the World Bank”.

But “the sensitive moment, characterised by instability, together with the transition from the previous government to the new cycle of governance which began in 2015, meant that we had knowledge and gradual contact with the dossiers on these debts as we went into greater depth about what was already known”.

This is a polite way of claiming that Guebuza’s outgoing government did not inform the new government of the true state of the country’s debts.

“We could have done better”, admitted Rosario. But it had been difficult to discuss debts that concerned “state security” in the “atypical situation” when the main opposition party, Renamo, had one foot in parliament, and the other in a bush war against the government.

As for the deal struck with the EMATUM bondholders whereby the EMATUM bond was transformed into a sovereign government bond, Rosario thought this was good for the country, despite the higher interest rate (10.5 per cent).

Under the original arrangement the government was paying the bondholders around 200 million dollars a year. But now the payments were staggered over a longer period. As from 2017, interest on the bond of 78 million dollars a year will be paid (in six-monthly payments of 39 million dollars).

This is a “bullet bond”, meaning that the capital will be paid in a lump sum at the end. That single payment will come in 2023, and Rosario put it at 731 million dollars.

Efforts would be made to make EMATUM a going concern.

“To ensure that EMATUM pays its part, a strategic partner is being identified who can bring experience and technical capacity to make the company profitable”.

Asked why the government had opted to buy the 24 EMATUM fishing boats from a shipyard in Cherbourg, France, rather than issuing an international tender, since there are many shipyards across the globe that can build fishing boats, Fisheries Minister Agostinho Mondlane claimed this was a matter of economy.

He said the order also contained military vessels, and in general military equipment is not put out to tender. It had been decided to put the six military speedboats and the 24 fishing boats in the same order, and so they had to come from the same shipyard. He was confident that a single order for the 30 boats had lowered costs.

SOURCE: Mozambique News Agency