Mozambique: State stakes in projects through ENH ‘represent fiscal risk’ – NGO

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Mozambique: State stakes in projects through ENH ‘represent fiscal risk’ – NGO

3:03 CAT | 22 Jul 2020

File photo: Lusa

The model under which the Mozambican state has a stake in natural gas projects in the country, through Empresa Nacional de Hidrocarbonetos (ENH), represents a fiscal risk, according to the Centre for Public Integrity (CIP), a non-governmental organisation that campaigns for good governance and against corruption.

In a note distributed to the media on Tuesday, the CIP notes that ENH, which represents the state in gas projects in the country, is responsible for over 90% of external public sector debt, and argues that this is not matched by benefits on the same scale.

“Indicators considered the most important in fiscal monitoring warn of the weak situation of public and state-owned enterprises, and ENH is no exception, highlighting the fact that the level of capacity to meet commitments with the resources that constitute its assets is far below that recommended,” the CIP notes.

“The net result for 2019 was 515.9 million meticais(€7 million),” it stresses. “Despite being positive, ENH’s net result fell by about 70% and 81% in relation to 2018 and 2017 respectively.”

At the same time the NGO goes on, there is a lack of transparency about the company’s financing costs – information that would facilitate an analysis of the conditions to which the state is subject in ensuring its participation in natural gas projects.

“The CIP recommends to the Government greater transparency and availability of information on financing … for the State’s participation in gas projects, so as to allow [its] inclusion in decisions on the State’s participation in this sector,” the note states, stressing the need to monitor the applicable interest rates.

In June, the minister of mineral resources and energy, Max Tonela, announced that ENH intended to find cheaper financing than that currently available to fund its stake in the largest natural gas project under construction in the country.

He said that “there is an agreement” with other Area 1 partners – international oil companies, led by Total of France – to finance ENH’s 15% share “in the construction phase”, but “as a company, ENH aims to maximise the return on its investment and, from that perspective, it is working with financial advice […] with a view to finding financing alternatives that allow lower costs of the operation.”

A project to raise around $1.5 billion (€1.3 billion) for ENH’s stake in Area 1 was the largest presented at an investment forum organised in November last year by the African Development Bank (ADB) in Johannesburg, South Africa.

Source: Lusa