Business News Mozambique

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1 Gabinete para o Fomento Económico Moçambique-Alemanha Southern African-German Chamber of Commerce and Industry Business News Mozambique I. GENERAL INFORMATION Mozambique: Parliamentary Commission approves resolution on extraordinary powers to amend Constitution The Constitutional Affairs, Human Rights and Legality Committee has approved a motion for a resolution that allows the Mozambican parliament to assume extraordinary powers to revise the constitution. The proposal approved by the first parliamentary commission will allow the Assembly of the Republic to make a flexible amendment of the constitution of the Republic previously submitted by the head of the state. Commission chairman of this Edson Macuácua explained that the proposal allows the waiver of some requirements and formalities that are a barrier to the revision of the constitution. Macuácua said that the consideration of the amendment of the constitution was proceeding at a good pace and there was consensus among the parliamentary benches. One example of this consensus was the understanding on the criteria to be adopted for the election of presidents of the municipalities (mayors) and provincial governors. According to Macuácua, the parliamentary groups agreed that the election should be through universal suffrage (Rádio Moçambique / Club of Mozambique). Amnesty International warns of culture of fear in Mozambique Amnesty International (AI) recently said that abductions and attacks on political analysts in Mozambique reveal the emergence of a society that does not respect freedom of thought, and warn of the emergence of a culture of fear. The latest case of abduction and assault involves journalist Ericino de Salema, a television commentator who was found seriously injured in the bush in Marracuene district, close to the center of Maputo occurred on Tuesday 27 March. Amnesty says recurrent abductions and attacks on human rights defenders in Mozambique are instilling a culture of fear, and the lack of a response from the government makes the situation more serious and unpredictable. De Salema, a commentator on Points of View ( Pontos de Vista ), a popular political analysis program, was abducted outside the National Union of Journalists, and was found in the same place where José Jaime Macuane, political scientist and commentator on the same program, was abandoned in 2016 after being kidnapped and shot in the legs, also by strangers. De Salema was found by locals, who took him to Maputo Private Hospital, where he is receiving treatment. Maputo police spokesman Orlando Modumane said at a press conference that an investigation was under way, without offering any further information. De Salema has worked with several Mozambican media outlets, but in recent years has been linked mainly with nongovernmental organizations involved in strengthening civil society and promoting freedom of expression and the press (Lusa). El Nino may see Maputo facing Cape-style water crisis Mozambique s capital Maputo could follow Cape Town s water crisis with the El Nino phenomenon in the Pacific Ocean which is responsible for the current drought in southern Africa effecting Mozambique this year, the country s National Meteorological Institute has warned. According to Aracio Tembe from the Meteorological Institute, the country s rainy season is nearly over and although rainfall has been reasonably good in all parts of Mozambique, the south-west which includes South Africa s watershed areas and Swaziland has suffered. Mozambique s water levels have only risen from 19 to 25 percent of capacity behind the Pequenos Libombos dam, which provides water for Maputo and Matola. If used sparingly, this amount of water could still suffice until the next rainy season which starts in November, but water restrictions will need to be introduced. The water shortage has been exacerbated by Maputo and Matola s rapid population growth. Work on the Moamba Maior dam was supposed to add water capacity but was stopped following a scandal involving the main Brazilian contractor which led to Brazil cutting funding. Currently a dam is being built at Corumana and that should be ready in 2019 to help address the water shortages. However, it will require a 90 km pipeline to reach Maputo (African News Agency / The Citizens). Anschrift Anschrift in Deutschland Telefon Telefax info@maputo.diplo.de Rua Damião de Gois, 506 Caixa Postal 1595 Maputo / Moçambique Auswärtiges Amt Für Botschaft Maputo Berlin (+258) (+258) Internet

2 2 II. ECONOMIC SITUATION Mozambique s economic growth expected to remain weak in 2018/2019 EIU Mozambique s gross domestic product (GDP) growth will remain weak in 2018/2019, with an average rate of 3.3% due to weak domestic demand and reduced investment, Economist Intelligence Unit (EIU) analysts have said in the latest report on the country. The EIU predicts that from 2020 until 2022 the Mozambican economy will grow at an average rate of 5.4%, with a maximum of 5.6% in 2022 and a minimum of 5.3% in 2020, with the inflation rate over those years in the 5.1% to 6.0% range. The report once again said that Mozambique is experiencing a liquidity crisis, triggered by excessive external debt and a freeze on development aid by the partners of the so-called Group of 14. According to the report, the Mozambican liquidity crisis will continue to have a major impact on the evolution of macroeconomic indicators, in addition to the country being unable to access virtually all external markets to finance itself due to its inability to service its debt. The EIU analysts pointed out that the relationship with program support countries remains strained, and that the country is not expected, in the medium term, to see a return to levels of aid seen before the hidden debt crisis (Macauhub). Mozambique expects economy to grow 8-10% per year from 2023 Mozambique expects its economy to grow by eight to 10 percent a year from 2023 on, as the export of liquefied natural gas in the Rovuma Basin starts, according to information provided to investors in London recently. A Mozambican delegation headed by Finance and Economy Minister Adriano Maleiane met creditors to study the restructuring of public debt, and the figures data were part of the accompanying macroeconomic projection. One of the government s graphs points to GDP growth of 9.9 percent in 2023, the figure remaining above 7 percent until Until 2023, the scenario is more restrained. In addition to the slower pace of GDP growth, the executive cites the International Monetary Fund (IMF) prediction that, until 2022, the credit granted to the economy will grow on average no more than 2.5 percent, compared to 24 percent in The government also expects to achieve a balanced budget, discounting interest expenses, by The primary balance stood at -4.5 percent in To this end, government is committed to fiscal consolidation, despite a reduction in international support, that is, with no financial assistance from the IMF. The tax measures include widening the tax base (by removing VAT exemptions on selected products) and introducing new excise taxes. Likewise, a rationalization of salary accounts is aimed at reducing subsidies and specific bonuses, along with limitations on hiring employees and on government subsidies for fuels and communication. The phasing out of subsidies to public enterprises is also on the list, in line with IMF recommendations (Lusa). Mozambique will exceed IMF debt limits by July Mozambique will surpass all five benchmarks used by the International Monetary Fund (IMF) to evaluate debt sustainability by July, the government admits in documents presented at meetings with creditors. By the end of 2017, all indicators of Mozambique Debt Sustainability Analysis (except the ratio of debt service to exports) were above the prudence threshold for countries with an average Country Policy and Institutional Assessment ( CPIA), one pages of the presentation to creditors held on March 20 in London reads. Below, it is stated that until March 20, 2018, Mozambique had delays in the payments of Mozam2023, MAM and Proindicus [the sovereign debt securities maturing in 2023 and the two loans contracted by two public companies with state guarantees] amounting to approximately US$636 million, which means that all five IMF-defined ceilings had been exceeded. Under the Fund s internal rules, countries that exceed these levels are unable to receive financial assistance, making Mozambique s already complicated economic situation even more difficult. In the spotlight are the current value of debt vis-à-vis GDP, exports and revenues, debt service in relation to exports and debt service against the value of revenues. By the end of last year, only the ration of debt service to exports was below the limit defined by the Fund, but a change in criteria in July means this value exceeds the maximum level indicated by the IMF (Lusa). IMF advises Mozambique to consider liquidating its hidden debts companies The International Monetary Fund has recommended that Mozambique study the possibility of liquidating those public companies which contracted undisclosed loans, after passing their assets over to the state. Under the Fund s and the World Bank s Joint Recommendations on the Mozambican economy, made under the IMF s Article IV, officials argue that the government should support the process of accountability and address the issue of undisclosed loans held by EMATUM, ProIndicus and MAM. These companies contracted state-backed debts not declared in official accounts, the inability to repay which put the country at the center of a financial crisis leading to a decline in market confidence. In the document, analysts say that this move would include defining how much of the loans would be included in the budget and how much remain with the companies, along with provision for a comprehensive and credible report on the effective use of lending funds and exaggerated pricing practices. They also suggest that the government should guarantee the transfer to the state of the security assets of the three companies, and consider the viability of these three companies, studying their possible liquidation after the restructuring of the loans. This set of recommendations follows the release of the IMF s annual review of Mozambique s economy under Article IV, which includes recommendations on improving economic governance and reducing the value of public debt, considered unsustainable in light of recent events. Among the main recommendations are the introduction of a framework of budgetary accountability and the efficient management of wealth from natural resources, as well as consulting the Bank of Mozambique whenever a public company wants to borrow more than a certain amount of money. Public company accounts are another focus of the recommendations, which advocate quarterly reports on assets, loans and accounts not only of public companies, but also of those in which the state has holdings and which can therefore affect public accounts (DW).

3 3 Mozambique: Fitch keeps country at Restricted Default level Rating agency Fitch has kept Mozambique s rating at Restricted Default because the government is still unable to meets the payments of its public debt and the borrowings of three state-owned companies it said recently. This rating reflects the country s inability to solve the default the agency said in a communiqué. Fitch has kept Mozambique at this rating level since November 2016, when the country began to miss the payments on $727.5 million of sovereign debt. Since that time, Mozambique has missed the payment of three coupons on this Eurobond and the payments of the borrowings taken out by three state-owned companies without the knowledge of the international partners and national institutions, Fitch added. Writing about a possible financial aid deal with the International Monetary Fund (IMF), Fitch said the chances were limited since the fund continues to demand that the government discloses critical information identified in an audit report issued by Kroll in June 2017 about the hidden debt (Lusa). Mozambique is in critical situation due to excessive debt, German NGOs say Mozambique is the African country in the most critical situation in terms of excess public debt, with the worst economic indicators on the continent, according to a report prepared by German non-governmental organizations Misereor and Erlassjahr, published recently. The document recalls that Mozambique was considered a model African country until two years ago, when it became public knowledge that two state-owned companies ProIndicus and Mozambique Asset Management had taken on State-backed loans in the amount of US$1.2 billion, in violation of legislation in force in the country. Tuna Company Ematum, which is also state-owned, added a further US$850 million to the country s debt, which was followed by the country s inability to honor that debt, with consequences including devaluation of the currency and increased consumer prices. The report from the two NGOs, an alliance of 600 civil society, religious and political organizations that call for debt pardons to poorer countries, according to Deutsche Welle, adds that in Africa there are ten countries classified as being critically or highly critically indebted and that this is expected to continue to increase (DW / Macauhub). Mozambican Administrative Tribunal audits less than 50% of State Budget CIP The Public Integrity Centre (CIP), a Mozambican civil society organization, announced recently that, by its estimates, the country s Administrative Tribunal (TA) audits less than half of the State Budget (OE), leaving the rest of the public resources unaudited. In an analysis of the performance of TA, the CIP states that 329 audits were performed in 2017, representing coverage of 48.4 percent of the total State Budget. In 2016, TA conducted 188 audits, corresponding to percent of the State Budget, the study said. According to them, it remains to be seen how the remaining funds not audited by TA are being managed, bearing in mind that the GCCC has repeatedly reported cases of misappropriation of public funds. CIP points out that in 2017 the Central Anti-Corruption Office (GCCC) indicated that the Mozambican state recovered only 17 million meticais (EUR 221,000) from 610 million meticais (EUR 7.9 million) that it lost to corruption. They also noted that TA has evoked insufficient human, material and financial resources, and that the situation has been exacerbated by delays in the disbursement of funds by international partners. They added that, in 2017, the number of civil servants sanctioned for mismanagement of funds by TA was 397, compared to 277 in the previous year. The situation implies, at the level of TA, the application of administrative penalties of restitution and fines (Lusa). Mozambican Economy now recovering, says prime minister Mozambican Prime Minister Carlos Agostinho do Rosario recently told the Mozambican parliament, the Assembly of the Republic, that the Mozambican economy is now recovering, after the crisis of 2016, and the government expects the growth rate to rise to eight per cent a year, as from 2022/2023. But this is entirely dependent on the liquefied natural gas (LNG) projects in the Rovuma Basin, off the coast of the northern province of Cabo Delgado. The first of these projects, by a consortium headed by the Italian energy company ENI, is for a floating LNG unit above the Coral South gas field which will produce 3.3 million tonnes of LNG a year. The company British Petroleum (BP) has agreed to buy 100 percent of this production. The floating LNG platform will be installed by late 2021, said Rosario, and so the first exports should be in 2022/23. A second consortium, headed by the US Company Anadarko, will liquefy the gas onshore, at two factories to be built on the Afungi Peninsula, in Palma district. The government has approved the Anadarko development plan, but production is unlikely to start before Rosario admitted that gas revenues are a narrow basis on which to build the economy. He blamed the economic crisis that had hit the country in 2016 on such factors as the fall in the prices of some of Mozambique s key exports, natural disasters such as the floods of early 2015, and the severe drought of 2016, and the suspension of financial aid from the 14 donors who used to provide direct support to the Mozambican state budget. (But Rosario did not mention that the donors cut this support because of the loans of over two billion US dollars to three security-related companies, illegally guaranteed by the previous government under President Armando Guebuza). The shocks the Mozambican economy suffered in , the Prime Minster said, led the government to conclude that Mozambique must continue efforts to improve its productive base through measures to stimulate increased production and productivity, and thus the country will be able to export more and generate resources to finance imports. But it was also crucial to reduce the budget deficit through the efficient allocation of resources and improved collection of state revenue. The government was working to restore confidence in Mozambique among the international financial markets, and to bring the country s public debt down to sustainable levels. For the first time, he revealed that the government has negotiated a restructuring of Mozambique s debt with China and India in order to release resources to finance the priority actions of the government s five year program. Dialogue with the country s other creditors was continuing, and Rosario believed that his would help restore international confidence in Mozambique (AIM / Club of Mozambique).

4 4 III. SECTORS MINERAL RESOURCES Anadarko announces approval of Mozambique LNG development plan Anadarko Petroleum Corporation recently announced it has received official approval from the Government of Mozambique for the Golfinho/Atum Field Development Plan. The Development Plan outlines the integrated onshore project from the reservoir to the LNG market and is a culmination of the substantial progress made to date on the technical and commercial aspects of the Anadarkooperated Mozambique LNG development. The Mozambique LNG project will be Mozambique s first onshore LNG development, initially consisting of two LNG trains with total nameplate capacity of MTPA to support the development of the Golfinho/Atum fields located entirely within Offshore Area 1. This foundational project paves the way for significant future expansion of up to 50 MTPA from Offshore Area 1. The Golfinho/Atum Project will also supply initial volumes of approximately 100 million cubic feet of natural gas per day (MMcf/d) (50 MMcf/d per train) for domestic use in Mozambique. Anadarko Moçambique Área 1, Lda, a wholly owned subsidiary of Anadarko Petroleum Corporation, operates Offshore Area 1 with a 26.5-percent working interest. Co-venturers include ENH Rovuma Área Um, S.A. (15 percent), Mitsui E&P Mozambique Area1 Ltd. (20 percent), ONGC Videsh Ltd. (10 percent), Beas Rovuma Energy Mozambique Limited (10 percent), BPRL Ventures Mozambique B.V. (10 percent), and PTTEP Mozambique Area 1 Limited (8.5 percent). Anadarko Petroleum Corporation s mission is to deliver a competitive and sustainable rate of return to shareholders by exploring for, acquiring and developing oil and natural gas resources vital to the world s health and welfare. As of year-end 2017, the company had approximately 1.44 billion barrels-equivalent of proved reserves, making it one of the world s largest independent exploration and production companies (PR Newswire). Over US$9B to be spent on Mozambique s upstream capex over next 3 years GlobalData expects that an average capital expenditure (capex) of $3bn per year will be spent on eight oil and gas fields in Mozambique between 2018 and Capital expenditure on Mozambique s oil and gas projects will add up to $9.1bn over the three-year period to the end of Ultra-deepwater projects will be responsible for over 65% of upstream capex in Mozambique, or $6.2bn by Deepwater projects will account for 25% of upstream capex with $2.3bn by 2020, while onshore projects will require $600m in capex over the period. GlobalData expects that Eni and Exxon Mobil will spend the most in Mozambique, each investing $1.4bn into the country s upstream projects by China National Petroleum Corporation will follow with $1.1bn investment into its Mozambique projects between 2018 and Coral South Project, a planned ultra-deepwater conventional gas field, will lead capital investment with $4.3bn to be spent between 2018 and Eni East Africa is the operator for the field. Golfinho-Atum Complex, a deepwater conventional gas field in the Rovuma Basin, follows with a capex of $2.3bn. Anadarko Mozambique Area 1, Limitada is its operator. Gas from both projects will be marketed as liquefied natural gas. GlobalData reports the average remaining capex per barrel of oil equivalent (capex/boe) for Mozambique projects at $6. Deepwater projects have the highest remaining capex/boe at $6.80, followed by onshore and ultra deepwater projects with $5.90 and $5.80 respectively (GlobalData Energy). Australia s Mustang finds new graphite and vanadium deposits in Mozambique Australian mining company Mustang has announced the discovery of new graphite and vanadium deposits in its prospecting area in the northern Mozambican province of Cabo Delgado. Drilling in the southern extension shows a potential of additional dimensions in the Caula project in Montepuez, establishing it as a world-class project, the company said in a statement. Mustang has a ruby mine in the same region from which it now plans to extract graphite and it sits next to a mine operated by Syrah, another Australian company that has already begun packaging and exporting graphite. The demand for graphite is on the rise worldwide as it is a component used in batteries, at a time when the market for electric cars and other electrical products such as drones is expanding. Vanadium is a metal whose demand Mustang expects will grow, given its increasing use in steel production and other alloys used in construction and also in batteries (Macauhub). Mustang Resources changes ruby sales strategy The Australian mining company Mustang Resources announced that it has changed its sales strategy for rubies from its mine in Montepuez, in the northern Mozambican province of Cabo Delgado. This follows a hugely disappointing ruby auction that the company held last November. The company had hoped to raise over seven million US dollars, yet only managed to sell 713,456 dollars worth of stones. Prior to the sale, Mustang had confidently announced record production at its mine and strong results from its artisanal miner development program. However, buyers attending the auction in Mauritius expressed disappointment at the poor quality of the stones. As a result, Mustang has decided to close its sales office in Mauritius and open a sales and marketing office in Thailand. According to the company, this is intended to generate a regular flow of cash from its bulk sampling activities in Mozambique. The office in Mauritius was designed to enable the company to undertake large scale auctions as are carried out by its very successful neighbors in Cabo Delgado, Gemfields. However, it is clear that the stones found by Mustang were nowhere near the quality found at Gemfield s Montepuez Ruby Project. Mustang s announcement makes clear that the new initiative is very much about right sizing the company s business structure to fit with the group s existing early stage smaller production. Thus, the facility in Thailand is markedly smaller and lower cost and more in line with the company s emphasis on project and ruby market development and research. Mustang s Montepuez Ruby Project consists of four licenses covering 19,300 hectares directly adjacent to the world s largest ruby deposit, mined by Montepuez Ruby Mining Ltd, which is 75 percent owned by Gemfields (AIM).

5 5 AGRICULTURE AND FISHERY Mozambique: British American Tobacco expects to pay 2 billion MT in taxes The Board of Directors of the Confederation of Economic Associations of Mozambique (CTA) held a meeting with Alexandre Carpete, general director of British American Tobacco recently, and discussed the tobacco market in the country, including the recent measure of smoking ban. The company intends to increase its production in Mozambique and is creating partnerships and investing in modern machinery to that end. In 2017, British American Tobacco paid the Mozambican government 1.7 billion meticais in taxes, and expects the figure for this year to 2 billion meticais. The institutions want to increase links between British American Tobacco and domestic companies, and will launch a campaign for responsible tobacco consumption and sales in conjunction with the CTA (O País). Mozambique: Pests and disease destroy a third or more of crop production The government of Mozambique said recently that between 30 to 40 percent of the country s crops has been lost to pests and plant disease since April 2017, a situation generally considered to be of concern. Corn has been attacked by the fall army-worm, coconut trees by the leaf-yellowing plague, bananas by Panama disease and the tomato by the hornworm caterpillar, spokeswoman Ana Comoana detailed at the end of a Council of Ministers meeting. Authorities remain vigilant over the risk of the lethal Maize Necrosis Disease, found in Tanzania, Kenya, Uganda and Sudan, she added. Overall, the situation is considered of concern, as it has contributed to losses both in the field and post-harvest estimated at between 30 to 40 percent of production. The plagues are affecting food and nutritional security in the country, as well as the incomes of smallholders most Mozambican households practice some subsistence agriculture and exports, the Cabinet spokeswoman said. Considering data on the impact of plagues and pests, Comoana pointed out that Nampula province exported 19 containers of bananas a week in 2013, but currently exported only one. To meet the challenge posed by plagues, the government is putting into practice a plan of action that provides for a survey of affected areas. The plan also includes management, training, the production and dissemination of information to producers, as well as the production and distribution of plants for restocking. The strategy involves the setting up of 80 fixed and 20 mobile clinics for the treatment of plant disease, and is budgeted at about 160 million meticais (two million Euros), of which 22.3 million meticais (EUR 290,000) are so far available. The Council of Ministers spokeswoman said that if the government did not implement the action plan, losses due to pests and disease would amount to around EUR 247 million (Lusa). Transmarítima and Peschaud sign MoU as Mozambique sets off to revitalise coastal freight transport State-owned Transmarítima and private company Peschaud Mozambique are to invest eight million Euros improving coastal freight transport in the Indian Ocean, the Mozambican government has announced. According to a statement from the executive, the two companies signed a memorandum of understanding aimed at revitalising cabotage navigation without losing sight of land. The registration of the partnership between Transmarítima and Peschaud Mozambique is expected to take place within a month, and the company to start operating in September. In the meantime, the selection of suitable vessels to ensure the interchange of goods between the different provinces of the country using primary and secondary ports would be undertaken. Peschaud chairman Christophe Peschaud says the project is well underway, an opinion shared by Transmarítima president, Jafar Ruby, who also promised speedy implementation. The signing of the memorandum was witnessed by the Minister of Transport and Communications, Carlos Mesquita, who believes that cabotage will reduce freight transport costs and reduce the number of road accidents (Lusa / o País / Club of Mozambique). INFRASTRUCTURE AND ENERGY The European Union and the German Development Bank may unlock Moz Malawi interconnector The European Union (EU) and the German Development Bank (KfW) are to extend a 20-million grant to Malawi to partially finance the $127-million Mozambique Malawi electricity interconnector project. Malawi is keen to fast-track the project so that it can start importing electricity from neighboring Mozambique and other Southern African Power Pool (SAPP) member countries to address an electricity supply deficit that has reached crisis proportions. The 218 km 400 kv interconnector will run from the Phombeya substation, in southern Malawi, to the Matambo substation, in Mozambique s Tete province. Electricity Supply Corporation of Malawi CEO Alexon Chiwaya says he expects more financiers to come on board for the project. He would like it to be operational from as early as KfW Southern Africa director Thomas Duve says the bank will extend 30-million to Mozambique for its portion of the project. EU head of delegation in Malawi Mirchal Gerrmann says it is important that Malawi, which has resorted to using diesel generators to overcome its electricity shortages, embraces long-term solutions to the crisis. Malawi is currently not connected to the SAPP and cannot import power from other countries in the region. Because of the electricity crunch, Malawi has had to resort to load-shedding, sometimes for up to 24 hours at a time. The electricity shortages are attributable to the drought-induced low levels of water in the Shire River, an outlet of Lake Malawi that hosts hydroelectric power plants, which produce about 98% of the country s electricity. Malawi has an installed generation capacity of 351 MW, compared with peak demand of 350 MW. Owing to the low water levels, it is able to generate only 200 MW. Malawi started preparing for the interconnector project several years ago. In 2007, the World Bank approved $93-million in financing for the project, with Malawi s share pegged at $45-million, while the balance was for construction on the Mozambique side. However, Malawi s Parliament refused to approve the loan, arguing that the project was too expensive for the country. Consequently, in 2010, the World Bank cancelled the loan (Engineering News).

6 6 Cahora Bassa hydroelectric plant is to invest EUR 40 million in improving quality of electricity supply The Cahora Bassa Hydroelectric Plant will invest EUR 40 million modernizing a substation in order to improve the quality of energy exported to South Africa, the company says in a statement. The substation is located in Songo, next to the Cahora Bassa dam, and is the cause of a sharp degradation in the conversion of alternating into direct current for export to South Africa, the HCB explains. The Brownfield Project has been assigned the task of modernizing the substation, the second phase of which is the subject of today s announcement. Among other things, the acquisition of a new 400kV converter transformer, the rehabilitation of 15 other converting transformers and the import and installation of an emergency generator are currently underway. HCB has also launched a public tender for the third phase of the work, which will run from 2018 to The modernization of Cahora Bassa is part of an overall plan called Capex Vital, budgeted at EUR 500 million. This is a strategic planning tool with a ten-year horizon that aims to optimize the production and transportation of energy, HCB explains (Lusa). Mozambique: Siemens builds electricity sub-station in the Mozambican province of Tete Siemens will build a substation this year to supply electricity through a high-voltage power line to the Moatize district in Tete province, central Mozambique, the company said recently. In a statement Siemens said construction of the facility will be carried out under a contract it has entered into with public power company Electricidade de Moçambique (EDM). The substation will be built in an area of 800 square meters, will have a capacity of 50 megawatts and be fed by a high voltage line connected to the substation of the consortium led by Brazilian company Vale. The Vale consortium has the largest coal concession in the Moatize district. The statement did not give the cost of the substation or the duration of the work (Club of Mozambique). Belgium finances renewable energy projects in Mozambique Mozambique and Belgium signed recently an agreement in Maputo under which the Belgian government has undertaken to provide 12 million euros (about 14.8 million US dollars) for renewable energy projects in remote parts of Mozambique. Signing the agreement were the Mozambican Minister of Mineral Resources and Energy, Max Tonela, and the Belgian ambassador, Herbert Cooremen. The agreement seeks to expand access to electricity in rural areas, particularly in the central province of Zambezia, and will be implemented by the Mozambican government s National Energy Fund (FUNAE). Speaking immediately after the signing ceremony, Tonela said the Belgian grant will finance a mini-hydropower station in Gurue district and 12 local electricity grids is isolated localities and administrative posts in Zambezia. He noted that over the past three years, some 51 communities, in Sofala, Tete, Manica, Cabo Delgado and Niassa provinces have benefitted from such systems. For his part, the ambassador said that the renewable energies project will allow the people living in remote areas to develop small and medium enterprises, and will help diversify the economy. The agreement is the continuation of a program signed in 2011, under which Belgium disbursed million euros to finance Renewable Energy for Rural Development. This phase of the program came to an end on 31May last year. In this phase, solar systems were used to electrify 195 schools, 79 health centers, 274 homes for teachers, nurses, and 77 secretaries of administrative posts in Zambezia, Manica and Sofala provinces. It was estimated that the project benefited 593,400 people (AIM / Club of Mozambique). New substations provide more power to Mozambique s Inhambane province The districts of Jangamo and Massinga in Mozambique s Inhambane province will benefit from more electricity distribution following the launch of two new substations. Luís Salomão from power company Electricidade de Moçambique (EDM) said works have been completed and the substations are now being inspected ahead of distributing electricity that will benefit the region. Financed by the Mozambican Government, with the support of Danish development agency DANIDA, the work cost 10 million euros. Work at the Massinga substation included installing a transformer with a 32 MVA capacity and a 110 KVA medium voltage line, to transport electricity to Massinga, Morrumbene, Maxixe, Jangamo and the city of Inhambane. At the Lindela substation in Jangamo district, work included installation of two new transformers each with a capacity of 15 MVA and a 30 KVA high voltage line. Following the launch of these two new facilities, Inhambane province will continue to expand its electricity grid, aiming to add 10,000 new connections this year (Macauhub). Sweden supports energy projects in Mozambique Sweden has promised to provide US$6 million to finance Mozambique Electricity (EDM) in the preparatory studies for electricity generation, transmission and distribution projects in the country. The idea is to enable EDM to structure projects and carry out feasibility, environmental and social impact studies, thus facilitating interaction with potential funders. Among the initiatives that could progress as a result of the Swedish funding are the second phase of the Mavuzi hydroelectric plant, the Tsate, Messalo and Mugeba hydroelectric plants, and the Nampula-Angoche, Chimuara-Dondo, Maputo-Salamanga, Ressano -Garcia-Beluluane and Macia- Chongoene power lines. It is also hoped to carry out studies for the electrification of administrative posts not yet connected to the national grid, for the rehabilitation and for the improvement of the Xai-Xai and Nampula distribution lines. Mateus Magala, chairman of EDM s Board of Directors, said that financing the preparation of projects was a novel kind of support, in that it filled a gap which made it difficult to obtain funds. Sweden s ambassador to Mozambique, Marie Andersson de Frutos, highlighted the need for EDM to focus on the use of new and renewable energy, especially solar power. She reiterated the openness of the Swedish government to continue supporting the development of Mozambique, as it had been doing since independence, particularly in the energy sector (Notícias / Club of Mozambique). USTDA supports wind energy in Mozambique through U.S. solutions Today, the U.S. Trade and Development Agency awarded a grant to eleqtra (Moçambique) Limitada for a feasibility study to assess the viability of a 120 megawatt (MW) wind power plant, to be developed in two phases of 60 MW each, located in the Namaacha

7 7 District in southern Mozambique. This plant will be among Mozambique s first utility-scale wind power plants, and will support the Government of Mozambique s efforts to increase electricity capacity to meet the country s growing demand. EleQtra (Moçambique) Limitada selected WorleyParsons Group Inc. (Houston, TX), an expert in engineering for power projects, to conduct the feasibility study. Mr. Bryan Hunt, U.S. Deputy Chief of Mission, signed the grant along with Lauren Thomas at a ceremony in Maputo, Mozambique. Mr. Hunt said that Mozambique is poised to become a leader in energy generation in Southern Africa, and they see this project as a significant step in realizing this potential. He also said that they look forward to following its progress and to continuing their ongoing cooperation with their partners in the Mozambican government (Club of Mozambique). Mota-Engil to carry out EUR 51.7M works in Port of Maputo The Maputo Port Development Company (MPDC) has announced recently that Mota-Engil will carry out 51.7 million Euros -worth of work, rehabilitating one kilometer of mooring berths from June onwards. Once rehabilitated, the quays will be able to receive larger ships, as provided for in the port development masterplan, the company says in a statement. The rehabilitation follows the dredging of the port access channel in January 2017, at a cost of EUR 70 million. Combined, the works, scheduled from June until the end of next year, pave the way for a 40 percent increase in the cargo capacity in Maputo and 55 percent of the cargo capacity in Matola. In 2017, MPDC registered a 22 percent increase in volumes handled in Maputo, with 18.2 million tons of cargo against 14.9 million in the previous year. The port expects to handle around 22 million tons of cargo this year (Lusa). TRADE/RETAIL Mozambique signs ACTFA free trade, free travel agreements in Kigali Mozambican President Filipe Nyusi joined 44 of the 55 representatives of African Union (AU) member states in Kigali, Rwanda, in signing the agreement to launch the African Continent Free Trade Area (ACFTA). The Mozambican head of state also signed the protocol on free movement of persons and residence. The launching of free trade bases and the creation of the single continental passport were the two main themes of the recent AU summit. Speaking from the Rwandan capital, Mozambique s Minister of Foreign Affairs and Cooperation José Pacheco said that, from the point of view of opening markets, the agreement is a challenge, because the other member states will also be looking at export opportunities for their products. According to Pacheco, as a continent as a whole, the advantage is very great, because Mozambique can harmonize efforts in negotiations with other trading blocs. Although signed, it is not known when the agreement will come into force. The next step is the internal ratification of the signatory states at least 22 confirmations are necessary for the ACFTA to enter into force. The African Continental Free Trade Area has the potential to become the largest single market in the world, with the 55 AU member states together representing gross domestic product of US$2,500 billion (Lusa / Club of Mozambique). Uhuru Kenyatta in Mozambique for blue economy, trade talks President Uhuru Kenyatta travelled to Maputo, Mozambique, last week for talks on fostering trade, boosting relations and the blue economy. President Kenyatta and his host President Filipe Nyusi will discuss the blue economy matter at length. This sector entails the sustainable use of ocean resources for economic growth and better jobs while preserving the health of marine and coastal ecosystems. State House Spokesperson Manoah Esipisu highlighted Mozambique s natural gas and offshore wealth, and said it has much to share with Kenya. In November, Kenya will host a high level conference on a sustainable blue economy. On the bilateral front, the President s will seek to deepen friendly relations with Mozambique as enhance interactions by the people (The Star Kenya). FINANCE Millennium BIM voted best bank in Mozambique again Millennium BIM has once again been recognized for its performance in the Mozambican banking sector, winning the Best Bank of Mozambique 2018 award for the 9th consecutive time. The prize is awarded annually by Global Finance magazine, an international reference in financial market information and banking sector analysis. Chairman of the Board of Directors of Millennium BIM Rui Fonseca says that this distinction reflects the Bank s contribution to the socio-economic development of the country, which for more than 20 years has actively promoted the bankization of the population in all provinces of the country. With 1.8 million clients, Millennium BIM is Mozambique s largest financial group, and the first Mozambican bank to appear among the 100 largest banks in Africa, currently occupying 56th position. TOURISM Mozambican Airlines (LAM) and Fastjet now able to share flights Mozambique s Linhas Aéreas (LAM) and the private company Fastjet will share passenger planes, they announced after signing a memorandum of understanding recently. LAM said in a statement that the memorandum will cover different partnerships such as code sharing. Code-share allows for a trip purchased with one company to be made on a plane owned by another. The Mozambican state-owned company has been experiencing frequent delays due to lack of airplanes and resources, reflected in a crisis over fuel payment difficulties which worsened dramatically earlier last month. Fastjet started operations in the Mozambique domestic market in November under the holding certificate of Solenta Aviation, its main shareholder. LAM s CEO António Pinto believes that the agreement signed recently will strengthen the public company and promote tourism, while Fastjet Executive Chairman Nico Bezuidenhout said that this approach to commercial cooperation is the first of its kind on the African continent. The

8 8 memorandum also provides for other forms of inter-airline agreement, such as optimized network synergies in common destinations to accommodate the same, as well as cooperation on other commercial systems such as cargo, engineering and maintenance. No specific figures regarding the agreement were disclosed. Most of the major airlines today have code sharing partnerships with other airlines, and code sharing is a key feature of the major airline alliances. Typically, code-sharing agreements are also a part of the commercial agreements between airlines in the same airline alliances (Lusa). Mozambique-South Africa: Ressano border to operate 24 hours a day, starting this month The Ressano Garcia border post between Mozambique and South Africa will be open 24 hours a day starting this month. The South African Minister of Foreign Affairs and Cooperation, Lindiwe Sisulu, gave a joint press conference with her Mozambican counterpart, José Pacheco, after talks between the two countries governments during a visit by President Cyril Ramaphosa to Mozambique recently. Without going into details, the head of South African diplomacy said that one of the issues raised by the Mozambican government, and a matter of some urgency, was visa facilitation for Mozambicans living in South Africa. President Ramaphosa met the Mozambican head of state, Filipe Nyusi, as president of South Africa and in the exercise of his Southern African Development Community (SADC) functions. During the talks, the two countries delegations, led by their respective presidents, reviewed a number of economic and political issues. Minister of Foreign Affairs and Cooperation José Pacheco said there was clear interest in increasing economic cooperation. Pacheco added that the next step would be the holding of the third Bi-national Commission meeting in South Africa, where all matters would be analyzed in depth and decisions taken to translate words into concrete actions so that the two countries increasingly progress towards the well-being of their respective populations. President Ramaphosa visited Maputo as part of a tour of SADC countries after coming to power in February following Jacob Zuma s departure from office (Notícias / Club of Mozambique). IV. TENDERS Information about tenders can be found here: V. LEGAL ISSUES Bank of Mozambique revises foreign exchange regulations Less than three months after its last review, the Bank of Mozambique has again changed foreign exchange regulations to introduce complementary norms to the movement of accounts in foreign currency with a particular incidence on the specific account of export revenue. Recently the Mozambican central bank decided to revoke paragraph 5 of article 8 of the foreign exchange law regulations of 27 December 2017 regarding the repatriation of revenues. It was then established that transfers could only be made from a specific account for export revenues from goods and services and foreign investment income to accounts of the same nature. Notice 04/GBM/2018 states in Article 4 (1) that the specific revenue account may be freely transferred to credit or debit in its holder s foreign transactions. Paragraph 2 of the same article states that the specific revenue account may be handled by all legally permissible means, provided that the rules governing each of the transactions are complied with and carried out. Meanwhile, paragraph 3 limits the movement of the internal transactions of the specific income account only to amortization of credits in foreign currency; provision of a specific revenue account in another bank, for payment abroad, upon presentation of the respective proof; constitution of term deposit; account closure. The exception to these rules is that they do not apply to exporters who enjoy a special foreign exchange regime. In addition, paragraph 4 establishes that at maturity or early maturity of the term deposit constituted in terms of C) of paragraph 3 of this article, the funds released shall be subject to the rules for moving the specific revenue account. In relation to the movement of other accounts in foreign currency, the central bank details that entities which import capital, in particular in the form of foreign investment or external credit may only convert the imported funds at the exchange rate of the receiving bank with the necessary adaptations to articles 3 and 4 of article 4 of this revision to the regulation of Foreign Exchange Law (A Verdade / Club of Mozambique). Mozambique: Assembly passes bill on state business sector The Mozambican parliament, the Assembly of the Republic, recently passed a government bill that establishes principles and rules for the entire state business sector. The state business sector consists of public companies, which are 100 percent owned by the state and, in principle, should only exist in strategic sectors, and a much larger number of participated companies, which are set up as limited companies under the Commercial Code, but in which the state is a shareholder. The new law establishes a common legal framework for both forms of state property. All will have the same structure of a general meeting of shareholders that elects a board of directors, which then draws up the company s plans and budgets, and also a three member Supervisory Board, including a certified auditor or accountant, which inspects and issues opinions on the company s accounts. All the companies must sign a contract-program with the government, to guarantee coverage of the costs of any social component of the public service provided, which must be approved by the Minister of Finance. The contract-program fixes the criteria for any subventions from the state budget. All the companies are subject, not only to their internal controls, but to external audits, by independent auditors, and risk management. The financial controls must include an analysis of sustainability, and an assessment of the legality, efficiency and effectiveness of the company management, as well as measures to prevent and manage fiscal risk, and limits to indebtedness. The acquisition of goods and services by the companies is governed by a set of principles including the pursuit of the public interest, transparency, publicity, competition and impartiality. A set of regulations, putting flesh on the bare bones of this law, must be published within 180 days. All the existing companies then have a further 180 days to bring themselves into line with the provisions of the law and its regulations. This could be a serious headache for some of the participated companies, which are in deep financial