JUST IN: Mozambique settles macroeconomic loss claim over "tuna bonds"
File photo: O País
The consultancy KPMG has delivered an “adverse opinion” on the Bank of Mozambique’s accounts for 2017, leaving economists fearing the central bank could be discredited.
The independent auditors KPMG’s report on the central bank’s accounts for 2017 states that the documents “do not present in a transparent and appropriate way the financial position” of the Mozambican financial regulator.
The auditors’ stance is part of an annual report on the bank’s yearly accounts, which was released in June and started to circulate on Mozambique’s social networking sites two weeks ago.
The key issue is the fact that the BM did not consolidate “the financial statements of Kuhanha”, the pension fund company it controls, “and its subsidiary acquired during 2017”, that is, Moza Banco, part-owned by Portuguese Novo Banco, whose share-holding fell from 49% to 7.5%.
“This investment was accounted for at historical cost. According to the International Financial Reporting Standard, the subsidiary should have been consolidated, considering that it is controlled by the Bank,” the auditors note.
Moza Banco had already been bailed out in 2016 by the central bank, which injected about 8 billion meticais (105 million Euros) into it, saying that it was preventing the collapse of the institution and concomitant consequences for the country’s financial system. (Moza Banco was the fourth largest bank in Mozambique at the time).
Earlier this year, shareholders decided to recapitalise to that amount, and among several competitors willing to participate, the Bank of Mozambique announced in May that only its own pension fund had met the requirements to do so – a decision considered illegal by the Mozambican Central Commission of Public Ethics (CCEP).
“If Kuhanha had been consolidated, many elements in the [central bank’s] financial statements would have been materially impacted,” KPMG notes, without specifying the exact impact on the year’s positive result of 5.5 billion meticais (about 78 million Euros).
In addition, according to the annual report, the Bank of Mozambique granted a 11.7 billion meticais “interest-free advance” to Kuhanha in the last year, whose repayment “will be made on the basis of the dividends or sale of the shares of its financial holdings”.
Mozambican economist Antonio Francisco said today in a statement to Lusa that the central bank’s negative rating was like “a punch in the stomach”, and that the news damaged the good image that the country was trying to recover.
“This news comes as a blow to the stomach when we consider that Mozambique is trying to recover its image after the hidden debts scandal,” Francisco said – at a time when the fate of two billion dollars of undeclared state debts, discovered in full in 2016, still remains to be clarified.
This is the first time in the last eight years that a consultancy has issued a negative opinion on the central bank’s annual accounts, Francisco notes, adding that it is now necessary to find out if the irregularities are the result of an error or something worse, since at this point the auditor “wrapped up and failed to clarify”.
“It is worrisome that the central bank of a country in a crisis situation and internationally in a situation of selective bankruptcy is in this position,” he concludes.
Another Mozambican economist, Thomas Selemane, goes further and, in statements to today’s edition of the weekly Savana, argues that if Bank of Mozambuique governor Rogério Zandamela does not make his position available, it is up to President Nyusi to fire him for failing to safeguard confidence in the national financial system.
“You cannot stand by as if the KPMG report was for journalists to see and commentators to talk about it and debate on social networks,” he added.
Despite several attempts, Lusa was unable to obtain clarification from the Bank of Mozambique.
In its annual report, the Bank of Mozambique’s management notes that it has taken the decision “to consider for consolidation purposes only acquisitions or investments directly related to its functions as a central bank”.
However, Selemane notes that while “all other acquisitions or investments made by its subsidiaries are outside the scope of consolidation”, the Bank of Mozambique has nevertheless consolidated another of its subsidiaries, Sociedade Interbancaria de Moçambique.
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