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 UN Secretary-General, António Guterres confident of peace being restored in Mozambique The UN Secretary-General, António Guterres, said recently in Lisbon that he was convinced that Mozambique was on the way to achieving lasting peace. Speaking at a press conference after being recognized as Doctor Honoris Causa by the University of Lisbon on a proposal from the Instituto Superior Técnico, Guterres said that it was the right of the Mozambican people to secure peace and a better quality of life. The UN Secretary-General s pronouncements were made on the same day that the president, Filipe Nyusi, met Afonso Dhlakama in Gorongosa to discuss disarmament, demobilization and the reintegration of Renamo military personnel in the Defense and Security Forces. The meeting came weeks after the head of state announced that consensus on changes in the nomination of provincial governors and district administrators and in the election of municipality mayors had been achieved. These changes will require an amendment to the Republic s constitution, a proposal for which has already been submitted for consideration and approval during the VII ordinary session of the Assembly of the Republic which started on February 28 (Notícias). Switzerland and Mozambique discuss cooperation Swiss president Alain Berset has met Mozambican president Filipe Nyusi in Bern. Nyusi acknowledged Switzerland s contribution to the country s peace process and the two delegations discussed development cooperation and bilateral economic relations. It was the first official visit of a Mozambican head of state and government since The Swiss foreign affairs minister, Ignazio Cassis, also attended the talks. Cassis and his Mozambican counterpart José Condungua Pacheco signed an agreement on international cooperation which sets out the framework for Switzerland s humanitarian, technical and financial assistance in Mozambique. The country is one of the poorest in the world and has long been a priority country for Swiss development cooperation, the Federal Council wrote in a statement external link. Berset praised the progress which had been made in the peace process, the Swiss News Agency reported. Mozambique was ravaged by a civil war between 1977 and 1992, the impact of which can still be felt today. Since 2016, Switzerland has chaired the Contact group set up to support the peace process by helping the two parties negotiate a peace agreement. Berset pledged Switzerland s continuing support for a lasting peace in Mozambique and said the country had great economic potential and natural resources. The two delegations also discussed measures regarding economic policy which could improve the investment climate in Mozambique, the Federal council wrote (Swissinfo). President Nyusi receives Honoris Causa doctorate for International Relations Mozambican president Filipe Nyusi was granted an honorary Doctorate in International Relations by the Geneva Diplomacy Institute. In his acceptance speech, Nyusi said that Mozambique supported scrupulous respect for the United Nations Charter on International Relations. Filipe Nyusi also said that the pillars for building a just, peaceful and equitable world must stand on developing relations of friendship between nations and international cooperation in solving problems. These goals were more relevant today than ever. According to President Nyusi, the democratization of the United Nations organization could greatly strengthen multilateralism, an important mechanism for helping humanity cope with the challenges it faces today. President Nyusi also stressed that education was a pillar of a nation s future, and a central concern of the Mozambican government s plans (O País). Mozambique falls on corruption index Mozambique has become notably more corrupt in recent years, according to the Corruptions Perception Index published by the leading NGO fighting against corruption, Transparency International (TI). TI gives each country in its index a score ranging from zero (totally corrupt) to 100 (absolutely clean). Mozambique s score fell from 31 in 2015, to 27 in 2016, to 25 in the 2017 index, which was released in Maputo by TI s Mozambique chapter, the Centre for Public Integrity (CIP), recently. Falling by six points in just two years is a sharp drop. In terms of ranking, Mozambique is in 153rd position out of 180 countries. In 2016 it was in 144th position out of 177 countries, and in 2015 it was 112th out of 168 countries. The fall between 2015 and 2017, is the first sharp decline in Mozambique s position since the index was created in 1995, CIP spokesperson Baltazar Fael told reporters. He had no doubt that the main cause 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 for the decline was the failure of the Mozambican authorities to bring to justice anyone connected with the illicit debts incurred by the security-related companies Ematum (Mozambique Tuna Company), Proindicus and MAM (Mozambique Asset Management) in 2013 and These companies obtained loans of over two billion US dollars from the European banks Credit Suisse and VTB of Russia. The loans were only possible because they were illegally guaranteed by the Mozambican government of the time, headed by President Armando Guebuza. The government guarantees smashed through the ceilings on guarantees laid down by the 2013 and 2014 budget laws, and also violated the Constitution which establishes that only the country s parliament, the Assembly of the Republic, can authorize such debt. Indeed, in last January the Attorney-General s Office appeared to pass the responsibility onto the Administrative Tribunal, the body that judges the legality of public expenditure. It said it had remitted to the Tribunal a denunciation of financial offences that may have been committed in contracting the loans. CIP regarded this as an attempt to evade responsibility, since the law makes it clear that the PGR has full powers to investigate financial crimes (AIM). Mozambican Government hoping to recover one million hectares of idle land The Government of Mozambique will be inspecting land use as of April 1st, with the aim of enforcing exploitation plans and payment of fees. Any space requested for economic purposes not being exploited will be recovered in favor of the State. The inspection campaign was launched recently by the Ministry of Land, Environment and Rural Development (MITADER) and is scheduled to run from April 1 to July 31 this year. MITADER expects to inspect more than seven million hectares of land across the country. MITADER s projections indicate that, currently, one million hectares are not being used for the purposes requested. Therefore, the ministry hopes to recover these hectares in favor of the state. Because there are several situations in the country of people who have set built residences without a holding a DUAT ( Land Use Right Title), minister Celso Correia says, that much more than inspecting, the campaign will be conducting an awareness raising process for people to regularize their situation. In the inspections carried out in the last 12 years, from 2005 to 2017, more than 1.8 million hectares of unused land were recovered in favor of the State. The fees collected by the state during the same period of time amounted to just over 330 million meticais. Authorities expect collect about 70 million meticais in DUAT fees this year (Club of Mozambique / O País). II. ECONOMIC SITUATION Mozambique will not have IMF financing until 2022 Economist The Economist Intelligence Unit (EIU) predicts that Mozambique will not receive any financial assistance from the International Monetary Fund in the next four years and will be deprived of access to financing from other international institutions due to lack of transparency in public accounts. In an analysis of the Mozambican economy, the EIU says that the government s short-term priority is to preserve macroeconomic stability in the context of an unsustainable external debt burden, capital flows and reduced economic growth. Without an agreement with the IMF for fear of political reprisals, since disclosure of the entire Kroll audit report on hidden debt could have political effects within the country, the EIU believes that the reform agenda will be casual. The scale of the financial crisis, analysts conclude, will force the government to undertake reforms that will reduce spending pressures, including the gradual withdrawal of subsidies and the privatization of some state assets. The gap in public accounts arose in 2013 and 2014, when three public companies an international audit says were acting as front businesses contracted debts of about two billion dollars, based on state guarantees allegedly signed without any legal basis and without the knowledge of donors or national authorities, in what became known as the hidden debt scandal. The fate of most of the money remains to be ascertained, with companies justifying non-disclosure on the grounds of national security. Among the creditors are holders of US727.5 million dollars worth of debt securities who have already accepted a reduction in payments and an extension of maturity, which led directly to the downgrading of Mozambique s credit rating to default. Holders of these securities (which result from the exchange for Ematum bonds) refuse to be treated equally with the banks and investors who lent the remaining US$1.4 billion to public companies Mozambique Asset Management (MAM) and Proindicus. The banks that lent the money were Credit Suisse and Russian VTB, whose chairman Andrey Kostin told Bloomberg a month ago that he was to meet Mozambican president Filipe Nyusi to persuade him to negotiate the payment of the country s debt (Lusa). Mozambique s donors will not return this year and public investment will continue to fall BMI The BMI Research consultancy has said it believes that Mozambique s donors will not resume aid to the country during the course of this year and that public investment will continue to fall due to a lack of international support. In BMI s most recent risk analysis, analysts are convinced that there is little chance that foreign creditors and donors will return in 2018 and, with the country having elections this year and national elections in 2019, current expenditure is unlikely to be reduced. BMI believes that the Mozambican economy has emerged from the worst of the crisis that followed the revelation of the hidden debt, and that gross. The Mozambican economy is showing signs of recovery after a difficult 2017, which saw a sharp slowdown in growth and shocks to both the country s currency and inflation (APA). Bank of Mozambique alarmed with the level of internal public debt The governor of the Bank of Mozambique, Rogério Zandamela, said recently that the level of public debt in the country, and particularly the state s increasing recourse to treasury bills for financing, was worrying. According to Zandamela, internal indebtedness increased from million meticais (1,313 million Euros) in December 2017 to 104,797 million meticais (1,398 million Euros) in February. The governor of the Bank of Mozambique said that only market reaction could signal whether the current volume of domestic debt was sustainable or not, given the level of risk that creditors perceive. He added that the Central Bank Monetary Policy Committee considers that the risks, including the fiscal, remain high, in addition to those resulting from the floods

3 3 that devastated much of the country at the beginning of the year, requiring the proper calibration of policies oriented to macroeconomic stability. In other development, Zandamela also said that the country is emerging from the crisis, a more optimistic view than he held last April, when he said that the country was still in the process. The Governor argued that the observation he made in April was not propaganda but were based on solid data (Sapo / O País). Mozambican Government sets 20 March meeting with creditors but so para ingles ver By Joseph Hanlon Government will make a presentation on 20 March in London to commercial creditors the holders of the $2 bn bonds and syndicated loans of the secret debt. But the meeting is mainly for show there will be no serious negotiations until at least 2020 after national elections, and perhaps not until 2023 when gas production starts. A statement by the Ministry of Economy and Finance (MEF) recently said that the presentation will provide an update on recent fiscal and macroeconomic developments in Mozambique. The Government of Mozambique will also present to creditors the key elements of debt restructuring proposals. But the update will surely say that Mozambique remains in debt distress and there is no chance of payments until there are gas revenues, probably 2025 or later. Thus any restructuring would involve a major cut in the value of the debt (known as a haircut ) and no payments for nearly a decade. The presentation has been forced by the IMF, which considers discussions with creditors to be essential, and therefore had to be announced before the IMF board meets this Friday 2 March to consider the results of the December Article IV mission to Mozambique. Bondholders, as well as Russian bank VTB which has some of the syndicated loans, have also been pushing for a meeting. But it is just for show as the phrase in Portuguese has it: so para ingles ver, just for the English to see. The phrase dates from the time when Portugal continued the slave trade but officially agreed to the British ban (Mozambique News Reports and Clippings). Mozambique: GDP grew 3.7% in 2017 Mozambique s economy grew by 3.7 percent in 2017, according to figures released recently by the government. Council of Ministers spokeswoman Ana Comana said that growth in gross domestic product was 3.7 percent [ ], above the average for sub-saharan Africa. The figure is below the 5.5 percent initially forecast by the executive, but still in line with the growth of the world economy. The 3.7 percent figure is close to the forecast of about 3 percent made by the International Monetary Fund (IMF) in December at the end of its mission to Maputo, but above the World Bank s December forecast of 3.1 percent. Comoana said In light of the figures, with regard to the balance sheet of the Social Economic Plan of 2017, there is a satisfactory performance in the framework of the implementation of the government s five-year program, As for the rest of the data released recently, Mozambique closed the year with average inflation of 15.1 percent, below the 15.5 percent foreseen by the government and the 19.5 percent figure registered in Net International Reserves were sufficient to cover 7.3 months of import, in a scenario in which exports grew 1.9 percent and imports slowed down, with a 22.8 percent decrease. Since 2016, they have fallen 37.5 percent. The executive also presented data on the implementation of the State Budget for 2017, pointing to a reduction of the budget deficit (after donations) from 31 percent (estimated) to 22.7 percent. According to the figures, revenue collected was percent higher than forecast, amounting to 214 billion meticais (2.8 billion Euros) including 20.9 billion meticais (278 million Euros) from capital gains resulting from the indirect transfer of 25 percent of the participatory interest in Area 4 of the Rovuma Basin from Eni to Exxonmobil. Total state expenditure was 242 billion meticais (3.2 billion Euros), 89 percent of the annual budget, the government announced (Lusa). Mozambique has highest debt to GDP ratio in Africa says S&P Standard & Poor s (S&P) says that Mozambique has the highest foreign currency debt ratio in sub-saharan African and will not return to the markets before an agreement with the IMF is reached. According to an S&P report on debt issues planned by Sub- Saharan African countries this year, Mozambique will not return to the international financial markets in 2018 due to the recent financial default on repayment of the foreign currency Eurobond in 2016 and loans from public companies. In total, the S&P report on the public debt of the 17 countries rated by the rating agency in sub-saharan Africa shows that these countries will be indebted by a further 57 billion dollars this year. This represents an increase of 7.4 percent compared to the 53 billion debt issued last year and proves that the commodity price crisis, which began in 2014, continues to affect resource-dependent economies efforts to balance budgets. For the rest of the countries, the financing needs will remain relatively stable, reflecting a balance between the slightly more favorable environment in the commodities market and the tightening of the financing conditions resulting from the normalization of the US monetary policy. S&P expects total African commercial debt stock to reach US$392 billion by the end of this year, and total debt (including at concessionary rates) to reach US$514 billion of dollars. The S&P report is in line with concerns repeatedly expressed by IMF Director-General Christine Lagarde, who said in a recent interview that 2018 may be the year the debt problem in Africa comes to a head (Lusa). Mozambican Government acknowledges fragility of community management of natural resources Recently, the Ministry of Land, Environment and Rural Development brought together stakeholders promoting natural resources community management initiatives in Maputo, 20 years after the institutionalization of the community management policy. Approximately 160 million meticais have been paid to communities in natural resource regions over the last three years. The government however acknowledges that challenges in involving the local population in the sustainable management of resources remain. There is still a lot of work to be done, World Bank director Mark Lundell says. As a government partner, he has made US$ 4.5 million available to promote community involvement in Cabo Delgado and Zambézia (O País).

4 4 III. SECTORS MINERAL RESOURCES Anadarko in talks with nine Indian firms to sell gas from Rovuma basin Anadarko Petroleum Corp. is in talks with nine Indian companies to sell gas from Mozambique s Rovuma basin, two people aware of the development said. The US-based energy company, holding 26.5% stake in Rovuma, is the operator of the block. Gas from the basin is expected to flow from , against an earlier estimate of The consortium is in talks with Petronet LNG, Oil and Natural Gas Corp., Hindustan Petroleum Corp. Ltd, Bharat Petroleum Corp. Ltd and Gujarat State Petroleum Corp. among others, the second of the two people cited above said, also on condition of anonymity. Recently, Anadarko signed a deal with Électricité de France, S.A. (EDF) of France to supply 1.2 million tonnes per annum liquefied natural gas (LNG) for 15 years. Bharat PetroResources Ltd, the upstream arm of state-owned Bharat Petroleum Corp. Ltd (BPCL) and ONGC Videsh Ltd (OVL) hold 10% each. Other consortium members are Beas Rovuma Energy Mozambique Ltd (10%), PTTEP (8.5%) and Mitsui E&P Mozambique Area 1 Ltd (20%). Empresa Nacional de Hidrocarbonetos E.P (ENH), the national oil company of Mozambique, holds 15%. Capital expenditure for the project was initially pegged at $21 billion in 2015, and revised since crude oil prices began falling in the same year. The project may have 60% debt and the rest as equity from partners. 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. This is Mozambique s first onshore LNG development, consisting of two onshore LNG liquefaction trains (of 6 million MTPA each) with total nameplate capacity of MTPA (Live Mint). Mozambique: Negotiations over Angoche Area A-5 block proceeding normally The National Petroleum Institute (INP) says that the negotiation of the agreement to explore for oil in the Angoche Basin Area A5-A in Nampula is proceeding normally, despite the withdrawal of the Norwegian company Statoil, which was part of the consortium interested in exploring the area. Statoil and its partners, Eni and Sasol, were declared winners of the A5-A concession area in the fifth tender launched in 2014 by the government. Norwegian company Statoil however recently informed the INP that it intended to abandon negotiations on the prospecting and research contract. It is thought the tender has the potential to attract investments in the order of US$700 million, but since it closed in 2015, contracts have not yet been closed and work on the ground has not yet started. The INP says that, companies requested changes in the tax and the foreign exchange regimes applying to the contracts during the negotiations. The fifth international hydrocarbon research tender concerns 11 offshore areas in the Rovuma, Angoche and Moçambique (Zambezi Delta) basins, and four onshore areas located in the Mozambique Basin (Pande-Temane and Palmeira), covering a total of 74,259 square kilometers. Twenty-three proposals, covering 11 of the 15 areas available, were received. Evaluation of the proposals established consortiums led by Eni Mozambico S.p.A the winner of Angoche area A5-A. The A5-B area in the same region was won by Exxon Mobil E & P Mozambique Offshore Ltd. This oil giant will also lead research in the Zambezi region Areas A5-C and A5-D, while Sasol Petroleum Mozambique Exploration will lead research in the Pande-Temane area, areas PT5-C, and Delonex Energy Ltd work in the region of Palmeira, Area P5-A (Notícias). Vale Mozambique coal output doubles The amount of coal extracted by Vale from the mine it owns in Mozambique more than doubled in 2017 compared to the previous year, the Brazilian company announced recently. The company produced 5.4 million tonnes of coal in 2016, a figure which rose to 11.2 million last year, according to the company s report for the last quarter of Production has consolidated, and the figure is in line with the successive 2017 production records at the inland Tete mine in Mozambique. As regards marketing, Vale s total coal sales reached 11.7 million tons in 2017, up 13.7 percent on 2016, the document adds (Lusa). Mozambique: Triton has agreements for 50% of graphite from Ancuabe The company has signed a second term sheet with a Chinese producer. Triton Minerals Ltd has executed offtake term sheets for more than 50% of anticipated annual graphite production from the Ancuabe project in Mozambique. This follows the signing of a new term sheet with a Chinese graphite producer, the second within a week. The term sheet with Shandong Province-based Haida Graphite is for up to 16,000 tonnes of graphite concentrate annually for an initial period of five years. Haida is a major Chinese graphite company with extensive mining, processing and sales experience. It produces a range of graphite products, including graphite sheets, spherical graphite, high purity and expandable graphite for customers in China and international markets. The agreement is on substantially the same terms as last week s term sheet with Tianshengda Graphite. It means that Triton has executed term sheets for up to 32,000 tonnes of graphite concentrate annually from Ancuabe. The latest term sheet sets the framework for a binding offtake agreement that is anticipated to be signed by 15 March 2018 (Proactive Investors Australia). British mining company to explore new gold deposits in central Mozambique The British mining company Xtract Resources announced recently that it will begin exploration of a new block of gold deposits in central Mozambique thanks to an agreement with another firm already active in the area. South Africa s Omnia already operates in Manica province, and the contract between the two companies provides for them installing structures for the processing of alluvial deposits rich in the precious metal. The company expects to increase processing capacity, reducing the expected exploitation period to six years. In addition to Mozambique, the British firm also operates in Chile and South Africa. Manica province, which borders Zimbabwe, is one Mozambique s richest in gold and precious stones, attracting mining companies as well as gold miners from neighboring countries (Lusa).

5 5 Niassa produces more than 90 kilograms of gold Niassa province produced 93.1 kilograms of gold last year, 86.2 percent more than expected. Local authorities had thought only about 50 kilograms of the precious metal would be produced. An economic balance sheet report from the provincial government indicates that the performance was due to improved information-gathering procedures, mitigation of the evasion of reporting by the artisanal miners and more rigorous inspection in the gold zone (O País). AGRICULTURE AND FISHERY EU pledges 370 mln USD for rural development in Mozambique The European Union (EU) in Mozambique said recently that it has an aid package of more than 300 million Euros to support the country s rural development in the Northern Province of Nampula and central Zambezia, in sectors of energy, agriculture and transport. According to Isabel de Almeida, Head of Cooperation for the EU delegation in Mozambique, the aid program will be carried out for a period of seven years, as part of the EU Development Fund, which will bring considerable benefits for local small farmers. The EU expects to have the three components targeting the two provinces in full implementation by 2020, an initiative fully controlled by the EU itself, to facilitate access to alternative energies and transform precarious road access into the drive for trade. The EU official clarified that the intention to improve small farmers access to agri-business doesn t mean to directly promote Mozambican products in EU market, but to work with selected value chains to explore the potential for investment and identify means to add value to agricultural products, including processing for national and external markets. EU expects that neighbouring provinces in central and northern regions of the country will also benefit from this investment. The EU says it is pleased with the cooperation with Mozambican government, characterized by dialogue and mutual consultation so far (Xinhua). AfDB & Mozambique sign US$29M grant for agriculture and skills acquisition Recently, the African Development Bank and the Government of Mozambique signed grant agreements for two operations totaling US$ 29 million. The first intervention will support the uptake of agricultural technologies and techniques, as well as small scale irrigation equipment to increase climate resilience of small agricultural producers in southern Mozambique. Another operation will strengthen the curricula and teaching facilities at the University of Lurio, in the north of the country, focusing on creating skills for agriculture and engineering. Speaking at the signing ceremony on behalf of the Bank s President, Akinwumi Adesina, the Country Manager for Mozambique, Pietro Toigo, said that the gas discoveries in Northern Mozambique are likely to transform its economy, but to make these resources improve lives, Mozambique needs to invest now in economic diversification. He added that this is why the Bank is investing in agriculture and skills to ensure the country has a solid economic base. The Minister of Finance and the governor for Mozambique at the Bank, Adriano Maleiane, underscored the close alignment of the Bank s High 5s with the Government of Mozambique s priorities, noting that these two operations support two pillars of the Government strategy, enhancing agricultural resilience and improving skills for young people to compete in the market place (Club of Mozambique). Government negotiates more funds for irrigation The Ministry of Agriculture and Food Security is negotiating an US$80 million loan from the World Bank for the implementation of the Irrigation and Market Access Project for Small Scale Farmers (IRRIGA). The project will cover over seven million hectares in Manica, Sofala and Zambézia. The city of Quelimane recently hosted a public consultation which brought together the government, the private sector and various civil society stakeholders to discuss and flesh out the proposal. António Tcheco, a representative of the Small Scale Irrigation Project in Zambézia, said that the aim of the program was to expand the irrigated area, introduce technologies to increase productivity and develop links between input providers and producers, as well as access to markets. Currently, the Agriculture and Food Security sector is implementing a Small Scale Irrigation Project (PROIRRI) in the central region of the country, covering around 3,000 hectares. To these will be added the 7,000 hectares of the project still in prospect, and expected to be implemented between It is believed that the project will contribute decisively to the establishment and strengthening of irrigation associations and the improvement of service provision and market links. The Quelimane meeting brought together various stakeholders in the agricultural production chain and was intended to enrich the policy framework and safeguard environmental and social management, reducing the negative impacts associated with the project. António Tcheco said that the project foresaw resettlement issues, dealing with sacred sites, and mechanisms to do with the mobility of people, property, family assets and even of the state itself. At the Zambézia province level, the initiative will cover 14 districts with agro-ecological potential for the production of rice, vegetables and fruit trees under a contract regime. In total, more than 4,000 producers will be involved, with the aim being to promote sustainable development while avoiding adverse environmental and socio-cultural impacts. IRRIGA will be the continuation of PROIRRI, which is also financed by the World Bank but which is expected to end this year. The experiences derived from the project will be used to improve the next intervention so that the results are even better, especially in helping small subsistence producers transform (Notícias). The buffalo strength: Soon to take Mozambican agriculture by storm Buffalo could strengthen agriculture in Mozambique, and buffalo milk production may soon start in the country, Notícias reports. Mozambique is already testing the use of buffaloes as agricultural draught animals and will soon start production of buffalo milk for human consumption. The Estação Zooténica de Chobela, a cattle management research unit in the village of Magude, Maputo province, already has 16 adult and two young buffaloes. A further eight new-borns are expected this year, the institution says. Avelino Nhate, one of the officials in charge of the station, which is linked to the Mozambique Institute of Agricultural Research (IIAM), explained that the idea was to breed buffalo for farmers to use as draught animals or for the production of their milk, which is

6 6 very nutritious. Speaking during the recent visit of Deputy Minister of Agriculture and Food Security Luísa Meque, Nhate noted that there were already farmers in Inhambane using buffalo to farm the fields. He said that buffalo are wetland animals and could be used for rice production in Chókwè, for example, when cattle and tractors could not move because of the deep mud. Buffalo are twice as strong as cattle, weight for weight. As for worries about buffalo being aggressive, Nhate said there are techniques for controlling their behaviour, even to the point of them living and working side by side with cattle. The buffalo breeding initiative in Chobela started a few years ago, but there is still no time horizon for the start of animal distribution. The current focus is purely on increasing the number of animals. The buffalo project is one of several ongoing initiatives in the Magude facility, although it is operating in facilities which are at risk of collapsing at any time. Faced with these infrastructural conditions, the deputy of Agriculture and Food Security acknowledged that the state of the buildings was not compatible with the research conducted there, and said that the government was mobilising financial resources for the rehabilitation of the station (Notícias). Chazeiras de Moçambique expects a boost in Zambézia tea production Prominent Mozambique tea company Chazeiras de Moçambique is planning to raise its Zambézia tea production to 1,300 tons this year, 100 tons more than in The company has also set ambitious projections for its exports, which from the previous 1,278 tonnes are hoped to rise to 1,350 tonnes for the current harvest. Chazeiras de Moçambique representative Almeida Lee said that revenue from exports would increase to US$1,830,000 in 2018, up from US$1,638,000 in Lee pointed out that, as a crop heavily dependent on exports, revenue in this sector was strongly influenced by the exchange rate. Although previously somewhat disappointed with domestic markets, Chazeiras de Moçambique says it is now becoming more optimistic about domestic consumers. Notwithstanding this favourable trend, there are no plans for expansion either in farming or processing. Any eventual plan in this area would depend on the situation of the metical, especially against the dollar. Chazeiras de Moçambique, one of the few companies to survive in the area of tea cultivation, processing and marketing in Mozambique, has reduced its level of intervention in the sector. Previously operating in several Zambézia province districts of Gurué, Ile, Lugela and Milange, Chazeiras currently restricts its activities to Gurué only (AIM). Fishing ports pass to indirect state management To ensure greater safety, efficiency and financial sustainability, the management of fishing ports and other such infrastructure will henceforth be carried out by the government indirectly. According to a press release, the Council of Ministers at its 5th Ordinary Session recently, considered and approved the decree establishing the National Institute for the Development and Management of Fisheries Infrastructures (INFRAPESCA). INFRAPESCA, reads the communique, is a public legal entity with legal personality and administrative, financial and patrimonial autonomy, created to exercise authority in fishing ports and other fishing infrastructures, with a view to ensuring their development and management, as well as implementation of hygienic fishery management measures in fishing ports and related infrastructure (Notícias). INFRASTRUCTURE AND ENERGY Mozambique, Zimbabwe and Botswana revive massive railway project Zimbabwe and Botswana have revived talks on the construction of a railway line that would link the two countries to Mozambique. If the project succeeds, it would become one of the most notable infrastructure projects in the region, as it would link more than two Southern African Development Community countries. The railway line is expected to link Francistown in Botswana, Bulawayo in Zimbabwe and the Mozambican port of Techobanine to facilitate enhanced regional trade. In an interview in Harare, Zimbabwe s Foreign Affairs and International Trade Minister, Dr Sibusiso Moyo, said the three countries have revived dialogue over the envisaged railway line. Moyo said the matter was one of the items under discussion during Zimbabwe President, Emmerson Mnangagwa s state visit to Botswana recently. Moyo also said that the three countries are now working on timelines to facilitate implementation of the project and the three countries Governments as well as private partners are expected to provide funding for the project. In 2016, the three countries signed a memorandum of understanding (MoU) for the project. According to that MoU, each country is expected to provide US$200 million towards the cost of the project with the rest of the work to be done through publicprivate partnerships (PPPs). Upon completion, the venture will facilitate inter-regional trade through the movement of passenger rail traffic and up to 12 million tonnes of goods per annum through the three countries (Club of Mozambique / Further Africa / The Southern Times). Mozambique seeks $544M for urban transport system Mozambique s Transport and Communications Minister Carlos Mesquita says his government needs to mobilize $544 million from foreign partners to implement the Automated Guideway Transit (AGT) system. AGT is a non-piloted transportation system whose operation depends on computer systems and will link downtown Maputo to the Zimpeto neighborhood, in the Mozambican capital. Mesquita made the announcement recently during the presentation of the project s feasibility study. The feasibility study was funded by the Japan International Cooperation Agency (JICA) based on a memorandum of cooperation signed in April 2017 between Mozambique and Japan, to improve the quality of urban public passenger transport services in the metropolitan area of Maputo (APA). Mozambican government seeks partners to resume construction of the Moamba Major Dam The Mozambican government is negotiating the completion of the Moamba-Major Dam in Maputo province with three potential international partners. The National Director of Water Resources Management Messias Macie said the executive is evaluating

7 7 proposals in order to select one the best one to participate, within a non-exclusive framework. Macie says the government will complete the evaluation of the proposals as quickly as possible and move forward with subsequent steps to continue the works, currently on hold due to the lack of Mozambican government participation to the value of US$200 million. According to Macie, the project is in limbo because of the need to ensure co-participation, since under the terms of the agreement, the project is financed by the Brazilian National Economic and Social Development Bank with a contribution from the Mozambican government which, in the current economic situation, is unable to provide its share. This could happen in the near future, Macie said, since all investors guarantee that financial engineering for the Dam will be in place this year. The Dam, whose first stone was laid in 2014, will have capacity of 760 million cubic meters and will control the flow of the Incomati River, improving water supply to the cities of Maputo, Matola and Ressano Garcia and generating 15MW of electricity (Notícias). Coal terminal of Indian group Essar in Beira, Mozambique, starts operating in 2020 The first phase of the 10 million-ton per year coal terminal to be built at the port of Beira in central Mozambique s Sofala province, by Indian group Essar is set to start operating in 2020 following an investment of US$260 million, the CEO of Mozambique Essar Ports, Ltd said in Cape Town. At the South African Coal Exporters Conference, 2018 held in Cape Town recently, Tej Nargundkar also said that the launch of the second phase of this project, where a similar investment is planned, will depend on the success of the first, according to the local press. The CEO Mozambique Essar Ports, Ltd. stated that the port of Beira being unable to receive ships of more than 50,000 gross tonnages or with a draft of more than 12 meters was not an obstacle to the business, as most ports in India are also not deep-water ports. The main aim of the Essar Group s investment through Essar Ports, Ltd is to use the port of Beira to export coal mined in Moatize, Tete province, in response to increasing demand from India. The port of Beira is located 580 kilometers from the Moatize coal basin and is served by the Sena railway line, recently overtaken by Brazilian group Vale to transport the coal mined at Moatize instead of using the railway that passes through Malawi and arrives at the Deepwater port of Nacala, over a distance of 912 kilometers. The new terminal will be fully mechanized from the unloading of the wagons to the storage and loading of the ships. The dock will be 300 meters long and 24 meters wide and the port will have a capacity of 700,000 tons in the first phase (Macauhub). Volume of cargo transported through Mozambique CDN increases by 67% the Northern Development Corridor (CDN) last year carried about 405,000 tons of miscellaneous cargo, against the 243,261 tons transported in 2016, an increase of 67 percent. The increase is a result of the CDN s responsiveness in terms of equipment availability and railway line quality, plus the commercial work and new business development efforts of the commercial sector of the company. At present, the Northern Development Corridor has 732 wagons for the transport of various cargo such as fertilizer, fuel, wheat, sugar, tobacco and various other agricultural products. The company s target this year is 480,000 tons of cargo, and the commercial department has already closed contracts with several customers. Last year, the CDN, concessionaire and operator of port infrastructure in the north of Mozambique, transported about 50,000 passengers in 627 trains on the Nampula-Cuamba, Cuamba- Entre Lagos and Cuamba-Lichinga rail lines. The Northern Development Corridor is a public company incorporated and registered in Mozambique, whose objective is the integrated management, rehabilitation and commercial exploitation of the infrastructures of the Port of Nacala and the rail line network of northern Mozambique. CDN is part of the Nacala Corridor Project, which covers the northern region of Mozambique, Malawi and Zambia (Folha de Maputo / Club of Mozambique). Mocuba: The birth of a large scale solar power plant in Mozambique A solar power plant capable of generating 40MW of electricity will start construction this March in the district of Mocuba, Zambézia province, in a public-private investment partnership worth US$80 million. The infrastructure will be linked to a network to be developed in a partnership between Scatec Solar, Norfund and Electricidade de Moçambique (EDM), according to Chairman of EDM s Board of Directors Mateus Magala, speaking during the Mozambique-Norway Energy Week business forum. The construction of the venture is covered by an agreement signed last year when Norwegian Foreign Minister Borge Brende visited Mozambique. This is the first large-scale solar energy project in Mozambique, and represents an important step in achieving the national goal of increasing renewable energy generation. Magala said that the Mocuba solar plant was very important because it would define a new attitude in the country to the production of solar energy in large quantities. According to the EDM chairman, another structural project in perspective is the Temane power station, which will generate 400MW of electricity from natural gas. Associated with this initiative is the construction of a transmission line linking Temane, in Inhambane, and Maputo, a distance of approximately 700 kilometers. Magala said that these were among a range of structural and transformational projects his company was carrying out. The conclusion of the Maputo Power Plant, the largest of all, is imminent, and it should start operating in August (Notícias). TRADE/RETAIL Mozambique joins the Economic Partnership Agreement between the EU and Southern African States Mozambique was the last piece of the SADC-EPA jigsaw to fall into place. The other five countries Botswana, Lesotho, Namibia, South-Africa, and Swaziland have been implementing the agreement since October Implementing the EPA means that Mozambique will not have to pay customs duties on its exports to the EU. The EU is the largest export market for Africa. Exports to the EU represent 22% of SADC EPA countries exports. The EU-SADC EPA provides opportunities for SADC countries to create jobs, attract more investment, industrialize, and integrate into global value chains. On the EU side, European businesses are increasingly investing in the region. For its part, Mozambique will progressively, over the course of several years, reduce or eliminate

8 8 customs duties for many of EU exports. Trade between the EU and Mozambique is currently about 2 billion annually. Mozambican exports to the EU include aluminum and raw cane sugar (Club of Mozambique). All products must be labelled in Portuguese, orders INAE The Mozambican government s National Inspectorate of Economic Activities (INAE) has warned all shops that, as from 31 March, the pre-packaged products they sell must be labelled in the country s official language, Portuguese. INAE inspector Veronica Duvane announced this at a Maputo press conference recently. INAE has previously complained about goods sold, particularly in northern Mozambique, that are labelled in languages such as Arabic and Chinese, without any Portuguese translation. But, if Duvane s words are taken literally, this INAE decree might endanger imports of products from neighboring products, notably South Africa, that are labelled in English. She added that, also as from 31 March, INAE will take measures against all goods that do not obey government regulation on the fortification of foodstuffs. Thus all salt sold in Mozambique must be iodated, and other basic foods (maize and wheat flour and vegetable oil, for example) must be fortified with micro-nutrients such as vitamin A, folic acid and iron. In September 2017 the Mozambican authorities banned the import of non-fortified basic foods. But there are believed to be many stocks of nonfortified foods, and the owners have been given until March 2018 to dispose of them. Around 43 percent of children in Mozambique suffer from chronic malnutrition. Duvane warned that, as from the end of March, INAE will withdraw from the market all goods that do not comply with the fortification rules. Such products should not enter Mozambican territory. INAE has also banned the consumption of alcohol inside the bottle stores or shops that sell alcoholic drinks. Duvane complained that bottle stores are only authorized to sell drinks, but in many cases have become bars. She also warned that no sale or consumption of alcohol is permitted within 500 metres of school. Any establishment within that radius that sells alcoholic drinks must either close down or find something else to sell (Club of Mozambique). FINANCE Mozambique: Commercial banks granted greater responsibility in managing foreign exchange operations Commercial banks are to receive applications for the licensing of foreign exchange transactions instead of making requests directly to the central bank as previously, Director of the Regulation Department of the Bank of Mozambique, Paulo Bandane has revealed. The director was speaking at a seminar publicizing foreign exchange law innovations which brought together different players in the banking market and users of foreign exchange transactions. The new Foreign Exchange Law rules and procedures were approved last year and are part of Notice 20 issued by the Bank of Mozambique. Bandane explained that, in undefined cases, commercial banks should pass the requests to the central bank for processing. Commercial banks are authorized to open bank accounts in foreign currency, in the cases where a foreign or non-resident relationship is proven. They may also receive funds in the form of foreign direct investment. With regard to income from repatriated exports, there is no longer an obligation to immediately convert 50 percent to the national currency (metical) in order to give greater protection to the exporters and investors. Under the new rules, a single currency hedge account has been created to allow conversions to take place as payment transactions become effective. The central bank intends these measures to improve the business environment (Club of Mozambique / O País). Arise Fund to enter Moza Banco Kuhanha, the company that manages the Bank of Mozambique s pension fund recently signed a memorandum of understanding under which the investment company Arise Fund will enter the commercial bank Moza Banco as a minority shareholder. Kuhanha is the majority shareholder in Moza Banco following recapitalization in early Moza Banco had entered a liquidity crisis the previous year, and the Bank of Mozambique stepped in to prevent a collapse. Since at the time Moza Banco was the fourth largest of the country s commercial banks, a collapse would have had serious repercussions across the financial system. The central bank injected funds to keep Moza Banco operating, sacked its board of directors and installed a temporary replacement. The recapitalization resulted in Kuhanha owning 80 percent of the bank. The Portuguese Novo Banco, which previously owned 49 percent, and Mozambique Capitais, with 50.9 percent, now each own 10 percent. Arise fund is the first new shareholder to enter Moza Banco since the recapitalization. Arise Fund is already a shareholder in a small Mozambican commercial bank, Banco Terra, and Kuhanya announced that Moza intends to acquire Banco Terra. The Kuhanya Chief Executive Officer, Felicidade Banze, said she was excited at the prospect of a partnership with Arise Fund. The CEO of Arise Fund, Deepak Malik, said the synergies offered by this relation between Arise and Kuhanya will put Moza Banco in a better position to serve Mozambicans and promote financial inclusion. Arise Fund was set up by three investors, namely Rabobank (the second largest bank in Holland, in terms of assets), the Norwegian development finance institution Norfund, and the Dutch Development Bank, FMO. Currently Arise fund manages assets in excess of 660 million US dollars in more than ten countries (AIM). Millennium Bim starts 2018 with expansion of services in Nampula province and Maputo City Millennium Bim started the New Year with the opening of another branch, continuing its strategy of expanding its service network in rural areas. The new branch is the bank s first in Ribaué district, Nampula province. The Ribaué branch benefits and promotes the financial inclusion of the district s approximately 291,000 residents, who now enjoy access to all the bank s products and services in a more modern, comfortable space offering guarantees of safety and quality. The new bank brings to 190 the number of Millennium Bim branches in the country. In Nampula province alone, the bank has 19 branches providing the banking products and services needed by the province s estimated 6,103,000 inhabitants. Throughout its 22 years of operation, Millennium Bim bank has actively contributed to the upgrading of the country s banking system. Its objective is to continue investing in quality customer service and maintaining a solid, innovative and sustained strategy of expansion. In other development, Millennium Bim said they have opened