Mozambique Should Revisit Mega Project Contracts -Millenium bim
22 February 2011 - 3:33AM
Dow Jones News
Mozambique should revisit the terms of its mega project
contracts with a view to ensuring that the country's citizens
derive more benefits, the new CEO of Millenium bim, Mozambique's
largest bank, said in a recent interview.
"I think the mega projects have to be revised for the (benefit
of the) people of this country," Manuel Marecos Duarte told Dow
Jones Newswires Thursday. "There's a need to review these great
projects."
A debate is currently being disputed in local media regarding
whether mega projects such as the Mozal aluminum smelter, the
largest single contributor to the country's gross domestic product,
contribute enough taxes to the country.
The Governor of Mozambique's central bank Ernesto Gove said
earlier this month that the economic and social conditions now
exist for the government to renegotiate contracts signed with some
of the mega projects, according to a report from the Agencia de
Informacao de Mozambique.
The early mega projects, including BHP Billiton Ltd's (BHP)
Mozal joint venture in Maputo and the processing of natural gas in
Inhambane province by the South African petrochemical giant Sasol
(SAS.JO), have come under frequent criticisms for the generous tax
exemptions granted by the government.
A new slate of mega projects such as Brazilian miner Vale SA's
(VALE) $1.66 billion Moatize coal project have also come under fire
for tax schemes that favor lower payments at the beginning of a
project and higher tax payments later on.
Fiscal incentives were granted to Mozal in order to attract the
flagship investment to the country. The plant was built in 2000 and
was seen as a showcase to the world that Mozambique was a safe
place to invest after nearly a decade and a half of civil war. In
Vale's case, such tax regimes are routine fiscal incentives use by
governments around the world to attract investors; they allow
investors to recoup their return on investment more quickly.
Duarte, who assumed the helm of Millenium bim in early February,
said he didn't dispute the overall benefits of mega projects but
noted that the terms of the contracts could be revised in order to
provide greater benefits to Mozambique.
He said the mega projects are a boon to the economy because of
the commerce that emerges around these projects. "It is this
business around the mega projects that (we) want to have. This is
(our) market," Duarte added.
Millenium bim, a unit of Portugal's Millenium bcp or Banco
Comercial Portugues SA (BCP.LB), is Mozambique's largest retail
bank accounting for almost 40% of the country's bank credit and 35%
of its assets. The bank has the largest retail network in the
country with 126 branches spread throughout the country. It wants
to increase its number of retail bank accounts in a country of more
than 22 million people to more than 1 million accounts in 2011, up
from about 900,000 accounts in 2010.
Duarte said the bank's expansion strategy is closely aligned
with the government's desire to see financial services expand into
rural areas. The bank plans to open 13 new branches in 2011, up
from 10 openings in 2010. Three of the new openings will occur in
urban areas and 10 will be in sub-urban areas.
In the western province of Tete, the bank is adding three new
branches to its existing network of six branches. The new branches
will cater to the growing number of people and capital flocking to
Tete as large mining companies such as Vale and Australia-based
Riversdale Mining Ltd (RIV.AU) begin to exploit the province's vast
coal reserves.
Millenium bim is also reaching out to more inaccessible
customers via mobile phone banking. "We want to be the bank of the
Mozambicans," Duarte said. He noted that the bank was solely
focused on retail banking and had no ambition to expand into
corporate or investment banking in Mozambique.
When asked if there was room for consolidation in Mozambique's
banking sector, Duarte said there wasn't much interest on Millenium
bim's part to take part in that consolidation. He noted that the
top four banks already account for about 90% of the retail market
while the remaining 18 banks are mostly micro-credit banks that
charge very high rates for their loans.
-By Alex MacDonald, Dow Jones Newswires; +44(0)7776 200 924;
alex.macdonald@dowjones.com