No.148, 8th December 1998
An international conference on Mozambique's foreign debt organised in Maputo by the country's parliament, the Assembly of the Republic, ended on 5 December with a call for the total cancellation of the debt.
Unanimity on this issue spanned the entire Mozambican political spectrum. It united the ruling Frelimo party, Renamo, the various minor parties, and intellectuals of no party affiliation at all who attended the conference.
Indeed, the only person who took the rostrum to oppose writing off the entire debt was the local representative of the World Bank, James Coates, who repeated the official Bretton Woods line that Mozambique cannot expect anything better than admission, in mid-1999, to the HIPC (Heavily Indebted Poor Countries) debt relief initiative, sponsored by the Bank and the IMF.
But the figures produced at the conference showed that Mozambique's gains from HIPC, at least over the short term, are not significant. According to Deputy Finance Minister Luisa Diogo, over the last three years Mozambique paid out in debt servicing an average of $110.8 million a year. With the implementation of HIPC the debt service will fall - to about $100 million a year.
Diogo made it clear that the government does not accept that HIPC is the end of the road. She insisted that "the ideal solution would be 100 per cent debt forgiveness".
The conference kept its conclusions brief and to the point. It called for writing the entire debt off - cancelling an additional $1.1 billion of debt in net present value terms (or about $2.4 billion in nominal terms), over and above what is on offer from HIPC. The money released from the state budget "should be channelled as a priority to the social sectors".
The conference recommended that the Assembly should "establish mechanisms to follow the debt question so that the Assembly of the Republic can play an increasingly active and consistent role". It called for coordination between southern African parliaments in coordinated debt cancellation efforts.
The parliaments of the region, it added, should reach out to the parliaments of the creditor nations to persuade them to put pressure on their governments and on the Bretton Woods institutions for total debt cancellation.
In his closing speech, the conference chairman, Abdul Carimo, attacked the IMF insistence that HIPC terms must be delayed until mid-1999 so that adherence to IMF programmes can be closely scrutinised first. He pointed out that, with great sacrifice, Mozambique has been implementing structural adjustment policies since 1987.
HIPC was "more daring" than earlier initiatives, he admitted, but he thought it ridiculous that debt service payments would remain much the same after HIPC.
"The situation we are experiencing is absurd", said Carimo. "The international community is prepared to finance development projects, but does not help release the funds that are absolutely indispensable for the correct use and the maintenance of the infrastructures created in these projects".
During the conference the London-based writer on debt, Joe Hanlon, challenged the Assembly of the Republic to intervene more strongly on loans and in its relationships with the IMF and the World Bank.
Hanlon pointed out that in several southern African countries all new loan agreements must be approved by parliament. He suggested that Mozambique would do well to follow this model. The requirement for parliamentary approval "would allow parliament to scrutinise the loan, which is an important part of preventing Mozambique from falling into another debt trap. Parliament must convince itself that the loan is wise and that it will generate sufficient revenue to repay the loan".
He suggested that certain World Bank loans - notably those connected with the roads programme ROCS, now widely regarded, even within the World Bank itself, as unsustainable - might never have been accepted, if the Assembly had looked at them first.
Furthermore, examining loans would inevitably lead to examining the policies on which they are based. This is particularly the case with loans that are inextricably tied to IMF structural adjustment requirements.
Hanlon believed that "Mozambique's democratically elected parliament has the moral authority to publicly challenge those who wish to use debt and aid to override democracy and impose their will on Mozambique".
The Frelimo Central Committee has warned against a triumphalist approach to the government's recent macroeconomic successes.
The Central Committee's concerns are included in a final document from a November meeting. Most of the meeting was closed to the press, and virtually no information filtered out at the time.
The document stressed that "absolute poverty" remains a serious problem, as does the growing gap between rich and poor.
Although hunger was no longer a generalised phenomenon, and despite improvements in health care, education and water supply, the Central Committee said it was "aware that the macro-economic results, in general, have not resulted in a significant improvement in the living standards of broad strata of the population".
It was true that more food and clothing was available nowadays than in the past, and that there was greater tranquillity. "But there remains misery and enormous vulnerability to climatic variations", said the document. "The urban areas suffer acutely from a housing crisis, unemployment and underemployment, where odd jobs replace genuine employment".
Under these circumstances, the Central Committee warned, ordinary citizens had difficulty in seeing any rewards from the hard work and sacrifices demanded.
The document attacked the "enormous restrictions on credit", and the gap between the central bank's rediscount rate, and the interest rates charged to the public by the commercial banks. This led the Central Committee to query the efficiency of the current financial system.
The Central Committee warned against the Mozambican banking system "becoming the monopoly of the banking system of another country, and of merely one financial group".
The document noted that in 1998 the number of schools and health units in the country finally surpassed the figure attained in 1983, the year before the apartheid war on the country's health and education systems, waged via Renamo, got into its stride.
It was now essential, the Central Committee said, to provide the education and health ministries with the resources to maintain what had been built, and to make local communities responsible for the upkeep.
The Assembly of the Republic, on 30 November set up an ad-hoc commission to "harmonise" the two electoral bills facing it, one drawn up by the government, and the other by a group of deputies of Renamo.
Both bills were given perfunctory first readings, and both were passed unanimously.
Presenting the government bill, Justice Minister Jose Abudo called for "the greatest consensus possible", a call echoed by representatives of both the Renamo group and the majority Frelimo party.
The Renamo bill wants the National Elections Commission (CNE), the body that will organise the 1999 presidential and parliamentary elections, to take its decisions "by consensus", whereas the government is sticking to the existing law on the CNE, whereby, if there is disagreement on the CNE, a vote is taken and the majority wins.
The ad-hoc commission consists of 15 members - eight from Frelimo, six from Renamo and one from the third parliamentary group, that of the opposition coalition, the Democratic Union (UD). It is to be chaired by Frelimo deputy, and Abudo's predecessor as justice minister, Ali Dauto, while its rapporteur is Renamo deputy Francisco Machambisse.
The commission has been told to complete its work within a week and present a "harmonised" draft, so that the Assembly, in plenary, can press ahead with a second reading, article by article, and the entire electoral bill can be passed in this parliamentary sitting, which is due to end on 18 December.
There is one major stumbling block. Both the government and Renamo want to change the composition of the CNE: but legal opinion is that this would be unconstitutional. Renamo wants a 21 member CNE, and puts its composition and powers into the electoral bill. The government wants a 13 member CNE, and proposes this as a series of amendments to the existing law on the CNE, which established a nine member body.
Frelimo's own experts on constitutional law believe it is impossible to tamper with the CNE at all without first changing the constitution. This is because the 1997 law on the CNE gave CNE members five year terms of office, and stated that they cannot be sacked before those terms are up.
Both bills are lengthy - 209 articles in the government one, and 277 in Renamo's one. Producing a harmonised version plus a constitutional amendment within a week is a tough task.
Minister of State Administration, Alfredo Gamito, announced on 4 December that a new, simpler set of career structures for the state apparatus will come into effect as from next April. The new system compresses the existing 6,000 job categories in the state into just 2,000, organised into 150 careers.
Classification and promotion, previously heavily dependent on academic qualifications, will now take a more balanced account of such factors as experience, length of service, and professional ability. Special incentives are being introduced to persuade state employees to work outside of Maputo and the other provincial capitals.
The controversial bill turning the two main Islamic sacred dates into public holidays, which was vetoed by President Joaquim Chissano in 1996, returned to the floor of the Assembly of the Republic on 1 December.
The bill sought to elevate to the status of national holidays Ide-ul-Fitre (the end of the fasting month of Ramadan) and Ide-ul- Adha (the "day of the sacrifice" coinciding with the end of the annual pilgrimage to Mecca).
It was the result of diligent lobbying by Moslem deputies of the ruling Frelimo party, who won the support en bloc of the Frelimo parliamentary group. They attempted to avoid turning it into a party political issue by mobilising cross-party support: thus the bill was signed by 30 Frelimo deputies, 25 from Renamo, and one from the coalition, the Democratic Union (UD).
However, Renamo had second thoughts, and in the original parliamentary debate in early 1996, denounced the bill as a violation of the constitutionally enshrined lay nature of the state. The Frelimo majority ensured that the bill was passed, but it ran into a storm of criticism from Christian churches, atheist intellectuals, and significant sections of the press.
President Chissano refused to promulgate the bill, and sought the opinion of the Supreme Court instead, which, in December 1996, ruled that the bill was indeed unconstitutional. The President returned it to the Assembly for "re-examination".
The Assembly has decided to set up a working group to study all public holidays and commemorative dates.
The Spanish government has promised to cancel at least 90 per cent, and possibly 100 per cent, of Mozambique's bilateral debts to Spain.
This pledge came on 25 November, at the end of a two day visit to Spain by President Joaquim Chissano. Mozambique's debt to Spain currently stands at $24.7 million.
Norway is to make 200 million Norwegian crowns (about $27 million) available to support Mozambican balance of payments over the period 1998-2000.
An agreement to this effect was signed in Maputo on 23 December by Deputy Foreign Minister Frances Rodrigues and Norwegian ambassador Sigurd Endresen.
Norway has decided that much of its aid will be channelled directly to the Mozambican state budget, so that the bilateral cooperation programme is in line with Mozambique's own development priorities.
The Mozambican and Italian governments signed an agreement in Maputo on 20 November formalising the rescheduling of $48.2 million of debt to Italy. This sum is 100 per cent of the debt service that should have been paid between July 1997 and June 1999.
It has now been rescheduled over 40 years at market interest rates reduced by 80 per cent.
The textile company Texlom, officially resumed activities on 19 November, after a paralysis of more than a year.
The chairman of the company's board of directors, Carlos Simbine, said that the factory had produced nothing since August 1997 because of the "ruinous" management by the Textile Management Society (SOGETEX), a joint venture between Texlom and the Portuguese company GPT (which held a 51% stake).
Among the results of this mismanagement, the factory's 1,115 workers were left without their wages. Furthermore Texlom accumulated debts amounting to about $3 million.
Failure to pay the bills led the electricity, water and telephone companies to cut off services to Texlom for about 10 months. It was only in July, after the contract with SOGETEX had expired, and the new board of directors showed a serious intention to resume production, that the power and water supplies were reconnected.
Simbine told reporters that, in this initial stage, Texlom is able to produce about 14 tonnes of clothing a day, which corresponds to 45 per cent of its installed capacity.
The consortium for the prospection of natural gas in Temane, in the southern province of Inhambane, has concluded that the five wells drilled and tested so far can produce between 23 million and 50 million cubic feet of gas a day, for the next 50 years.
The consortium consists of the Atlantic Richfield corporation (ARCO) of the United States, Sasol Petroleum of South Africa, Zazara of the United Arab Emirates, and Mozambique's publicly-owned National Hydrocarbons Company (ENH).
Sales of the gas to the Mozambican, South African and probably Zimbabwean markets would amount to around $200 million a year. The Mozambican state would also benefit from royalties, taxes, and jobs created by the consortium.
After completing the work in Temane, the consortium will move, by mid-1999, to Sofala province, where it is believed that natural gas can be found in marketable quantities offshore.
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