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Community transmission of covid-19 declared in Pemba; Negotiations with Renamo dissident leader have failed, UN envoy says

Welcome to Zitamar’s daily Mozambique briefing for 22 June, 2020

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  • Thursday: Public holiday in Mozambique for Independence Day. No Zitamar Daily Briefing will be published

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Community transmission of covid-19 declared in city of Pemba
Pemba is the second city after Nampula to be given the status, and accounts for 23 of the 65 cases announced over the weekend

The best of the rest:

  • Negotiations with Renamo dissident leader have failed, UN envoy says (STV)
  • Nampula receives more than 5,000 refugees from Cabo Delgado (Lusa, AIM)
  • Crisis forces Zimbabweans to cross closed border to buy food in Mozambique (VOA)
  • Donors promise $667m to help Mozambique through covid-19 pandemic (Lusa, Statement)
  • Total to close $16bn Mozambique LNG financing within days, but has laid off 5,000 workers (O País, Lusa)
  • State-owned companies increasingly in debt (O País)

Negotiations with Renamo dissident leader have failed, UN envoy says (STV)
Attempts at reaching an understanding with Mariano Nhongo, leader of the Renamo Military Junta paramilitary faction, have broken down, according to the United Nations secretary-general’s personal envoy to Mozambique, Mirko Manzoni. In an interview with television channel STV, Manzoni said he had been speaking regularly with Nhongo for over a year and revealed that both President Filipe Nyusi and the leader of opposition party Renamo, Ossufo Momade, had tried to approach the dissident general who has broken away from the Renamo leadership, but he has never facilitated the talks. “It is not true that [Renamo] president Ossufo Momade did not want to speak with Mariano Nhongo. Everyone spoke to Mr Nhongo and now the problem is on his side”. Meanwhile, police in Sofala province announced that on 14 June, the dead body was found of a school headteacher kidnapped in mid-May by armed men believed to have belonged to the Junta. The kidnappers, according to the police quoted by the newspaper O País, were led at the time by André Matsangaissa junior, nephew of André Matsangaissa, founder and first commander-in-chief of Renamo.
The Military Junta's armed attacks continue, but mainstream Renamo is apparently still open to including them in the process of disarmament, demilitarisation and reintegration (DDR). Zitamar News understands that one of those who chose to leave the dissident group is Colonel João Machava, Nhongo's right-hand man, who was a spokesman for the junta. He left the woods of central Mozambique and returned to the military base of Funhalouro in Inhambane province to take part in the DDR process. Carta de Moçambique on Monday quoted Renamo spokesman Jose Manteigas as saying that the party remains open to receiving Nhongo in order to be part of the disarmament.

Nampula receives more than 5,000 refugees from Cabo Delgado (Lusa, AIM)
Nampula province has received 5,067 internally displaced people from neighbouring Cabo Delgado province, from where they are fleeing extremist attacks, according to Alberto Armando of the National Institute for Disaster Management (INGC). Armando said that almost half (2,284) of them were children, and the remainder were women. Most of the men had come to Nampula to leave their wives and children before returning to Cabo Delgado, claiming they have to take care of some goods, he added. Armando was speaking during a meeting with the prime minister, Carlos Agostinho do Rosário, who visited the administrative post of Namialo, where the largest number of displaced people is concentrated. Do Rosário said that the authorities would do everything to assist the refugees, but added that work was also being done to identify possible jihadists within the displaced.

Crisis forces Zimbabweans to cross closed border to buy food in Mozambique (VOA)
At least 44 Zimbabweans have illegally crossed the Machipanda border crossing, the main crossing point between Zimbabwe and Mozambique, since Mozambique closed its borders to prevent the spread of covid-19, according to a migration official in nearby Manica district. The lockdown in Zimbabwe has exacerbated the already acute food shortages in that country. “All Zimbabweans were looking for staple products, especially food. We are aware of the economic situation in Zimbabwe, which is not a good one, so many Zimbabweans struggle to enter Mozambique in search of food products,” Jorge Machava, a spokesman for the Provincial Migration Services, told VOA.

Donors promise $667m to help Mozambique through covid-19 pandemic (Lusa, Statement)
Donors will provide $667m over the next three years to mitigate the effects of the covid-19 pandemic in Mozambique, according to a statement from the European Union which co-chairs the Cooperation Partners’ Platform along with the USA. At the end of March, the Mozambican government said that it needed $700m to cover the budget hole left by covid-19, which would also include the construction of hospitals in districts that did not have health facilities. The International Monetary Fund provided $309m and, according to the Mozambican minister of the economy and finance, Adriano Maleiane, several other partners expressed their intention to support the country, including the World Bank, African Development Bank and the European Union.

Total to close $16bn Mozambique LNG financing within days, but has laid off 5,000 workers (O País, Lusa)
Oil and gas company Total will sign the agreement that guarantees the financing for $16bn of its $20bn Mozambique LNG liquified natural gas project within a few days. With a large part of the money almost secured, Total says that it has no doubts that the first gas production of the project will start, as predicted, in 2024. The minister of mineral resources and energy, Max Tonela, said on Friday that 11% of the general work on the project had already been completed. Tonela added that the “project is viable”, even with the drop in global oil prices, and that state-owned oil company ENH would still “have benefits” from the project, despite being heavily in debt to the other partners to finance its stake. The financial models of the Area 1 project point to $61bn in global earnings over its 25-year life and “the Mozambican state, through taxes, profit sharing and ENH shareholding, will be just over 50%, about $31bn,” he said. Total said that it had already spent $699m with Mozambican companies and had 6,100 workers employed in December 2019, but this number went down to 900 after widespread surge of covid-19 virus in the months of April and May in its main camp at Afungi. After being declared safe this month, 3,500 workers are expected by August when normal travel conditions will be reestablished. The number is expected  to increase to 6,500 by December.
Tonela confirmed again that ENH is looking to refinance its 15% stake in the project, which lenders put at a total of $24bn. One of the reasons former chairman Omar Mithá was said to have been replaced was because of his failure to make progress on this issue. Bloomberg reported that the state oil company has now hired Societe Generale to help it in the process. Societe Generale is currently acting as financial adviser to the shareholders of the Mozambique LNG project. It will have its work cut out: ENH has no cash, Mozambique is still technically in a state of default, and oil prices remain well below a level that would make Mozambique LNG economic.

State-owned companies increasingly in debt (O País)
The external debt of Mozambican state-owned businesses increased by 23.5% between 2018 and 2019, from around $1.4bn to $1.7bn, which represents 12% of gross domestic product, according to the government’s 2019 public debt report. Oil and gas company ENH accounted for the overwhelming majority of the debt, with about $1.6bn borrowed to finance its participation in liquefied natural gas projects in the Rovuma basin off Cabo Delgado province. Airline LAM was in second place with debt valued at $102.9m, fuel company Petromoc was third with $26.4m, and electricity company EDM fourth with $14.3m. Debts owed by state-owned businesses to domestic commercial banks amounted to 22.6bn meticais ($320m), which represents 2.4% of GDP.

Company Announcements

  • New cabotage company SMC has signed Manica Freight Services as its navigation agent for all of Mozambique’s ports
  • Ncondezi Energy published its annual report and accounts for 2019, reporting cash and cash equivalents of $700,000 at 31 December 2019, and cash reserves of $900,000 at 1 June 2020. The accounts noted that the company was funded until the fourth quarter of 2020 assuming that a shareholder loan of $4.5m, which fell due last November and is in restructuring, could be extended. The accounts said that “notwithstanding the shareholder loan, further funding will be required as detailed above to meet operating cash flows under current forecasts or in the event of accelerated project advancement” and that, with no binding agreements for further funding in place, “these factors indicate the existence of a material uncertainty which may cast significant doubt about the group’s ability to continue as a going concern”
  • The Bank of Mozambique announced publication of a financial inclusion newsletter
  • Hidroeléctrica de Cahora Bassa published its annual accounts for 2019 on the Mozambique Stock Exchange
  • New Energy Minerals issued a statement saying that “nearly all” the conditions precedent and Mozambican approvals for the sale of its ruby mining licences in Mozambique to Fura Gems had been received, and that the sale was expected to close “imminently”. The company said that all conditions precedent had been satisfied except for receipt of one of two ministerial letters, which it understood had been signed by the minister but not yet by the director of mines of the National Institute of Mines. It added that convertible loan notes which had fallen due on 12 June would now be paid out using proceeds from the Fura transaction, plus interest accrued since the maturity date

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