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Mozambicans pay dearly for a president’s financial mistake
Vota Guebuza - election posterEduard Grebe/Flickr
Diagnosed HIV-positive two years ago, Kayana Kandagona* suffers regular episodes of dizziness. However, this is not the cause of the 34-year-old’s anxiety as she waits for a routine appointment at a faith-based organisation’s outpatient clinic in the Mozambican capital, Maputo.
Cradling her three-month-old HIV-negative daughter she explains that her 12-year-old daughter and 10-year-old son are always saying: “Mama, we are hungry”. The collapse of the single mother’s cross-border trading business and her sudden relegation to the ranks of the urban poor was as swift as the sharp slump in Mozambique’s macro-economic fortunes.
Kandagona, like many Mozambicans, blames former president Armando Guebuza for the financial scandal at the end of his final term in office that has wrecked one of Africa’s most hopeful economies.
The scandal involved loans amounting to $2 billion – roughly equivalent to one third of the national budget – to build a tuna fishing fleet and buy maritime security vessels in 2013 and 2014. The problem was those loans, at an interest rate of 8.5 percent, were taken out when the local currency was falling, Mozambique’s gas exports were down, and export prices on its coal and aluminium were also taking a knock.
Compounding the problem, the loans breached commitments to the International Monetary Fund and were hidden from both the Fund and parliament. When they were discovered, in 2016, the IMF and other international partners suspended financial assistance, amounting to $300 million, or nearly 40 percent of the government’s social spending budget.
Crash
On these revelations, the once-stable local currency, the meticais, crashed. Steep price rises quickly followed, while interest rates tripled in order to brace the currency as it threatened to go into freefall, further squeezing economic growth. In March 2017, the inflation rate was 21.57 percent.
Kandagona used to import beds and bedding from neighbouring South Africa and turned a monthly profit of about $700. Owed money by customers, she set monthly repayment schedules of $15, but found, “people can’t afford to pay that, so maybe they pay me back 50 ($0.80) or 100 meticais ($1.60) each month”. Her income has now dropped to as little as $25 a month.
 cost 200 mets [$3.15] and now it’s 500 [$7.90],” he said. “Electricity used to be 300 mets [$4.70] a month. Now it’s more than 500 mets [$7.90]… I only eat breakfast and dinner.”
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After fuel and monthly mechanical costs, Simba, 30, earns about $90 from his taxi work, just shy of his policewoman partner’s wage.
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They live with Simba’s brother, 33-year-old Serge, and his partner in a four-room concrete block house in the Santa Maria area, a few kilometres north of Maputo. The house does have sanitation and a standpipe, although the water has to be boiled to be potable.
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Serge describes himself as part of the urban lower middle-class and earns about $400 a month in commissions as a rental accommodation agent, servicing mainly foreign nationals from Portugal, Brazil, China, South Korea, and Turkey.
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“Before, the rents were all paid in dollars. Now it’s in meticais and there are too many empty properties in the city,” Serge explains. “Most people don’t understand what is happening [to the economy]. They just say: ‘It’s Guebuza’.”
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Angry mother
Guy Oliver/IRIN
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Belt tightening
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Nercia Pedro, 29, suffered a difficult first pregnancy in early 2016. She gave up her $191-a-month restaurant chef job with a tacit agreement to resume work after the birth of her child. In the intervening months the debt crisis struck and when she returned to the workplace her employer reneged on the deal.
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She has established a home-based catering business for family celebrations and other functions and makes about $63 a month, half of which she gives to her parents. The family’s bank repayments on a home improvement loan have increased from $78 to about $110.
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Her husband’s $283 monthly wage at the city’s international airport is the last strand keeping the family afloat, and his job is far from secure.
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“LAM [the national airline] is falling apart,” says Kim Harnack, senior adviser at the Center for Public Integrity, an anti-corruption NGO. Mozambique’s flag carrier has reportedly grounded half of its eight passenger jets, unable to pay maintenance costs. The schedule of domestic flights between the main cities along the country’s 2,500-kilometre coastline is becoming increasingly haphazard.
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Harnack says the IMF, “as a good faith broker”, will assist once the ruling Frelimo party government has adopted a credible macro-economic programme, which includes a schedule to settle all external debt.
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But that will come at a price. General subsidies, which include bread, fuel, and transport – accounting for about 2-3 percent of GDP – are seen as an inefficient and costly expenditure by the IMF, as they indiscriminately benefit the rich.
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And the subsidies are unlikely to survive expected government cuts aimed at hauling Mozambique out of its self-imposed financial quagmire – inflicting yet more pain, especially on the poor.
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*Not her real name
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ga/oa/ag
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TOP PHOTO: Vote Guebuza - election poster. CREDIT: Eduard Grebe
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