Mozambique: “LAM’s biggest debtors are government entities”

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Mozambique: “LAM’s biggest debtors are government entities”

12:48 CAT | 06 May 2022

File photo: DW

Interviewed by DW, economist Thomas Selemane says he has no doubt that Mozambican Airlines’ debt is putting the company’s future at risk, and that the resolution of the problem depends “on who runs the country”.

In recent statements to the press, published in the newspaper ‘O País’, the director general of Linhas Aéreas de Moçambique (Mozambique Airlines-LAM), João Pó Jorge, acknowledged that the country’s flag carrier airline “is not being able to repay its debt”, because there is still no restructuring plan.

Interviewed by DW about the current situation at the national airline, Thomas Selemane frankly states that the company’s debt – estimated at seven billion meticais – puts the continuity of its operation at risk, and that only the government can solve LAM’s problems.

According to the Mozambican economist, the roots of these problems are so “structural” that the resolution “does not depend on who sits in LAM’s offices, but on who is running the country”. This is because, he adds, the company’s biggest debtors are ministries of the executive itself or clients of the state.

DW Africa: In 2018, the announcement of LAM’s new management brought hope to the airline. However, four years later, the financial problems remain. What is this stagnation due to?

Selemane.dw_ — *Thomas Selemane, Centre for Public Integrity (CIP)*

Thomas Selemane (TS): I think the stagnation is due to two main reasons. The first is structural, which has to do with the failure of the Mozambican state to make LAM a real company, a real airline, which generates profits with proper business management, without ‘politics’. The second reason why LAM is in this situation is the market reason, concerning the company’s lack of ability to respond to the demand for air transport in the last four or five years.

DW Africa: So you reject the company’s justification associating this failure with Covid-19…

TS: Covid-19, in the case of Mozambique, only arrived practically in mid-2020, when half of the LAM management team’s commitment time had already passed. It is true that the pandemic has seriously affected the business performance of LAM, and of several other companies, not only in Mozambique but in the world. But it’s also true that, from the airline’s reports and accounts, even without Covid-19, I don’t believe that now, in May 2022, LAM would be in a better situation than it is. Because, for me, the fundamental issues that put LAM in the red are not being resolved.

DW Africa: And what are these issues?

TS: Firstly, the inefficiency of the company, characterised by the excess of workers and collaborators, taking into account the true size of the enterprise. Second, the political interference that LAM has from several government and state customers who travel with the company without paying, or who accumulate debts that are never paid. The situation is extremely serious.

DW Africa: LAM’s managing director recently said that there is still no restructuring plan for the company. Is this justifiable, four years after the new administration took office?

Maputoairp.dw_ — *Maputo airport [File photo: DW]*

TS: It’s not justifiable from a technical point of view, because no company in the world stays four years with the accounts ‘in the red’ and without a restructuring plan. That simply doesn’t exist. Why does this happen here? It happens because the Mozambican state does everything to make LAM not a company, but an instrument of performance, fortification and maintenance of power. It is not by chance that the big debtors are ministries, public institutes and other government entities.

DW Africa: Could this LAM debt, which currently stands at 7 billion meticais, jeopardise the company’s activity?

TS: It’s not that it could jeopardise [it] – it’s already jeopardising the company’s continuity, because LAM’s operations today are minimal. Minimalist in the sense that the company can only carry out indispensable flights. There is one plane that makes three to four routes on the same day. This is simply unsustainable. The risk of failure and breakdown of LAM’s operations is not far away. It is a risk that everyone is seeing by the day.

DW Africa: Even so, the airline’s management once again stated that it plans to increase its fleet and the number of routes by 2030. Does that seem like a feasible plan?

TS: I don’t think so. What LAM should say is that it will carry out a company planning process. It cannot promise us an increase of the fleet. The company has to resolve the debts; it has to resolve the inefficiency. Without this, no bank today will lend money to the company. How will it increase the fleet? It’s impossible. The Mozambican state has no money to give to LAM, and neither will the International Monetary Fund (IMF) nor the World Bank allow it.

Source: Deutsche Welle