Mozambique 18 Jan 2017: Default at the first hurdle
Good afternoon. Today is the day the first interest payment on Mozambique’s first ever sovereign bond falls due - a flagship bond issue that introduced Mozambique to the international capital markets, as finance minister Adriano Maleiane explained last year. What an introduction.
SEE: Mozambique says it will default on debut sovereign bond
With Monday’s announcement that it will not make the payment, “Mozambique joins the elite group who fail to make even the first coupon payment on a sovereign bond,” as pointed out by London-based bond trader James Croft. Whether or not the sovereign guarantees are ever honoured, Mozambique’s credibility has been shot to pieces - notwithstanding the government’s new-found, impressive transparency over the issue - and will have to be rebuilt from scratch. How to do that is a question that the government of Filipe Nyusi now has to answer.
The other big question for Frelimo in 2017 is whether, and to what extent, it is willing to share power with Renamo. An article published yesterday by Cambridge academic Justin Pearce describes the split within the ruling party over the issue:
On the one hand, a centralised state is an article of faith for party hawks, who also fear that Renamo appointments to provincial governorships would create centres of patronage for Renamo and represent cracks in Frelimo’s dominance of state power.
But another tendency within the party, likely including Nyusi himself, believes Frelimo has little to fear from decentralisation. This more flexible position on Nyusi’s side could explain why a couple of ad-hoc phone chats between him and Dhlakama have managed to keep alive the idea of a peace just weeks after the mediation process fizzled out.
While a final decision is still probably a long way off, two delegations from the Mozambique parliament - including members from Frelimo, Renamo, and the MDM - are visiting Spain and Germany over the coming weeks, to learn how their decentralised structures work. Some are suggesting, however, that the more centralised French model would be more relevant.
SEE: Mozambique parliament seeks advice from Spain on political decentralisation
New exploration for oil and gas remains on hold until questions around foreign currency regulation can be resolved, Mozambican media reported this week.
SEE: Currency questions delay Mozambique oil and gas exploration contracts
Nevertheless, other projects in the energy sector are moving ahead - including a 120 MW hydropower plant slap bang in the middle of Mozambique’s conflict zone.
SEE: Consultation launched for new 120 MW hydro plant in Mozambique
Heavy sands miner Kenmare reported positive results this week, hitting new production records despite low global prices.
SEE: Kenmare 2016 ilmenite production up, but prices still lagging
But misfortune still dogs Mozambique’s coal miners, after a coal train derailment on Saturday blocked the line running from the coal centre of Moatize to the port of Beira.
SEE: Mozambique coal train derails, blocking Beira line
Have a great rest of the week.
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Consultation launched for new 120 MW hydro plant in Mozambique
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Currency questions delay Mozambique oil and gas exploration contracts
