Moz SOEs fail to ac­count for $500m

Loans are be­ing in­ves­ti­gated

The Star Early Edition - - BUSINESS REPORT - Matthew Hill and Borges Nhamire

MOZAMBICAN state com­pa­nies have failed to ac­count for about a quar­ter of the pro­ceeds of $2 bil­lion (R25.8bn) in loans be­ing in­ves­ti­gated, ac­cord­ing to a re­port by Kroll that cred­i­tors said was needed for debt re­struc­tur­ing talks to start.

“At least $500 mil­lion of ex­pen­di­ture of a po­ten­tially sen­si­tive na­ture re­mains unau­dited and un­ex­plained,” Kroll said in the re­port, com­mis­sioned last year by Mozam­bique’s at­tor­ney-gen­eral. Credit Suisse Group and VTB Bank were paid al­most $200m in fees for ar­rang­ing the loans, the New York-based in­ves­ti­ga­tor said.

The In­ter­na­tional Mon­e­tary Fund (IMF), which has said the probe was nec­es­sary for it to re­sume fund­ing to the coun­try, noted “in­for­ma­tion gaps” on how the money was used, but oth­er­wise wel­comed the re­lease of the au­dit. “These doc­u­ments con­sti­tute an im­por­tant step to­ward greater trans­parency re­gard­ing the loans,” it said on Satur­day.

The sum­mary of the au­dit into three gov­ern­ment loans could help pave the way for re­struc­tur­ing talks with own­ers of the debt and mend re­la­tions with the IMF. The fund halted pay­ments to the world’s ninth-poor­est na­tion in April last year, when the gov­ern­ment re­vealed it guar­an­teed two pre­vi­ously hid­den loans by sta­te­owned com­pa­nies to­talling more than $1bn.

De­tailed re­view

VTB won’t com­ment on the Kroll au­dit un­til the Moscow-based lender has com­pleted a re­view of the re­port. Credit Suisse de­clined to com­ment.

The 67-page doc­u­ment dubbed “Project Mon­tague” also raised ques­tions about the pric­ing of the as­sets that two of the Mozambican sta­te­owned com­pa­nies bought from Priv­in­vest, which was the main con­trac­tor for the projects the loans funded.

An in­de­pen­dent ex­pert Kroll hired to price boats and air­craft un­der the con­tracts val­ued them at $505m, while ProIndi­cus and Ema­tum were in­voiced for $1.2bn.

Priv­in­vest wel­comed the re­lease of the au­dit re­port, say­ing it showed the com­pany co-op­er­ated, a spokesper­son said yes­ter­day. The com­pany dis­puted Kroll’s pric­ing, say­ing that the Mozambican com­pa­nies’ prices were “com­pa­ra­ble to those charged to our other cus­tomers.”

The at­tor­ney-gen­eral re­ceived the thrice-de­layed re­port from Kroll last month, and planned to re­view it be­fore an­nounc­ing the find­ings.

While the three com­pa­nies, Ema­tum, ProIndi­cus and Mam, had been fore­cast to gen­er­ate to­tal op­er­at­ing rev­enues of $2.3bn by De­cem­ber 2016, their sales are neg­li­gi­ble, Kroll said. The firms rely on fi­nan­cial sup­port from the gov­ern­ment to make debt re­pay­ments, it re­ported.

An IMF team will visit Mozam­bique for nine days from July 10 to dis­cuss the re­sults of the probe and re­assess the macroe­co­nomic sit­u­a­tion, the fund said. It will also talk to the gov­ern­ment about the bud­get for next year.

“The re­port sum­mary pro­vides use­ful in­for­ma­tion on how the loans were con­tracted and on as­sets pur­chased by the com­pa­nies,” the IMF said. “How­ever, in­for­ma­tion gaps re­main, in par­tic­u­lar on the use of the loan pro­ceeds.”

The fi­nance min­istry an­nounced in Oc­to­ber it can’t af­ford to ser­vice its com­mer­cial dol­lar debt, and de­faulted on its $727m Eurobond at the start of the year. It’s also missed pay­ments on two state-guar­an­teed loans. Ar­rears for all three loans to­tal about $490m.

A group of bond­hold­ers have said they’ll only start debt re­struc­tur­ing ne­go­ti­a­tions once the au­dit is pub­lished and they’ve seen the out­line of a new eco­nomic pro­gramme be­tween the gov­ern­ment and the IMF. – Bloomberg

Bond­hold­ers will only start debt re­struc­tur­ing ne­go­ti­a­tions once au­dit is pub­lished.

PHOTO: BLOOMBERG

A hand­ful of met­i­cal ban­knotes in this ar­ranged photo. The Mozambican fi­nance min­istry an­nounced in Oc­to­ber that it can’t af­ford to ser­vice its com­mer­cial dol­lar debt.

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