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Cabo Delgado

RENAMO Leader Calls For Joint Efforts Against Terrorists in Cabo Delgado

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Ossufo Momade the President of Mozambique’s main opposition political party, Resistencia Nacional Mocambicana (RENAMO) has called for concerted efforts in the fight against terrorists in Cabo Delgado.

He made the remarks in the capital Maputo on Tuesday during celebrations for Eid Al-Adha.

He described the moment as one of sacrifice and an opportunity to renew spirituality, prayer and reflection for families to celebrate by thanking Allah, praying and supporting the victims of terrorist violence in Cabo Delgado and showing solidarity with those suffering from Covid-19.

RENAMO is a militant organization and political movement in Mozambique. It was originally sponsored by the Rhodesian Central Intelligence Organisation, it was founded in 1975 as part of an anti-communist backlash against the country’s ruling FRELIMO party.

In August 2019, RENAMO and the ruling party FRELIMO signed a peace agreement and committed to work together for the interests and advancement of Mozambique.

Under this arrangement, over 300 RENAMO militants are being trained to formally join the national Police and defence forces.

“This group will protect the Renamo leaders and Renamo assets”, the party’s general secretary Andre Majibire told reporters in Beira on 5 July.

However, Majibire has been skeptical of the transition and intergration process.

“It’s very difficult to make predictions in cases like this”, he said. “Our desire, as Renamo, is that the process should end tomorrow. But, unfortunately, it is a delicate matter, and the objective is not to end it urgently but to ensure that everything goes well. So, we have to accept ups and downs in order to guarantee a lasting peace,” Majibire
said.

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Cabo Delgado

Fitch Affirms Mozambique at ‘CCC’

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Fitch Ratings has affirmed Mozambique’s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at ‘CCC’.

Mozambique’s ‘CCC’ rating reflects risks to debt sustainability from elevated debt levels, limited sources of financing combined with high fiscal and external financing needs, and still unresolved public-sector debt liabilities.

The ongoing impact of the pandemic and security risks increase near-term expenditure pressures and, in the context of relatively limited sources of financing, could negatively impact medium-term growth prospects and increase challenges to debt sustainability.

Mozambique has not made a final decision regarding its participation in the G-20/Paris Club Common Framework to seek debt relief from official creditors, which we view as a distinct possibility.

Comparable treatment by private creditors would likely be a condition for a deal. This could also affect Mozambique’s sole 2031 Eurobond.

After contracting by 1.2% in 2020, Fitch expects Mozambique to expand modestly by 1.8% in 2021 due to the ongoing impact of the pandemic (with the country experiencing a sharp increase in cases) on the services sector (46% of GDP), limited room for monetary and fiscal policy stimulus due to increased inflationary pressures in 1H21, and financing constraints.

Fitch expects growth to recover to 3.4% and 4.0% in 2022-2023, thus approaching pre-crisis trend levels.

Economic prospects are sensitive to adverse climate events and the evolution of the pandemic in Mozambique and key export markets.

The vaccination campaign has faced delays (1% of the population vaccinated at early July) due to global supply constraints.

Total suspended its liquid natural gas (LNG) project in April, while ExxonMobil had already postponed its final investment decision on its USD30 billion project.

The off-shore ENI project is on track to begin operations in 2022. According to official projections, gas projects were expected to boost growth by an additional 1.1pp in 2023 and over 2pp in 2024, but this positive impact is likely to be postponed by at least one year.

Political risks have increased. The intensification of the conflict with the Islamist insurgency in the gas-rich northern province of Cabo Delgado has escalated since the beginning of the year, leading to population displacements and the suspension of operations by Total.

In addition to training support from the US and EU, the government has recently agreed to receive military assistance from neighboring countries to re-establish control in the area.

The conflict could weaken domestic confidence, exacerbate pressures on public finances and further increase risks to debt sustainability.

Fitch forecasts the fiscal deficit (including grants) to widen to 5.2% of GDP in 2021, up from 3.3% of GDP in 2020, reflecting lower-than-budgeted growth and likely additional spending requirements related to the ongoing third-wave of the pandemic and security and social demands.

Fitch expects a gradual fiscal consolidation with the deficit reaching 3.2% in 2023. The expenditure profile is rigid, with wages and interests estimated to equal 54% of total spending in 2021.

The coupon rate on Mozambique’s 2031 USD900 million Eurobond will increase to 9% in 2024 from 5% currently.

In addition, Fitch expects tax collections to return to pre-pandemic levels only gradually, while grant flows are set to decrease over the projection period.

Expenditure under-execution, most notably in terms of capital spending, could ease fiscal financing requirements.

Financing options remain limited. Apart from the IMF through its Rapid Credit Facility (USD310 million) in 2020, official creditors have not resumed direct budget support loans, halted since the ‘public hidden debt’ scandal in 2016, although they have provided grants to the country.

The government is reportedly interested in agreeing on a multi-year program with the IMF. Nevertheless, the timeline for negotiations remains uncertain. A program could help ease financing conditions and serve as policy anchor.

Fitch expects Mozambique to meet its 9.5% of GDP 2021 fiscal financing needs (deficit plus debt amortizations) through a combination of external official financing, domestic market issuance (given weak credit demand and available liquidity), use government deposits from late-2020 external loans and participation in the G-20’s Debt Service Suspension Initiative (DSSI).

The DSSI has led to saving USD22 million (0.2% of GDP in 2020) and USD50 million (0.4% of GDP) in 1H21, with an additional 0.4%, if extended until end-2021.

Government debt rose to 121% of GDP reflecting largely the impact of the 18% metical depreciation (83% of debt is foreign currency denominated).

Our debt metrics include arrears, including the loans to two former state-owned enterprises, of an estimated USD1.4 billion (10% of GDP) at end-2020.

Although the government has challenged the validity of both SOE guarantees through legal disputes in the English courts, the risk remain that they may crystalize as a liability for the central government depending on the outcome of the legal proceedings.

Fitch forecasts debt to remain broadly stable at 119% of GDP in 2023 reflecting gradual fiscal consolidation and economic recovery, moderate exchange rate depreciation and borrowing from ENH to finance Mozambique’s equity participation in gas projects.

External buffers remain adequate. International reserves were USD3.9 billion as of May, Reserve coverage should average 4.4 months of CXP in 2021-2022, down from a high 5.3 months at the end-2020, reflecting the USD302 million SDR allocation but also recovering import demand and the government’s use of foreign currency deposits.

Fitch expects the current account deficit to average 35% of GDP in 2021-2022. As megaproject imports intensify leading to a widening of the external deficit, FDI and private sector borrowing related to the projects will be the main sources of external financing.

The central bank tightened policy significantly by increasing its policy rate by 300bps to 13.25% in early 2021 to address rising inflationary risks partly derived from the sharp depreciation of the metical in 2020. Fitch forecasts inflation to reach 5.9% at end-2021.

Nevertheless, the metical appreciated significantly in 1H21, which combined with weaker domestic demand could mitigate inflationary pressures.

ESG – Governance: Mozambique has an ESG Relevance Score (RS) of ‘5’ for both Political Stability and Rights and for the Rule of Law, Institutional and Regulatory Quality and Control of Corruption.

These scores reflect the high weight that the World Bank Governance Indicators (WBGI) have in our proprietary Sovereign Rating Model.

Mozambique has a low WBGI ranking at 22th percentile, reflecting a track record of civil conflict, relatively weak rights for participation in the political process, weak institutional capacity, uneven application of the rule of law and a high level of corruption.

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Cabo Delgado

Inside SADC Standby Force Ready For Deployment In Mozambique

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Peace and security are necessary preconditions for sustainable development and deeper regional integration.

In this regard, the Southern African Development Community (SADC) continues to place top priority on developing and strengthening cooperation among the 16 Member States.

One joint initiative in the area of peace and security is the SADC Standby Force, or Brigade, which was established by SADC Heads of State and Government through a Memorandum of Understanding (MoU) signed in Lusaka, Zambia in August 2007.

The SADC Standby Force is a regional, multidimensional, peace-support operations capability established under the framework of the African Standby Force (ASF).

This represents a commitment of purpose that ensures a collective approach to defence and security, protecting people and safeguarding the stability of the region.

The Standby Force operates as a tool of the SADC Organ on Politics, Defence and Security Cooperation and receives its direction and guidance from the SADC Committee of Chiefs of Defence staff and the Committee of SADC Police Chiefs to provide peace-building efforts in the region.

These peace-building efforts include post-conflict disarmament and demobilisation and humanitarian assistance in conflict areas and in areas impacted by major natural disasters such as drought and floods.

The Force is made up of multidisciplinary contingents of the Military, Police and Civilians who are stationed in their countries of origin and ready for deployment when necessary.

Other support mechanisms could be in the form of logistical and medical services.

The SADC Standby Force does not actually have a physical presence as the Force is constituted when the need arises.

The size of the regional Force is also not fixed but depends on the nature of the assignment as well as what individual Member States are able to contribute.

For every mission, SADC appoints a Force Commander, Commissioner of Police and Head of the Civilian Component to lead the operation.

The SADC Standby Force is deployed on the authority of the SADC Summit, ensuring that SADC leaders have the final say on the deployment and objectives.

In preparation for its responsibility, the SADC Standby Force conducts various drills and exercises such as Exercise UMODZI held in 2018 and Exercise AMANI Africa II in 2015, and became fully operational in 2017.

Some of the preparatory work for the Exercises is conducted at the SADC Regional Peacekeeping Training Centre (RPTC) located in Harare, Zimbabwe which hosts Scenario Development Workshops and Integrated Exercise Planning Courses.

These courses are aimed at strengthening the Exercise planning by sharing essential skills and techniques such as mastering the appropriate attitudes required for effective coordination of integrated multi-dimensional Exercises.

The RPTC also delivers training for peacekeeping practitioners from the SADC region and other parts of Africa, and has participated in the preparation and running of all major peacekeeping exercises conducted in the region.

The RPTC contributes to the core objectives of the SADC Organ on Politics, Defence and Security Cooperation, as one of the main implementing entities in training for military, police and civilian components for peace support missions in the region, and also conducts capacity-building courses for regional and national mediation to improve and strengthen domestic mediation capacities in SADC Member States.

According to the MoU establishing the SADC Standby Force, the SADC Heads of State and Government agreed on the need to establish a main logistics depot in one of the Member States.

The depot will provide storage, inspection and maintenance facilities for equipment and materials for all components of the SADC Standby Force.

The construction of the SADC Regional Logistics Depot is progressing well in the Rasesa village on the outskirts of Gaborone in Botswana.

Major equipment and other materials for the depot will be contributed by Member States.

In this regard, the main aim of the depot is to provide stocks on a just in time basis to meet the rapid deployment capability of the SADC Standby Force to support regional peace operations.

SADC has also adopted a Counter-Terrorism Strategy in 2015, intended to strengthen the regions peace and security architecture by enabling a common approach.

This collective approach includes the sharing of information on suspected terrorists; enacting and reviewing legislation at national level on preventing and combating terrorism; and strengthening capacity of the Financial Intelligence Units.

The SADC Standby Force is one of the building blocks of the ASF, a continental peacekeeping force established by the African Union (AU) and comprising Military, Police and Civilian components that are on standby in their regions of origin and available to the AU for deployment in times of need.

The ASF, which became operational in January 2016, draws from Africa’s five sub-regions of North Africa, East Africa, Central Africa, West Africa and Southern Africa.

The SADC Standby Force successfully assumed its rotational leadership of the ASF on 1 January 2019 for six months up to the end of June 2019, accepting the primary responsibility of being the first responder to conflict situations on the continent by providing a rapid deployment capability.

 

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Cabo Delgado

South African General To Command SADC Force In Cabo Delgado

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Stergomena Tax the Executive Secretary of the Southern African Development Community (SADC) has presented the legal instruments authorising the organization to send a standby force to support efforts to combat terrorism in Cabo Delgado.

According to details, the instruments were handed over to the commander of the SADC mission to Mozambique, a South African general who is expected to work in collaboration with the representative of the chairperson of the Organ for Cooperation in Politics, Defense and Security of SADC.

For now the SADC military mission will initially last for three months, the mandate may be extended depending on how the situation unfolds in the operational theatre.

A budget of U$12 million has been made available for infantry, air force and navy actions.

Despite this advance, the official date for the arrival of the military force of this regional organization in Mozambique is not yet known.

In his statements, Stergomena Tax stated that SADC has great confidence in the capacities and abilities of the leaders of the SADC mission to lead outstanding men and women to achieve peace and security in Cabo Delgado

“We believe they will help to create an enabling and peaceful environment for the people of Mozambique and the southern region in general,” said Stergomena Tax, quoted on the SADC official website.

The leader urged the commander of the standby force and his team to carry out their duties with zeal and diligence for peace and security in Mozambique and in the SADC region.

The South African general said he was grateful for the trust placed in him to lead this mission and pledged not to disappoint the region, fulfilling the mandate with the greatest diligence and commitment.

The presentation of the instruments of authority follows the approval, by the Summit of Heads of State and Government of SADC, of ​​sending a standby force to Mozambique to support the fight against terrorism and acts of violent extremism in Cabo Delgado.

The ceremony to hand over these instruments was attended by, among others, the Minister of Defence, Justice and Security of the Republic of Botswana, Thomas Kagiso Mmusi; the Secretary for Political Affairs, Office of the President and Special Representative of the President of the Organ for Cooperation in Politics, Defense and Security, Mpho G. Molomo.

Meanwhile, the Rwandan military mission is already operational in Cabo Delgado province, which arrived in Mozambique on 10 July, with a force of 1,000 men, including soldiers and police.

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