Mozambique: Audit reveals reservations about Bank of Mozambique’s 2019 accounts

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Mozambique: Audit reveals reservations about Bank of Mozambique’s 2019 accounts

8:51 CAT | 20 Jan 2022

Photo: Lusa

An audit has expressed reservations about the Bank of Mozambique’s 2019 financial statements, despite them having recalculated figures from the previous year (2018) that raised doubts, according to the annual report of the financial institution.

“Due to the fact that the predecessor auditor issued an adverse opinion on the financial statements for the previous year, we are unable to ensure the completeness, existence and accuracy of the opening balances,” reads the opinion of the independent auditor BDO, signed on 31 December, 2021, and included in the financial statements available since Tuesday on the central bank’s website.

Without that information on the opening balances, the auditor says information on “the impact on closing balances as of 31 December, 2019” is also compromised.

“This situation constitutes a limitation to the scope of our work,” it adds.

At issue is the fact that in 2017 and 2018 the Bank of Mozambique did not consider the accounts of its subsidiary Kuhanha – Sociedade Gestora do Fundo de Pensões dos Trabalhadores do Banco Central, which acquired a majority stake in Moza Banco, one of Mozambique’s main commercial banks.

The purchase generated public discussion as to its compatibility with the role of the regulator, at the same time as audit firm KPMG completed two consecutive annual audits issuing an “adverse opinion”.

“The consolidation of Kuhanha would give rise to material impacts on many elements of the financial statements” of the Bank, so the accounts did not reflect reality, it justified.

The situation is now addressed in the 2019 financial statements, with the tables including a column titled “2018 restatement”, where the figures for that year are recalculated.

But the central bank justifies the new calculations with another added factor: corrections in transactions with gold and currencies of other countries.

“The restatement aims to accommodate the change in accounting policy, in which the bank began to consolidate its subsidiary Kuhanha, as well as the correction of the accounting classification of the result of operations in foreign currency and gold,” the Bank says.

As such, the central bank in 2018 went from a positive result of 1.4 billion meticais (€19.6 million) to a now rewritten one representing a loss of 12.4 billion meticais (€173.6 million).

The main difference in the column of the new 2018 calculations is in the “results from foreign currency and gold operations”, which instead of generating 18.7 billion meticais (€261.8 million), have fallen to 4.8 billion meticais (€67.2 million).

In 2019, the negative balance for the year has been reduced to 4.8 billion meticais (€67.2 million), this being the most recent net result approved by the central bank.

With the “restatement” of the 2018 figures, total equity reached negative amounts: it went from 9.3 billion meticais (€130.2 million) to a negative 4.5 billion meticais (negative €63 million).

In 2019, total equity came back to the fore with a positive value of 2.3 billion meticais (€32.2 million).

Kuhanha tops the list of debtors to the central bank (after credits and advances granted to the government), with a total of four billion meticais (€56 million) relating to “a supply contract concluded between the parties”, whose repayment “will be made through dividends or sale of shares relating to its financial participation”, it states, without further details.

The central bank’s pension fund holds 59.4% of Moza Banco after, in June, 2017, it became part of the shareholder structure via an injection of 8.1 billion meticais as part of the bank’s recapitalisation process, which made it possible to restore levels of prudential ratios and led to the regulator (Bank of Mozambique) extinguishing extraordinary reorganisation measures.

In another reservation note regarding the Bank’s 2019 accounts, the auditor said that the state did not assume the equivalent of €528 million of debts to the central bank related to exchange rate fluctuations since 2005, and the financial institution itself did not recognise associated revenues of around €137 million.

Source: Lusa