Mozambique 16 Nov: A game of chicken
Good morning. Mozambique’s attempted debt restructure is turning into a saga, with both sides using the press to set out their stances, in the absence of proper negotiations.
The holders of a sovereign bond, issued in April this year, say they won’t enter into restructure negotiations while there are still facts about Mozambique’s controversial loans to come out. But the independent audit into the debts will not be completed until after the first payment on the sovereign bond is due - which could lead Mozambique having to decide whether to default, or raid the central bank’s $1.6bn reserves to pay the $60m coupon.
SEE: Mozambique bondholders ask ‘where is the money?’ from $1.2bn hidden loans
The Mozambique government is firm that the results of the independent audit into the deals won’t change how much debt has to be restructured and ultimately repaid - so creditors shouldn’t wait to negotiate.
The two sides are on course for a collision; who will chicken out first?
SEE: Mozambique government says audit won’t change debt restructure needs
The other unknown is the stance of the IMF. A senior official visited Maputo this week and said the Fund wants to “see the result of the audit, and progress in the discussions with creditors,” before it restarts its lending programme, but that still leaves room for interpretation by government and bondholders over what should happen first.
In the meantime, Mozambique has plenty of homework to be getting on with - including restructuring a portfolio of loss-making state-owned enterprises, including the state-owned airline and telecoms companies.
SEE: Mozambique still working to restructure state-owned airline and telcos
Another troubled state-owned firm is electricity utility EDM, which is supposed to partnering with Sasol on a large gas-fired power plant near the South African company’s project in Inhambane province. Sasol told Zitamar they can work around EDM’s readiness to move ahead with the project, thanks to a flexible drilling schedule.
SEE: Sasol stays flexible on Mozambique gas expansion plans
EDM was the second-largest shareholder in Nosso Banco, an institution set up by a Rwandan millionaire that seems to have been inexplicably propped up by the Mozambican state. Now, the central bank - under new management - is liquidating the bank, in what looks like a concerted effort to clean up the sector.
SEE: Bank of Mozambique shuts down another failing bank
Lastly, the peace talks restarted this week, with the Renamo negotiating team back up to full strength following the killing of one of its members over a month ago. He has been replaced by a veteran of the last round of talks, which - after making some gains - were ultimately abandoned due to a lack of progress. Let’s hope for better luck this time.
SEE: Dhlakama names veteran negotiator to Mozambique peace talks team
Have a great week.