Maputo, Mozambique — The Mozambican state's strategy to privatise what were once state-owned commercial banks lay in ruins Tuesday night after the private shareholders in the Austral Bank, the third largest bank in the country, pulled out.
To the dismay of the Bank of Mozambique, at the Austral Bank's Annual General Meeting the private shareholders proved unable or unwilling to provide the increase in capital required to shore up the bank, and simply handed their shares back to the state.
According to the governor of the Bank of Mozambique, Adriano Maleiane, the Austral Bank requires an increase in capital of no less than 1,300 billion meticais. In addition, it requires a further 1,500 billion meticais for its pension fund.
The total financial requirement of 2,800 billion meticais is equivalent to about 151 million US dollars.
This means that, as long suspected, the disaster in the Austral Bank is worse than that in the larger of the two privatised banks, the Commercial Bank of Mozambique (BCM).
The alarm bells in the BCM were sounded when it announced losses for 1999 equivalent to 127 million dollars. Further losses of over 20 million dollars were announced for 2000.
But the majority shareholder in the BCM is the largest Portuguese financial institution, the BCP of Jardim Goncalves, which had no problem in coming up with its share of the necessary capital to bring the BCM within the central bank's solvency limits.
The Austral Bank has no such solid backing. When it was privatised in 1997, 60 percent of its shares were purchased by a consortium headed by the Southern Bank Berhard (SBB) of Malaysia. SBB took 30.4 percent of the shares, while its Mozambican partner, Invester, a company headed by former Industry Minister Octavio Muthemba, took 29.6 percent.
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But it seems that the Malaysians were quite unprepared to invest the money needed to put the bank on a solid footing.
A statement issued on Tuesday night by the Bank of Mozambique recalled that the assumption behind privatisation was that the private shareholders "would guarantee the capital and know-how required so that, within three years, the institution would become modern and competitive".
But the central bank, in its role as supervisor of the banking system, noted that the Austral Bank management was not carrying out the agreed restructuring. Its financial situation deteriorated, liquidity problems occurred, and its credit portfolio was "of poor quality" - a euphemism for non-performing loans.
The Bank of Mozambique now reveals that it issued several warnings to Austral Bank, and despite this there was no sign of the promised fresh capital from the private shareholders. Nor was there any improvement in the bank's management.
The Austral Bank was "running risks incompatible with its capacity", the statement said, "which led the Bank of Mozambique to impose a series of restrictive measures, mainly on the expansion of credit and on participation in the inter-bank money market".
