Mozambique News Agency

AIM Reports


No.351, 7th December 2007


Cahora Bassa is ours – President Guebuza

"The last mark of 500 years of foreign domination in our country has finally been removed”, President Armando Guebuza told a cheering crowd on 27 November, as the country celebrated the handover of a majority participation in the Cahora Bassa dam to the Mozambican state.

President Guebuza was speaking at the dam town of Songo, overlooking the Zambezi River in the western province of Tete, after he had accompanied four other heads of state around the dam wall and power station.

They included Zimbabwean President Robert Mugabe, whose country is already a consumer of Cahora Bassa power, and Bingu wa Mutharika of Malawi, which has expressed an interest in purchasing electricity from the dam. Also on the tour were Presidents Festus Mogae of Botswana and Levy Mwanawasa of Zambia, and the Prime Minister of Swaziland Absalom Dlamini.

November 26 and 27 saw the conclusion of a series of technical documents on the transfer of shares in the dam operating company, Hidroelectrica de Cahora Bassa (HCB), from Portuguese to Mozambican ownership, and on the financial arrangements.

In essence, the deal is simple – Mozambique is paying Portugal $700 million to acquire 67 per cent of the HCB shares. This pushes the Mozambican state’s holding in HCB up from 18 to 85 per cent, while the Portuguese holding falls to 15 per cent.

The money for the transfer has been lent to the Mozambican government by a consortium formed by the French bank CA Lyon and the Portuguese Investment Bank. They will recoup the money from the sale of Cahora Bassa power. The government has pledged that no money from the Mozambican state budget will go towards paying this debt.

"Cahora Bassa is ours!" President Guebuza declared to the Songo rally. "As from today Cahora Bassa joins the other resources to participate in implementing our national anti-poverty agenda".

President Guebuza pointed out that this is the second largest hydroelectric dam in Africa. Cahora Bassa can generate 2,075 megawatts of power, not far short of the 2,100 megawatts of the Aswan dam in Egypt. Transfer of ownership, he said, "will favour an attractive environment for further undertakings to generate electricity for the national grid".

One example was the planned dam at Mphanda Nkuwa, also on the Zambezi, 70 km downstream from Cahora Bassa. "Our dream is that the day will come soon when we exploit our full potential of more than 12,000 megawatts", declared the President.

Control over Cahora Bassa, he added, "opens up the possibilities of accelerating our industrialisation. The availability of more electricity will be a strong factor in making investment projects, public and private, national and foreign, viable in our country".

It had taken 32 years since independence to achieve the transfer of Cahora Bassa. "These were 32 years of advances and setbacks, 32 years of hopes and frustrations", said President Guebuza.

One of the sticking points in the long drawn out negotiations was how to deal with HCB’s debt to Portugal, which the Portuguese government claimed had reached $2.5 billion. Eventually this was knocked down by 90 per cent to $250 million, paid off in a lump sum from HCB’s coffers in 2006.

New board

A general meeting of the shareholders of HCB in Maputo on 27 November elected former Transport Minister Paulo Muxanga chairman of the board of directors.

Re-elected to the new board were Manuel Tome, who is the head of the parliamentary group of Frelimo, and Gildo Sibumbe, a former director of the state electricity company, EDM.

There are four other Mozambican directors (Max Tonela, Isabel Guembe, Domingos Torcida and Rosaque Guale), and two Portuguese directors (Fernando Marques da Costa and Alvaro Pinto Correia).

The supervisory board is now chaired by jurist Acucena Duarte, who also heads the Petitions Commission of the Mozambican parliament, while the chair of the General Meeting is the Portuguese, Galvao Teles.

If, as seems likely, Portugal sells a further five per cent of its shares in HCB, the number of directors to which it is entitled will fall to one.

Government set to meet 2007 targets

The Mozambican government is on target for meeting most of the targets laid down in its Economic and Social Plan for 2007. Addressing the country's parliament, the Assembly of the Republic on 5 December, Prime Minister Luisa Diogo noted that the plan had set a target for a seven per cent growth in Gross Domestic Product. This is likely to be surpassed, with figures for the first six months showing that the economy was growing at a rate of 8.8 per cent a year.

The plan also envisaged a growth in commodity exports of nine per cent, reached $2.292 billion. This figure too looks set to be comfortably surpassed, as by September the country had exported goods worth $1.844 billion.

Over three quarters of these export earnings came from just three products - the aluminium ingots produced at the MOZAL smelter on the outskirts of Maputo, the natural gas piped from Inhambane province to South Africa, and electricity, mostly produced at the Cahora Bassa dam on the Zambezi and sold to South Africa and Zimbabwe.

The plan called for net international reserves sufficient to cover imports of goods and services for four months. Diogo said that currently the reserves cover five months of imports.

The metical showed gains against both the US dollar and the South African rand. By September, the metical had appreciated by 1.1 per cent against the dollar and 2.1 per cent against the rand.

Diogo recalled that one of the government's main goals was to establish conditions to make investment in Mozambique attractive - and by October new investment projects valued at over $7.3 billion had been approved (however, one project, the building of an oil refinery at Nacala-a-Velha, in the northern province of Nampula, accounts for $5 billion of this).

When it comes to the inflation rate, there is doubt that it will meet its target for an average annual rate of six per cent. Diogo said that inflation from January to October had reached 5.3 per cent.

As for education, in 2007 a further 722 schools began operating - 677 primary schools, and 45 secondary schools.

Diogo pointed out that economic success was achieved despite a series of disasters at the start of the year - including major flooding in the Zambezi valley, Cyclone Favio, that devastated parts of Inhambane and Sofala provinces, and the explosions of obsolete weaponry at a military arsenal in the Maputo suburb of Malhazine, which cost 105 lives, and destroyed or damaged many hundreds of buildings.

The government had to move quickly to cope with these unpredictable events, said the Prime Minister.

Also beyond the government's control was the rise in oil prices. "Considering that the Mozambican economy is highly dependent on imported fuels, this situation has negative impacts on the normal functioning of our economy", she said

The government had thus adopted "policy measures to improve constantly domestic macro-economic management, so as to control inflation and minimise the effects on the costs of production".

Economic and social plan for 2008

Next year the government plans to attain a level of economic growth of around seven per cent and bring the inflation rate down to 5.7 per cent.

Other targets in the 2008 plan include an increase in commodity exports of two per cent, and maintaining a level of net international reserves sufficient to cover 4.2 months of imports of goods and services.

Explaining the plan in detail, the Minister of Planning and Development, Aiuba Cuereneia, told the Assembly of the Republic that the government expected an increase in agricultural production of about 7.5 per cent resulting from both an increase in the area under cultivation, and gains in productivity.

The latter will include increased use of animal traction, and the spread of improved agricultural technologies as part of the "Green Revolution" that the government advocates.

The plan envisages raising grain production from the 2007 figure of 2.2 million tonnes to 2.4 million tonnes (a rise of nine per cent), while production of beans and groundnuts should increase by 12 per cent (from 366,000 to 410,000 tonnes).

The government expects a 6.9 per cent increase in agricultural marketing, mostly of cash crops, and particularly sugar. Cuereneia said there would be an increase of 16.5 per cent in the area under sugar cane cultivation, while the four sugar mills (at Marromeu, Mafambisse, Xinavane and Maragra) would produce 273,000 tonnes of sugar in 2008, an increase of 36.2 per cent.

As for livestock, Cuereneia said that the number of cattle in Mozambique should reach 1.7 million, an increase of 7.2 per cent on the 2007 figure.

Mining production is set to increase by 30 per cent. Much of this is because 2008 will be the first full year of production of titanium ores at the Moma heavy sands mine in Nampula province.

Growth of 22.7 per cent is expected in transport and communications. This is largely because 150 new buses will enter service on the country's roads, and new air traffic routes will be inaugurated.

Communication services will continue to expand (dominated by the mobile phone companies M-cel, and its South African rival Vodacom).

As for the water supply the government plans to build 1,500 new wells and boreholes and rehabilitate 500 existing sources. A further 792,500 people should benefit from these source, pushing the percentage of Mozambicans with access to clean drinking water up from 46 to 48.5 per cent.

The government plans that 858 new schools will function in 2008 - 435 of these will be in first level primary education (1st to 5th grades), 375 in second level primary education (6th and 7th grades), 36 in the first cycle of secondary education (8th to 10th grades), and 12 in the second, pre university cycle (11th and 12th grades). There should be a rise of 13.6 per cent in the number of pupils attending school. To teach them, 12,000 new teachers will be recruited, on top of the current figure of about 87,000.

In health care, Cuereneia pledged priority to "increasing access to health services and improving the quality of the services provided, in order to reduce high rights of mortality and morbidity".

To reduce infant mortality, the government promises "the expansion of essential care for newborns in the health units, and training in paediatric anti-retroviral treatment (the only hope for HIV-positive infants) for doctors and other health staff".

The number of health units providing basic and emergency obstetric care will increase as a key measure to reduce maternal mortality. Some 60 per cent of the country's health units will be able to offer pregnant women "Intermittent Preventive Treatment" against malaria, which remains one of the major causes of maternal deaths.

The health ministry also hoped to give vitamin A supplements to 85 per cent of women of childbearing age, and iodine supplements to 80 per cent of them.

Budget funding reliant on foreign aid

The state budget for 2008 is dependent on foreign aid for 56 per cent of its expenditure. Finance Minister Manuel Chang told the Assembly that public expenditure in 2008 would reach 89 billion meticais (about $3.6 billion). This is an increase of 22 per cent compared with the expenditure of 72.9 billion meticais envisaged in the 2007 budget.

The state's revenue will also rise - from 33.3 billion meticais in 2007 to 38.8 billion in 2008. That leaves a deficit of 50.2 billion meticais (just over $2 billion), which must be covered almost entirely by foreign aid.

Chang was confident that this money would be forthcoming. The budget, he said, "enjoys a great increase in financial contributions from our cooperation partners. This really bears witness to the good relations and the harmony of interests between the Mozambican state and its partners". He said 48.8 per cent of next year's foreign aid would take the form of direct budget support, while 51.2 per cent will be earmarked for specific programmes and projects.

To avoid running up unsustainable debts the government has ensured that over two thirds (68.1 per cent) of this foreign aid consists of grants, while only 31.9 per cent is in loan form.

The budget contains 38.1 billion meticais for running costs, of which 18.8 billion is for wages and other staff costs, 8.1 billion for goods and services, and 6.9 billion for current transfers (including transfers to Mozambican embassies, and from the central state to the local authorities).

1.3 billion meticais is to service the government's debts (both foreign and domestic). Total debt servicing in 2007 amounted to the equivalent of about $54 million. Over two thirds was interest paid on the internal debt, and less than a third was service on the foreign debt.

Chang said that the debt burden in 2008, when expressed as a percentage of GDP, should decline by 0.3 percentage points. He attributed this to improvements in managing the internal debt, and the various international debt relief initiatives that Mozambique has benefited from.

The capital budget is 43.9 billion meticais, while state financial operations are budgeted at slightly more than seven billion meticais.

Chang said that "at least 65 per cent" of total expenditure (excluding debt servicing and state financial operations) would be spent on the priority areas for poverty reduction. Breaking this down by sector, Chang said 18.4 per cent of the budget would be spent on education, 17.5 per cent on the health service (including the fight against AIDS), 13 per cent on infrastructures (notably roads, electricity and water supply), and 18.6 per cent on governance, security (essentially the police force) and the legal system.

He announced that there is sufficient money available to recruit 11,990 new teachers, 3,209 health workers, 3,112 policemen and other public order staff, and 356 staff for the legal system.

Tender for oil exploration

Mozambique's has launched its third international oil exploration tender. On offer is a total area of 61,000 square kilometres, from the northern part of Inhambane province to the central part of Zambezia province.

It has been divided into nine blocks - two of them onshore, and seven offshore. Of the offshore blocks, two are in shallow water, and five in deep water.

The National Petroleum Institute (INP) believes that the geological characteristics of central Mozambique suggest that the rock formations contain hydrocarbons. According to Carlos Zacarias, of the INP Project Department, the geological similarities with other parts of the world where oil has been found, suggests that there may well be oil in the Mozambican subsoil.

Zacarias said companies interested in exploring in these blocks should submit their proposals by June 2008. A technical commission would then work on the proposals and announce the final results within two months.

President calls for routine HIV testing

President Armando Guebuza on 1 December urged that routine testing for HIV, the virus that causes AIDS, should be introduced into the country's health units. He acknowledged that this option would imply changes to legislation and to the administrative procedures.

Speaking in Maputo at a ceremony marking World AIDS Day, President Guebuza said that routine testing was "a type of intervention that can have an impact in reversing the current picture".

He insisted that the human rights of the patients must be respected, and it was this, in his view, that distinguished routine testing from compulsory testing.

Mozambique's national HIV prevalence rate appears to have changed little over the last three years. The epidemiological surveillance round of 2004 suggested that 16.2 per cent of Mozambicans aged between 15 and 49 were HIV-positive. According to Health Minister Ivo Garrido, the latest survey, of 11,000 pregnant women across the country, came up with a figure of a 16 per cent HIV prevalence rate.

There are significant provincial variations. It used to be considered that central Mozambique had the worst problem. In 2004, Sofala province had the highest prevalence rate - 26.5 per cent. But today's figures put Sofala on 23 per cent. There have been similar falls in Manica and Tete, where the rates have fallen from 19.7 to 16 per cent, and from 16.6 to 13 per cent respectively.

But the situation in the south of the country has worsened dramatically. In Gaza province the HIV prevalence rate has risen from 19.9 to 27 per cent. Maputo province is not far behind - the rate here has risen from 20.7 to 26 per cent. For Maputo City the rise has been smaller - from 20.7 to 23 per cent.

Two northern provinces saw a decline in infections. In Niassa the rate found in 2004 was 11.1 per cent, and in Nampula it was 9.2 per cent. Garrido said the latest figure for both provinces was eight per cent. In the third northern province, Cabo Delgado, the prevalence rate rose from 8.6 to 10 per cent.

In the remaining two provinces, the infection rates are more or less stable. In Inhambane the rise in HIV prevalence was from 11.7 to 12 per cent, and in Zambezia from 18.4 to 19 per cent.

"We have to face this epidemic as a serious obstacle to our development", said President Guebuza. "These infection figures threaten to undermine the results we are achieving in the fight against poverty. So each one of us, infected or not, should feel responsible for reversing the current levels of infection".

Prevention remained "the cheapest, most effective weapon, and is accessible to all of us". Counselling and voluntary, confidential testing should also be encouraged, said the President, since "early discovery of the disease increases the likelihood of success in interventions that can prolong the patient's life".

AIDS was no longer a death sentence, he pointed out, and treatment with the life-prolonging anti-retroviral drugs is now available in all Mozambican districts. Since AIDS can be treated, but not cured, this put it on the same level as other chronic diseases such as diabetes.

Grain silos under construction in Nacala

Building work is under way on the first six of twelve planned silos in the northern port of Nacala, with a capacity to store 60,000 tonnes of grains.

According to Fernando Couto, the chief executive officer of the Northern Development Corridor (CDN), the private-led consortium managing the port and the Nacala-Malawi railway "this is a large private investment, costing $8.5 million".

Austral renamed Barclays

The scandal-tainted name of the Austral Bank has passed into history: as from 3 December the bank bears the name of Barclays-Mozambique.

The change follows the 2005 takeover by Barclays of the South African group ABSA. Barclays paid $2.6 billion for a 56 per cent stake in ABSA. Since ABSA owned 80 per cent of Austral, Barclays found itself in control of the Mozambican bank.

At a press conference Chief Executive Officer of Barclays Mozambique, Paul Nice, declared that Barclays' target was "to be the best retail and commercial bank for every customer, every market, every product, every time".

In terms of number of branches, Austral/Barclays has the second largest network in Mozambique. In 2006, it had 48 branches and 71 automatic teller machines (ATMs). This was a long way behind the largest of the commercial banks, the Millennium-BIM (International Bank of Mozambique), which had 76 branches and 191 ATMs.

Nice declared that Barclays is expanding - by the end of this year it would be opening ten new branches. In 2008 Barclays hoped to roll out 30 new points of presence.


This is a condensed version of the AIM daily news service - for details contact


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