18 October 2016

Mozambique: Inflation Hits 25% but Devaluation Slows

Photo: Kevin Gabbert//Wikpedia
Maputo
analysis

Annual inflation hit 24.92% in September, compared to only 2.73% a year earlier, according to the National Statistics Institute (Instituto Nacional de Estatistica). The main cause has been rising food prices, in turn propelled by the drought and the rapid devaluation of the Metical. There are now 5.46 MT to 1 Rand and 77.9 MT to 1 US dollar, compared to 2.68 and 44.62 in January. But in the past two months, devaluation has been only 1% against the Rand and 8% against the dollar.

Government promises to pay December salaries but will cut overtime payments, although not of doctors and teachers, Economy and Finance Minister Adriano Maleiane said Friday. He also left unclear whether government would pay the traditional 13th month salary at the end of the year. However, in a meeting with President Nyusi 12 October, teachers said that the overtime had already been cut. (O Pais 13, 17 Oct) Because of budget restrictions, the Ministry of Education has not been able to hire enough teachers, and schools are dependent on teachers doing extra hours covering classes without teachers.

$900 mn not additional debt . Economy and Finance Minister Adriano Maleiane has denied that the $900 mn in arms loans revealed two weeks ago by Africa Confidential (AC) is a new debt - and that is correct. The AC article was badly edited to say "another US$900 million of secret" loans and had a misleading headline claiming "more secret debts", but on close reading does not claim this is new debt. Instead it is an explanation of part of the $2.2 bn in secret loans which had not previously been identified. What AC claims is that the three SISE and Ematum companies took almost half of the money they borrowed and then lent it on to companies linked to the Frelimo elite who used it to buy weapons and pay commissions. So these are new loans, but relending money already included in the $2.2 bn, so not additional debt.

Over 1,200 workers have lost their jobs in Nampula province because of the closure of 30 companies due to the economic crisis, according to Mozambique’s main trade union federation, the OTM (Mozambican Workers’ Organization). (AIM En 13 Oct)

Private security companies are in crisis according to Boaventura Sibindy, the General Secretary of the Union of Workers of Private Security Companies. There are 102 private security companies with 52,000 workers, but 2,300 have lost their jobs in the past year, and in Sofala, Zambezia, Nampula and Niassa there are serious wage arrears, in part because government is not paying the companies. Some dismissed workers cannot claim unemployment benefits because the companies robbed them by deducting social security contributions from their wages, but then failing to pass the money on to the National Social Security Institute (INSS). (AIM En 8 Oct)

Comment
The real price of excess

Two bridges in Zambezia cut in the floods earlier this year cannot be repaired because of lack of money, according to provincial public works director Artur Graciano. The bridge over the river Malei, near Maganja da Costa, will cost $25-30 mn to rebuild. The other bridge is over the Licungo River near Mocuba. (Noticias 10 Oct)

But it is not simply lack of money, it is allocation of funds. The Maputo-KaTembe suspension bridge will be a dramatic landmark, but it comes with a high price tag - two loans from the Export-Import Bank of China totalling $754 million. A more modest but totally adequate bridge could have been built for one-third of the cost. This would have released $500 mn for bridges and roads elsewhere. A choice was made, and bridges are not being repaired in the rest of the country so that Maputo and President Guebuza can have a landmark bridge. Similarly the Bank of Mozambique headquarters in Maputo will cost $230 mn instead of the $90 mn planned; this represents a choice of one investment over others. (Mozambique news reports & clippings 326 - 10 June 2016) jh

In brief

Parliament (Assembleia da República, AR) opens its next regular session Wednesday 19 October.

Samora Machel was killed 30 years ago, 19 October 1986, in a still unexplained plane crash in Mbuzine, South Africa.

Prominent businessman Omar Faruk Ayoob was shot and severely injured Friday on Kenneth Kaunda Avenue, Maputo, in front of the US embassy. He is the brother of Momad Khalib Ayoob who was murdered in April 2012 outside a Maputo mosque. Khalib Ayoob had been arrested at Matsapha airport, Swaziland, in December 2010 with $2.7 million in banknotes; he exported the money illegally from Mozambique and said he was taking it to Dubai. The money was confiscated by the Swazi authorities. Khalib Ayoob’s widow, Reyma Ayoob was kidnapped in October 2014, and spent 22 days in captivity before she was released on payment of a ransom. In April 2014, one of his sons, Bilal Ayoob, was kidnapped, held captive for 10 days, and released when the family paid an unspecified ransom into a bank account in an Asian country. In August 2012, Ayoob's 17 year old niece, Hina Farouk Ayoob, was abducted. The Ayoob family owns several companies, one of which, Niza Lda, achieved notoriety in 2010 when the Mozambican Tax Authority ordered the public sale of its goods to pay off a debt of 276 million meticais (then $8 million) to the mobile phone company M-Cel. Niza had been selling M-Cel pre-paid phone cards but failed to pay M-Cel. (AIM En 14 Oct)

CEPAGRI was closed by the government on 12 October. The Centro de Promocao de Agricultura (Agriculture Promotion Centre) was created a decade ago to promote large scale agricultural investments, but none of them have succeeded.

Pedro Couto was sacked as Minister of Mineral Resources and Energy of 29 September and named to what is mainly a sinecure post, chair of the Board of Directors of Hidroelectrica de Cahora Bassa (HCB) the company that operates the Cahora Bassa dam on the Zambezi river. (AIM En 29 Sep) No reason has been given for the dismissal of a minister noted for his integrity. Savana agued that the gas companies pushed the sacking because Couto was driving too hard a bargain. On Monday night Leticia Deusina da Silva Klemens was named minister. She had been chair of Millennium BIM and President of the Women's Business Association (Associacao das Mulheres Empresarias e Empreendedoras Mocambicanas, FEMME).

Capitalists want more state money . Maputo province businesspeople say the government should give them more. The told a meeting with government on 14 October that taxes are too high, VAT rebates are too slow, and they want subsidised credit for agriculture. They also objected to what they saw a corruption at the lorry weigh-bridge in Moamba, which is attempting to control overweight lorries damaging roads. (AIM Pt 14 Oct)

Mixed rainfall patterns are predicted for the coming rainy season by the National Meteorology Institute (Instituto Nacional de Meteorologia, INAM). Drought will continue in the far south, Maputo province and southern Gaza. The centre of the country plus southern and western Nampula province and southern Niassa are expected to have above average rainfall, with possible flooding. But northern Niassa, Cabo Delgado and coastal areas of Nampula are predicted to have average or below average rainfall. (AIM Pt 7 Oct)

Iron and steel production in Tete is slowly moving closer. It has been a dream since the colonial era, as Tete has high quality iron ore plus coal, electricity and water. Baobab Resources has access to the iron ore and is mostly owned by private equity group African Minerals Exploration & Development Funds and 13% owned by the World Bank's International Finance Corporation. It is is trying to put together a $1 billion package with Chinese investors. In September the govenrment agreed to create an industrial free zone for the project. (Zitamar 6 Sep, 10 Aug)

And, finally, two foreign lessons for Mozambique

The British High Court has ruled that it was not an "abuse of trust" or "undue influence" for Goldman Sachs, to order to win business from the Gaddafi government in Libya, to provide members of the Libyan Investment Authority (LIA) with lavish hospitality, including prostitutes, private jets, and five star hotels, as well as to provide an internship for the brother of a senior official of the LIA. (Guardian, London, 15 Oct)

US Republican presidential nominee Donald Trump has said the US election is "absolutely rigged" by the "dishonest media" and "at many polling places". (BBC 16 Oct) It should be remembered that the respected investigative journalist Seymour M. Hersh in his 1997 book "The Dark Side of Camelot" wrote that John F Kennedy used ballot box stuffing (particularly in Texas and in Chicago, where the dead commonly vote) and the mafia to steal the closely contested 1960 election from Richard Nixon.

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