Brazilian cooperation in Mozambique refutes criticism on proximity with business
AFP (File photo) / A Mozambican woman works in a rice paddy in Palma, where large offshore deposits of natural gas have been found. The Rovuma basin project is expected to yield some 3.4million tons of gas
Despite potentially explosive details contained in an audit report on the $500-million (R6.5-billion) missing from Mozambique’s $2-billion loan – which was extended to three state-owned companies – Africa’s largest natural gas producer is still seen as a foreign investors’ paradise.
The prospect of foreign investors pulling the plug on Maputo is unlikely, although an audit report by Kroll has raised the red flag over $500-million that cannot be accounted for, $713-million diverted through the overpricing of goods and $200-million paid in commissions to international banks.
Now it appears that the debt crisis is at risk of being overshadowed by the promise of lucrative returns, which Mozambique has the potential to deliver to foreign investors. No action on the audit report has been taken by authorities.
Mozambique President Filipe Nyusi boasted in June to foreign investors at a US roadshow that “Mozambique is back and foreign investment is safe”.
In the past four years the country has been a hot pot of civil unrest and natural disasters.
The pain also extended to the economy: an average growth of 8% in the past decade slumped to 2.8%last year, when the metical fell sharply against the dollar.
International goodwill nose-dived and a $286-million aid programme from the IMF was cut in April, after the extent of Maputo’s debt crisis began to emerge.
But Adrian Frey, president of the Mozambican-Swiss chamber of commerce, said this week it was necessary to take a long-term view.
“Over the past 20 years Mozambique has done extremely well. It moved successfully from war to peace, opened up the markets for privatisations and investments, has done legal reforms and is democratic,” he said. “The debt crisis is a step back, but this is after many good steps forward … This will force us to more transparency.”
Italy’s Eni and the US’s Anadarko own an $8-billion Coral South liquefied natural gas project in the Rovuma Basin, expected to have an annual output of 3.4million tons once it comes online in 2022.
Joseph Hanlon, visiting fellow at the London School of Economics, said investments into Mozambique were mostly gas related, and isolated from the rest of the economy.
“Gas and oil companies do not pay attention to political shenanigans. Also, it will be their money – royalties and profits – that will eventually pay off the debt, so they will feel safe from being disrupted,” he said.
Asked about the audit report’s impact, he said the damage to the country’s reputation was likely to be minimal.
“The reputations of Credit Suisse and perhaps Privinvest are more at risk. It will take a year or more to sort out the debt renegotiation and to delay repayment until there is gas revenue. After that Mozambique should have no problem borrowing against future gas revenues,” he said.
Swiss bank Credit Suisse and Russia’s VTB Capital provided loans of $850-million to state company Ematum.
Anne Frühauf, senior vice-president for Southern Africa at advisory firm Teneo Intelligence, said that politically there had been strong reluctance to hold the key players in the scandal to account. “The audit should provide the basis for prosecutions by the Mozambique attorney-general’s office. I expect this will be a very slow and incomplete process.”
All eyes will be on the IMF this month, when it visits Mozambique to discuss the report’s results with authorities. How much pressure the IMF brings to bear on Maputo will be closely watched.Source: Business Live