Barclays warns on Moz FDI
Barclays Africa’s Mozambican unit expects foreign direct investment (FDI) to slow in the country as companies scale back or postpone investments after revelations of previously undisclosed government debt and the first default on a stateguaranteed loan.
Investment in general would also be hurt by credit downgrades, rising debt and a weakening local currency, Barclays Bank Mozambique said in reply to City Press’ questions.
However, the bank sees the effect of these as short term, with its longterm future anchored by gas deposits.
“We expect a slowdown on investment, particularly foreign direct investment, which will have an impact on the banking sector growth and shortage of foreign currency availability,” the bank said.
“In the long term, Mozambique remains one of the most attractive markets in the region, with expected growth rates of high single digits or even double-digit growth.”
Mozambique was plunged into crisis earlier this year when the International Monetary Fund found that the government hid as much as $1.4 billion (R21.3 billion at the current exchange rate) in state guarantees to state-owned companies.
The World Bank subsequently led international donors in suspending aid to the southern African nation until the government made a full disclosure of its foreign debt.
Finance Minister Adriano Maleiane has conceded that state-owned Mozambique Asset Management had missed a May 23 $178 million loan repayment to Russia’s VTB Bank, the country’s first default.
He said talks were continuing, however, and he urged both parties not to depend on a state bailout.
Barclays said an immediate consequence of the crisis, which has seen ratings agencies S&P Global and Fitch downgrade the country, was an increase in bad loans, though that would be mitigated by the low level of unsecured private debt.
However, the bank is urging President Filipe Nyusi’s government to quickly conclude the negotiation process for the export of gas to help pay for the burgeoning foreign debt and restore confidence in the markets.
Barclays Bank Mozambique, which is among Mozambique’s five largest banks, said it was continuing to invest in the country, including launching Ready to Work, a project that seeks to help youngsters prepare for employment and entrepreneurship.