Dodgy Tuna Bonds, East Africa and the Other 90%

Mozambique’s Dodgy Tuna Bonds

In 2014 the IMF held its “Africa Rising” conference in Maputo. Mozambique, with the huge potential of its natural gas reserves, was supposed to be a rising star. Now, stealthy speed boars, the secret service and a Russian bank – elements worthy of a John le Carre’ spy novel – have lead to a crippling, multi-billion dollar debt pile and the potential loss of donor support.

The massive fraud began under former president Armando Guebuza, who bypassed parliament to provided supporters and loyalists with extraordinary contracts, commissions and kickbacks as part of a failed attempt to extend his terms of office. In 2013 Credit Suisse and a subsidiary of Russia’s VTB raised an US$850 million loan to supposedly fund a state tuna fishing fleet. Instead the money went mostly towards navy security contracts. Investigations have subsequently uncovered a further US$1.4bn of hidden debts that have taken Mozambique’s debt-to-GDP ratio above 100%. The scale of the problem is enormous. Mozambique spends 25% of its national budget on defence and hundreds of millions of dollars are missing or unaccounted for. The problem will probably only get worse as bilateral loans to specific ministries are often not declared to the Ministry of Finance and there is already talk of further undisclosed loans from Portugal and China.

Mozambique is now in a precarious position. Annual debt service has ballooned to an unsustainable US$600m. The IMF has halted lending and bilateral donors, who fund a quarter of Mozambique’s budget, may pull out. The US provides US$400m annually and is likely to be displeased about security deals involving Russia.

The real concern is that Mozambique may not be alone. Historically low interest rates in the developed world and the commodity boom have given emerging African countries the ability to borrow from markets rather than rely on donor aid – which typically has more strings attached. It is very concerning that leaders who are nearing the end of their terms in office could use government funds to build up patronage networks and ensure the on-going loyalty of supporters. South Africa is already tired of newspaper headlines and allegations of “state capture” by the Gupta family. Lets hope there’s no tuna involved.

(Financial Times, Africa Confidential)

Investors Look to East Africa

Kenya, Tanzania and Rwanda were the countries in vogue at the World Economic Forum’s summit in Kigali this week. According to the IMF, all three economies should grow at more than 6% this year, which is double the average for sub-Saharan Africa. Investment in tourism, agriculture, infrastructure and services and manufacturing industries is driving growth in East Africa. The countries with diversified economies are also benefitting from lower energy costs. The divergence in growth between Africa’s commodity exporters and importers could not be more marked. Nigeria, which relied on crude oil for more than 90% of its export earnings in 2014, is expected to see growth of 2.3% this year down from 10% in 2009. 

The Other 90%

South Africa’s national broadcaster, the SABC, has introduced a new quota system requiring 90% of the music played across its 18 radio stations to be by local artists. The SABC said it made the moved after extensive consultations with stakeholders. The change will only be in place for 3 months and may be extended subject to listener feedback. South Africa has 296 radio stations, of which 40 are commercial / public and 256 are community radio stations. The SABC’s decision does not affect privately owned radio stations, although ICASA, the broad casting regulator, requires commercial stations to play a minimum of 35% local content. Out of interest these are South Africa’s top 10 radio stations based on weekly listenership:

  1. Ukhozi FM – 7.5 million
  2.  Metro FM – 6.8 million
  3. Umhlobo Wenene FM – 4.6 million
  4. Lesedi FM – 4 million
  5. Motsweding FM – 3.1 million
  6. Thobela – 3 million
  7. Jacaranda FM – 2 million
  8. Kaya FM 95.9 – 1.8 million
  9. 5FM – 1.8 million
  10. RSG – 1.7 million

(City Press, BBC, BusinessTech)