There are causes for optimism about Mozambique’s political and economic future due partly to a recent peace accord with opposition Renamo ahead of the country’s October election and partly to the announcement of several major projects following the discovery of huge deposits of natural gas. African Development Bank figures show Mozambique’s GDP growth was 3.5% in 2018, down sharply from the average of 7% from 2004 to 2015, mainly because of the steep decline in public and foreign investment. Mozambique has a debt crisis and it remains in debt default after the 2016 discovery of US$2bn (13% of GDP) of questionable government-guaranteed debt. The minister of Economy and Finance, Adriano Maleiane said recently that the budget deficit will be 8.9% in 2019. The growth outlook varies widely. Some commentators expect GDP growth of less than 1% in 2019 due to the devastating impact of cyclones Idai and Kenneth and widening fiscal and current account deficits due to reconstruction costs from the storms. The AfDB expects growth of 4.5% in 2019 and 5.0% in 2020 driven by a recovering agriculture sector, extractive industries and coal exports. Mozambique’s economic prospects hinge largely on major projects in the Rovuma Basin, where huge natural gas reserves were discovered. A Whom Owns Whom report on The Mozambican Petroleum Industry indicated that the 35 trillion cubic metres of natural gas deposits in the Rovuma area could put the country among the 10 largest liquefied natural gas producers over the next few years. The report, quoting an International Monetary Fund June 2019 update, said Mozambique’s economic situation had been improving following a drop in inflation (from 26% in November 2016, to 3% in April 2019) and the further development of gas projects, until cyclones Idai and Kenneth hit. The Mozambican economy is characterised by a lack of diversity, with the agriculture sector, which was devastated by the cyclones and their aftermath, accounting for about 30% of GDP and around 80% of the country’s labour force, according to the Who Owns Whom report. Mozambique is also affected by corruption, poor governance, bureaucracy, the weak rule of law and an underdeveloped financial sector that makes it difficult to access finance. Companies contend with a shortage of skilled labour and state-sanctioned monopolies. However, gas investment will bring opportunities. Major investments include Anadarko and partners’ US$25bn in the Rovuma liquefied natural gas project and ExxonMobil, Eni, China National Petroleum and partners’ development of a US$27bn to US$32bn project. Eni and ExxonMobil have a second US19bn project under development, while Eni operates another US$8bn project and Shell has completed a feasibility study for a US$5bn gas to liquids plant. The economy, meanwhile remains susceptible to downside risks. The African Development Bank said these include debt distress, rising prices for key imports such as fuel and food, economic difficulties in South Africa, Mozambique’s second largest export destination, and natural disasters.
Zambia’s economy is holding steady despite the massive drop in agricultural output in 2018. But political and economic challenges weigh heavily on the country. World Bank figures estimated Zambia’s 2018 GDP growth at 3.5% while the African Development Bank estimated economic growth at 4.0% in 2018, compared with 4.1% in 2017. It said that agricultural output fell more than 35% in 2018 due to poor rainfall, although copper production and construction contributed positively to growth. The World Bank expects the Zambian economy to grow 2.5% in 2019 and 2.8% in 2020. Finance minister Bwalya Ng’andu, a recent replacement of Margaret Mwanakatwe, who was unexpectedly fired, reduced the country’s growth outlook for 2019 to 2.5% from an initial estimate of almost 4%. Since president Edgar Lungu came into power in 2015, many Zambians have been unhappy about increasing corruption and fiscal and political challenges which have seen some ministers resign and a number of opposition leaders being imprisoned. Britain’s outgoing ambassador recently slammed the country’s rampant corruption and fraud, saying it had led to withholding of aid and investment. The economy, which is heavily reliant on copper mining and agriculture, is vulnerable to variations in the copper price, and to drought, according to a Who Owns Whom report on the agri-business sector. The report said that economic growth was mostly due to growth in the services and mining sectors that offset a contraction in the agricultural sector as a result of low rainfall. The World Bank said in its April 2019 Macro Poverty Outlook report that the GDP of Zambia’s agricultural sector decreased in real terms by an estimated 6.5% in 2018, after achieving a growth rate of 16.5% in 2017. The Who Owns Whom report indicated that maize production dropped by 33.6% in the 2017/2018 season on the back of a 15.3% reduction in the area planted, and a 21.5% drop in maize yields, caused by prolonged dry spells. Investors have been having difficulty in Zambia. Vedanta Resources got a South African court order blocking the liquidation of its Zambian-based Konkola Copper Mines in an ongoing battle with the government, which has claimed that Vendata abused its mining licence and was shifting profits. Zambia is 118th out of 140 countries in world competitiveness and scored poorly in measures of human development. Ng’andu pointed out that resources are largely being deployed to service debt. This will likely see it continuing to find it difficult to develop infrastructure and to attract investment. It is widely acknowledged that a substantial portion of Zambia’s external debt, believed to have totalled $10bn at the end of 2018, is owed to China, and a number of reports express fear that Zambia is in negotiations to or is expected to hand over national assets such as electricity producer Zesco, Lusaka’s airport and mines, including Vendata’s, to China and increasingly fall under its control. The Economics Association of Zambia said recently that Zambia’s debt to China was US$3.1bn, a third of the US$9.51bn external debt the country had in the third quarter of last year. China is already a major provider of development finance and has invested in water, milling, mining, broadcasting and cement projects and companies,
How are we going to uplift the unacceptable levels of vulnerable people in our society? The Black Economic Empowerment (BEE) policy was designed to redress the economic imbalance caused by apartheid, yet, in 2019, it still has a long way to go to bring dignity to all South Africans. Social development must come from the private sector because these are different times and business and the state need to engage more productively if we want to see sustainable change. Read more on The Africa Report
The global fight against corruption, money laundering and terrorist funding activities has seen the obligation to ‘know your client’ become an inexorable international trend, which has been brought even closer to home with the Gupta, VBS, Steinhoff and Bosasa delinquencies. To bring South Africa in line with international efforts and to meet our commitments to the G20 in this regard, government promulgated The Financial Intelligence Centre Act (Fica) of 2001 (amended in 2017) to create the Financial Intelligence Centre, which has become one of the most effective institutions fighting corruption and crime in our society. Fica places the obligation on a wide range of professions and financial services companies to ‘know your client’, particularly with regard to who owns them. While section 26 of the Companies Act gives any member of the public the right to request the share register of a private company, the practicalities of accessing this information tend to defeat the intention. In 2013 Moneyweb journalist Julius Cobbett requested the share register of Nova Property Group Holdings, which was involved in the Sharemax property syndication. Nova refused to provide it, and the matter went all way to the Constitutional Court which, in 2016, dismissed Nova’s appeal against the Supreme Court ruling against it, settling once and for all the principle that any person has an unqualified right to access the securities register of any company. However, while the right is there, the process to uplift this information is onerous. WOW, amaBhungane and the Helen Suzman Foundation have, for the last two years, been petitioning the Department of Trade and Industry to introduce legislation into the Companies Amendment Act which will obligate private companies to list beneficial shareholders on CIPC, as is currently the case with directors. We hope that we are being heard. Fica does state that outside sources may be used to verify data, and WOW has accumulated, over 39 years, ownership information on 180,000 companies. WOWEB users are increasingly using this information for know your client purposes.