Nigeria and Mozambique dominate capex outlook in sub-Saharan Africa
O País / Adriano Maleiane
The Mozambican Minister of Economy and Finance, Adriano Maleiane, has denied that creditors rejected the government’s debt restructuring proposals put before a meeting in London last week.
Interviewed in Monday’s issue of the independent daily “O Pais”, Maleiane also denied that there was any “impasse” in talks with the creditors.
“I don’t see the impasse you’re talking about”, he said. “We went to London, first to continue the meeting we held in 2016, when we said we would see how the economy is growing. This time we gave an update on the situation, and said yes, there is an effort, but the conditions still haven’t been created for us to pay, under the terms we had agreed, and so we are accumulating debt”.
“It was important to say that we would like to comply with our undertakings, because the State must be credible”, he said. “But it’s one thing to have the desire, and the reality is something else”.
Maleiane presented the creditors with three restructuring options, and “we gave the opportunity to each group of creditors to question the document and request any further information. Afterwards, they took the proposals to the creditors that each one of them represents, so that they could then make counter-proposals. We didn’t fix any deadline. When one of them has a counter-proposal, he’ll present it to the government, through our consultants”.
Despite this optimistic view from Maleiane, there is no doubt that the initial reaction from the group calling itself the “Global Group of Mozambique Bondholders” (GGMB) was hostile. Their spokesperson, Thomas Laryea, in contacts with journalists described the government proposals as “a total non-starter”.
Maleiane told “O Pais” he believed this was a reaction to the government’s proposal for a 50 per cent “haircut” (i.e. cancellation) of arrears in interest payments (currently running at 636 million US dollars – so 318 million dollars would be cancelled).
The creditors, Maleiane said, argued that “in order to restructure the debt, the interest should be paid. We replied that it’s just a proposal and they would have the possibility to study it”.
He expected the GGMB (which basically consists of European hedge funds) to present a counter-proposal by April.
“Meanwhile we wait”, said Maleiane, “and work so that the economy continues to produce. Our mission wasn’t to ask for money. It was a meeting of dialogue with the creditors, to see if they can attenuate their demands so that payments can be regular”.
“I didn’t see any negative reaction”, he added. “Their reaction is normal, because creditors would like to be paid 100 per cent.”
He was sure that the creditors would make counter-proposals, since the government had never expected them to take a decision immediately. “There’s no reason to despair”, said the Minister. “Nothing was rejected, and there was nothing to be rejected, since we didn’t go to ask for money, but to renegotiate existing conditions”.
Maleiane thought the current situation was bad for all concerned, for without a solution “these loans will always be in the press, it will be negative for Mozambique’s ratings, and if that happens, it’s bad for the price of the debt, and it’s bad for the country’s risk, making the costs of loans for the private sector and for investors more expensive”.
“It’s in their interest to take a step towards normalising the situation”, he argued, “so that we can operate”.
Maleiane clearly accepts that the debts must be paid and this enrages both opposition political parties and Mozambican civil society. For the debts in question are illegal: they are the loans that three security-related companies, Ematum (Mozambique Tuna Company), Proindicus and MAM (Mozambique Asset Management), took from the European Banks Credit Suisse and VTB of Russia in 2013 and 2014.
The loans were made, because the government of the time, under President Armando Guebuza, offered illicit guarantees, which violated both the budget law, and the clause in the Mozambican constitution which states that such debt can only be authorised by the country’s parliament, the Assembly of the Republic.
The alternative to debt restructuring, advocated by Mozambican civil society bodies, and supported by the British NGO, the Jubilee Debt Campaign, is to renounce the debt. Mozambique could declare the debt odious and pay nothing at all.
No doubt creditors are aware that this option remains in the background, and that if they do not accept debt restructuring, the matter is likely to end up in the British courts (since the loans were made by the London branches of Credit Suisse and VTB). Because of the malpractice of the two banks, there is no guarantee that the creditors would win in a court case.