So close to crisis
Frantic negotiations to help Mozambique avoid the ignominy of defaulting on sovereign debt are in play, while hushed accusations threaten to sully the reputations of the current and former heads of state.
The country is facing a foreign debt crisis after it admitted to secret government borrowing of US$1.16bn. This was Mozambique’s attempt to restructure an $850m Mozambique Tuna Company (Ematum) bond, borrowed on international capital markets in 2013 to fund a fishing fleet and coastal defence hardware, inadvertently brought other debts to light.
While the deal was on the table, Standard & Poor’s downgraded Mozambique’s foreign currency ratings — triggering early repayment clauses on $787m of outstanding debt. This debt was linked to ProIndicus — a company which invested in defence equipment that Mozambique struggled to justify.
The revelations coincided with the IMF’s Spring Meetings where Mozambique’s finance minister Adriano Maleiane failed to pacify irate IMF MD Christine Lagarde, who cut off support.
A week later, President Filipe Nyusi was forced to send his prime minister to Washington to explain the debts — uncovering, meanwhile, Mozambique Asset Management (MAM), the firm trying to find a solution to a missed payment of $178m.
Finance ministry spokesman Rogério Nkomo told Bloomberg that MAM had agreed to restructure the finance with its lender, Russia’s VTB Capital. This suggests disaster may have been averted — at least until the next Ematum and ProIndicus repayments are due in 2017. S&P says it still lacks clarity on what the country owes.
Mozambique’s financial crisis has been compounded by the IMF’s decision to cut off credit half-way through its disbursement of an emergency credit line agreed in December 2015.
Ematum, ProIndicus and MAM are owned by companies linked to the intelligence services and defence ministry. They spent almost all the money they borrowed with one supplier: the Privinvest group, owned by controversial French-Lebanese businessman Iskandar Safa.
There is also the question of what the three companies got for their money. Ematum’s fishing boats cannot ship tuna to Europe until they meet European standards. Patrol boats ordered by ProIndicus are in plastic wrappers at a naval base in Pemba while the offshore oil and gas industry is stalled; and there is no sign of the shipyards that MAM paid half a billion dollars up front for.
Within Mozambique’s ruling party, finger-pointing has begun. Nyusi was defence minister when these deals were arranged. But few think he masterminded them. Rather, suspicion has fallen on his predecessor, Armando Guebuza – though few are willing to say so in public.