Mozambique News Agency

No.181, 17th April 2000


Debt servicing falls, but no debt cancellation

Mozambique's annual debt servicing has fallen from $104 million in 1999 to between $23 and $25 million, according to Finance Minister Luisa Diogo. The reduction is the result of two instalments of debt relief under the HIPC (Heavily Indebted Poor Countries) initiative, agreed by the World Bank and the IMF. Under the original HIPC initiative, Mozambique saw $3.7 billion (in nominal terms) of its debt cancelled at the end of June 1999.

The Bretton Woods institutions announced on 12 April that Mozambique has qualified for "enhanced HIPC", which knocks a further $600 million off the debt.

Diogo told a Maputo press conference on 14 April that the net present value of the debt stock now stands at $760 million (in nominal terms the figure is $1.7 billion).

The decline in the annual debt service requirements was a very welcome step, she said, "but despite this reduction, Mozambique's debt is a serious constraint on the fight against underdevelopment". "This is a poor country", she stressed, "and every cent that this country pays out abroad is taken from Mozambicans in a situation where two thirds of them are living in absolute poverty".

Diogo said the government still wants to see the cancellation of Mozambique's foreign debt in its entirety, in the belief that this would lead to better economic performance. The World Bank/IMF decision, she added, was no reason why bilateral creditors, individually, should not go further.

"We already have some very good signals, from Finland, for instance, which has taken the decision to cancel Mozambique's debt entirely". Diogo said. Spain and Austria had taken similar decisions "because they believe this money will be redirected by the government into poverty reduction programmes".

She stressed the government's commitment to the education and health sectors. In 1994, education and health between them only accounted for 14 per cent of the Mozambican budget, said Diogo. But this year the projected figure is 35 per cent.

Stocks dwindle of food aid for flood victims

The World Food Programme (WFP) has warned that emergency food stocks for the victims of flooding in Mozambique may soon run out, if the allocation of more funds is not speeded up, reports "Noticias" on 13 April.

WFP spokesperson Inyene Udoyen said that there are only about 5,000 tonnes of food left, which is enough for two weeks. WFP reckons that it distributes between 10,000 and 11,000 tonnes a month.

"At the moment we are using stocks that were meant for development projects, such as 'food for work' schemes in areas vulnerable to disasters, the project for building schools, with the support of the World Bank, and the food intended for school meals", he said.

Udoyen said that his organisation is expecting to receive a further 10,000 tonnes, which will just be sufficient until mid-May. He also called for urgency in the granting of funds, to compensate for the time it takes for the suppliers to deliver the goods and the time-consuming rules imposed for the disbursement of funds.

"We hope the donors will respond to the appeal for an allocation of $30 million", he said.

Udoyen added that the WFP has been conducting bilateral negotiations with donors, since the launching of the last updated appeal by the Mozambican government, on 22 March. There have been some pledges, he said, and support has been flowing in, albeit slowly.

"We hope that the May conference (which is to take place in Rome) will be the big opportunity for the donors to announce their contributions", said Udoyen, stressing that there should be a response, otherwise stocks will run out.

He said the WFP is preparing, together with local NGOs and district administrations, various actions for resettling people displaced by the floods. These actions included the urgent rehabilitation of about 1,000 kilometres of roads and several bridges, to allow access to isolated areas, so that food aid can be distributed.

For his part, the spokesperson for the National Disasters Management Institute (INGC), Antonio Macheve, also complained of slow donor response.

"Our concern is the need for money to pay for the present expenses. What is easily quantifiable, at the moment, is the food component, where the WFP needs $30 million, but it is also necessary to take into account resettlement, which has already started, and logistics", said Macheve.

He said that about 490,000 people are still in accommodation centres, but about 650,000 people in all will need assistance during the next six months.

Macheve also acknowledged that there are people in certain areas, who are not receiving adequate assistance.

Dhlakama threatens to take governorships by force

Renamo's leader, Afonso Dhlakama, has claimed, in an interview with a Portuguese newspaper, that his organisation is negotiating with the ruling party, Frelimo, for the appointment of Renamo provincial governors.

He told the Lisbon weekly "O Independente" that if Frelimo members still occupy the governorships in all 11 of Mozambique's provinces, it is because he, Dhlakama, allows them too.

But he added that it was now "urgent" that Renamo appoint governors in the six provinces where it won a majority of votes in the December general elections, stressing that if Frelimo does not give up these provincial governments "then I shall occupy them by force".

"It doesn't cost anything. It's just a matter of appointing our governors and administrators, and we stay there with total autonomy", claimed Dhlakama. Those who had been appointed by President Joaquim Chissano would have to leave, he insisted.

He denied this meant that Renamo was planning some sort of insurrection, and made his usual claim that "the people" would rise up spontaneously.

"It's not me who will expel them. It's the people", Dhlakama declared. "If Frelimo still occupies these positions, they owe it to me, because I am calming the people, though I am under a lot of pressure to take a vigorous attitude".

"On the day that I say 'people, Frelimo is playing about with the negotiations, do what you think appropriate', then in less than 24 hours we will take over the country", he threatened.

Dhlakama's insistence that secret negotiations are taking place flies in the face of all the repeated Frelimo denials. President Chissano, Prime Minister Pascoal Mocumbi, and the Frelimo parliamentary group have all denied that there are any political negotiations with Renamo underway.

Renamo to boycott budget debate

Renamo and its associates in the Electoral Union coalition say that they will not take part in discussions on the state budget in the country's parliament, the Assembly of the Republic, because the budget comes from a government they regard as illegitimate.

The budget for the year 2000 is four months late. Normally the budget is approved by parliament in December: but in December there was no sitting of the Assembly because of the general elections held that month.

On the parliamentary agenda, the debate on the budget is now scheduled for the last week in April.

The deputy chairperson of the Renamo-Electoral Union parliamentary group, Jose Samo Gudo, cited in "Noticias" on 12 April, said that the budget is just a continuation of the government's Economic and Social Plan for 2000, which Renamo is refusing to discuss, for the same reason.

Asked what the Electoral Union deputies will do when the plenary reopens next week, Gudo said they will be present but only to discuss what he termed "important aspects that are part of the national agenda".

US funds rehabilitation of Limpopo rail line

The United States government, through its Agency for International Development (USAID), has granted $1.6 million for emergency repairs to the Limpopo rail line, that links the port of Maputo to Zimbabwe, through the Gaza province. This line was seriously damaged by the floods that hit Mozambique in February and March.

This money is part of the 7 million US dollars needed for the emergency repair and reopening of the line. The Mozambican publicly owned Railway Company (CFM) estimates that a full repair of the line will cost about $43 million.

The Limpopo line is one of the most important outlets to the sea for landlocked Zimbabwe.

EU funds rehabilitation of northern railway

The European Union (EU) has assured the Mozambican government that it will grant more than $30 million for the rehabilitation of the 77 kilometres of railway between the town of Cuamba, in the northern province of Niassa, and Entre-Lagos, on the border with Malawi, reports "Noticias" on 11 April, citing Transport Minister Tomas Salomao.

Salomao said that during his recent visit to the northern railway, which runs from the port of Nacala to Malawi, he kept in regular contact with the European Union's headquarters in Brussels, to ascertain the status of the promised finance.

This was "because it is our intention to start work, this year, to rehabilitate the Cuamba-Entre Lagos stretch. You don't have to be an expert on railways to understand that the current state of that stretch does not satisfy the economic interests either of our country or of Malawi", said Salomao.

After travelling along that stretch, Salomao said that he now knew why Zambia had declined to use the Nacala Corridor for its imports and exports, even though Nacala is the nearest port to eastern Zambia.

"Trains take about eight hours between Nacala and Cuamba, a distance of 610 kilometres, but they then spend the same amount of time to reach Entre-Lagos, from Cuamba, a stretch of only 77 kilometres", noted Salomao.

The line from Nacala to Cuamba was completely rebuilt, under wartime conditions, in the late 1980s and early 1990s. Inexplicably the donors (including the EU) who had financed over 600 kilometres of line, declined to complete the job and pay for upgrading the remaining 77km.

IMF accused of sabotaging sugar industry

Free trade ideologues in the International Monetary Fund (IMF) have the Mozambican sugar industry in their sights and seem determined to abort the programme to rehabilitate the country's six sugar mills.

Although most sugar producing nations take measure to protect their sugar industry, the IMF objects to the measures of protection adopted by the Mozambican government - which take the form of a heavy surtax on imported sugar.

The independent newsheet "Metical" has acquired the Letter of Intent signed by the government, and dated 17 March, which lists the actions agreed with the IMF, on the basis of which Mozambique has access to concessional IMF credits. (Such agreements with the IMF are usually a precondition for much bilateral aid, as well.)

The paragraph on sugar in this document states: "The government recently increased the import surtax on sugar, in an attempt to provide temporary protection for the rehabilitation of the sugar industry. Aware of the need to assess the merits and costs of this policy in the light of its effect on economic efficiency, real wages, and opportunities for contraband and bribery, the government will carry out a study of its sugar policy in order to assess the competitiveness of the sector in local, regional and world markets, taking into consideration the effect of any local distortions in the investments of companies in the sector."

The document continues: "If the study concludes that government support for the sector is justified in economic terms, it will compare the merit of continuing the current policy of variable import surtaxes, with the alternative of subsidising the producer companies from the budget. In this case, the study will also propose the amounts, duration and disbursement mechanisms for this support".

On the face of it, this time the IMF has just demanded a study. However, this has been enough to worry the companies, and the foreign investors whose money is crucial for the rehabilitation plans.

They know what happened to the cashew processing industry when the IMF and World Bank demanded that it be stripped of protection. They know that study after study made no difference: today, most of the cashew factories remain closed, with no prospect of reopening while the liberalisation of the trade in cashews continues.

The sugar companies fear that the IMF is about to tear up the government's promise of protection against the dumping of cheap sugar from neighbouring countries onto the Mozambican domestic market.

"Metical's" sources warn that the companies, while waiting for the study results, will halt the entry of any further investment. That in turn will obviously prevent the recovery in sugar production that the government has been promising.

The most serious problem is with the Maragra mill and plantation about 80 kilometres north of Maputo, where flooding on the Incomati river in February wiped out 4,200 hectares of sugar cane. Maragra needs a further $18 million to recover from the floods, and cannot produce any sugar for the next two years.

Some of the money for rehabilitating the sugar sector takes the form of foreign loans to the government, with the understanding that the sugar companies will eventually pay them off. But if the IMF shuts down the sugar mills, that money will be added to Mozambique's public debt.

Rehabilitation funds that came from private banks or from companies themselves (such as the Mauritian consortium that has so far put $25 million dollars into the Marromeu mill on the south bank of the Zambezi) pose a legal problem.

These companies have contracts with the government: stripping away the agreed protection could be viewed as a breach of contract, leading to international lawsuits to reclaim the investment money.

The government has received very clear warnings of what further concessions to the IMF will entail. On 24 March, the Finance and Agriculture Ministers, Luisa Diogo and Helder Muteia, met with the sugar companies. One of "Metical's" sources said the meeting gave a very clear message: if the protection is removed, then the industries will just shut their doors.

Sugar company to relaunch livestock farming

The Sena Sugar Company, whose major shareholder is a Mauritian consortium, has decided to invest about $1.5 million in the relaunching of livestock farming in the central province of Zambezia.

Currently involved in rehabilitation work on the Marromeu sugar mill, in the neighbouring province of Sofala, in a project costed at about $70 million, the company also intends to rear 10,000 head of cattle in the Luabo area of Zambezia. In its initial phase, the project will start off with the 1,000 head that already exist and a further 2,000 heifers will be imported.

It is expected that the project, which will create 60 jobs in Luabo, will later be expanded to the districts of Mopeia and Chinde.

Meanwhile, according to a source in the Sofala provincial government, the privately-owned company Enacomo has applied for 30,000 hectares of land to rear about 10,000 head of cattle in Marromeu district, near the south bank of the Zambezi. It is expected that 20 people will be employed in this project.

About $300,000 have been earmarked for the project, and it will produce 400 tonnes of meat per year to be consumed in the port city of Beira.

Enacomo already holds the rights to exploit a block of about 200,000 hectares in Marromeu. About 30,000 hectares of the block will be home to an ambitious game farm project for the preservation of wild life - this has been costed at $400,000.

Also the Madal group is currently transferring its 9,000 head of cattle and 1,000 head of water buffalo from its coconut plantations north of Quelimane to the administrative post of Micuane, in Luabo.

Madal also intends to invest about $600,000 in the rehabilitation of infrastructures, roads, fences and houses in an area of 26,000 hectares.

S Africa to review Cahora Bassa agreements

South Africa is prepared to discuss the possibility of reviewing its agreements with Mozambique and Portugal on the supply of electricity from the Cahora Bassa dam (HCB), Mozambique's Minister of Mineral Resources and Energy, Castigo Langa, has told "AIM".

Under the agreements, which are more than two decades old, all the electricity generated by Cahora Bassa, located on the Zambezi river, in the western province of Tete, is earmarked for the South African electricity company Eskom. Mozambique is in the odd position of requiring permission from Eskom to use power generated from a dam on its own soil.

South Africa remains the largest consumer of Cahora Bassa power, followed by Zimbabwe. The line from Cahora Bassa to Zimbabwe started operating about three years ago.

South Africa has been paying the Cahora Bassa company, HCB, regularly for its electricity, albeit at a tariff HCB regards as far too low. But Zimbabwe has run up a debt to HCB which now amounts to about $30 million.

South Africa is prepared to review the agreements because it now has surplus electricity generating capacity, and so is not dependent on Cahora Bassa, which is not the scenario imagined when the dam was built in the 1970s.

Langa confirmed the South African interest in reviewing the agreements, and noted that this will allow increased supplies to Mozambique. He explained that for Mozambique, the most important issue is to eliminate the clause under which Mozambique must ask Eskom, two years in advance, for the supply of the Cahora Bassa electricity it will need for its own requirements.

He said that reviewing the agreement is part of a plan of the Mozambican government aimed at improving HCB's services in the interest of the country.

Mozambique has expressed an interest in acquiring the 82 per cent share in HCB still held by Portugal, and an international company has been charged with carrying out a study on how to render HCB more profitable.

Langa said that Mozambique is also considering seeking other partners for the management of HCB.

The government also wants to ensure transmission lines from Cahora Bassa to those provincial capitals which are still dependent on obsolete oil-fired power stations, such as Inhambane, in the south, and Pemba in the north.

Swedish aid for Mozambique

The Mozambican and Swedish governments on 6 April signed two agreements on debt relief and on education.

Under the first agreement Sweden agreed to place a further 50 million crowns (about $6 million) into the Mozambican debt relief fund. This fund is a mechanism whereby donors pay off Mozambique's debt, thus saving money from the Mozambican state budget that would otherwise have gone on debt servicing.

The second agreement concerns a grant of 150 million crowns (about $18 million) to support the government's strategic plan for the education sector.

In addition, an amendment was signed to the existing agreement on Swedish support for Mozambican roads, budgeted at an extra 35 million crowns ($4.2 million).

Three killed by cyclone Hudah

A preliminary assessment of the damage caused by cyclone Hudah in the provinces of Nampula and Zambezia indicates that at least three people died, 424 houses were destroyed, and about 573 hectares of crops were swamped. As the assessment continues, more damage is discovered, and the figures increase.

Of the deaths, two occurred in Nampula province, whereas the third was reported from the district of Pebane, in Zambezia, where another four people were seriously injured.

While it was in the Mozambique Channel, Hudah brought torrential rain to the Nampula and Zambezia coasts. When it came ashore on 8 April, Pebane bore the brunt of the cyclone. Other areas in Zambezia affected were the districts of Maganja da Costa, Mocuba, Gurue, and Milange and the provincial capital, Quelimane.

The INGC says that it will only start distributing aid to the victims, after making a full assessment of the damage in all the affected regions. Meanwhile, the victims will have to fend for themselves.

First alumina shipment for MOZAL

The "alumina bridge" between Australia and Mozambique is now open, declared Ian Reid, managing director of the MOZAL aluminium smelter, under construction on the outskirts of Maputo, at a ceremony on 14 April to mark the arrival of the first shipload of alumina, the smelter's raw material.

The ship, the "Petka", docked at the Matola industrial port on 12 April, carrying a cargo of 36,0000 tonnes of alumina, produced by the Worsley refinery in Western Australia. The ship was loaded on 28 March at the Australian port of Bunbury, and took 15 days to make the journey across the Indian Ocean.

Reid told the gathering that the Worsley Refinery is undergoing a $600 million expansion. The refinery will supply MOZAL with 500,000 tonnes of alumina a year.

The alumina shipments will turn Australia into Mozambique's second largest trading partner (after South Africa).

This shipment of alumina (valued at about $7 million) is now being loaded into the MOZAL silos. Trucks will carry it the smelter site at Beluluane, 17 kilometres from central Maputo, when MOZAL is ready to produce its first metal, in the third quarter of this year.

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