Bank stand-off the last thing Mozambique needs
Last week, the Mozambican economy was plunged into chaos by a tussle between Bizfirst and Simo. Simo is the Mozambican Interbank Company (51% is owned by the Bank of Mozambique) while the Bizfirst is a Portuguese enterprise that provides the computer software that drives the Simo network.
“The Simo network covers most banks in the country, and hence most debit cards and ATMs. When Simo goes down, it takes most of the country’s electronic transactions with it,” said a report by national news agency Aim.
At the heart of the stand-off is a payment dispute. The Bank of Mozambique denies Bizfirst’s claim that it owes anything or that it has not paid licence fees for the software.
By Monday, private businesses were reporting losses of about $82 000 a day, according to the Confederation of Mozambican Business Associations. Who can survive - and for how long - if their sales were cut in half by a bungle that nobody wants to take responsibility for?
The African Development Bank Group (ADBG), in its latest Country Economic Outlook, describes this situation as a “combination of declining prices for traditional export commodities, persistent drought effects from El Niño, internal military confrontations and large decreases in foreign direct investment”. With its FDI down 50% and the 2016 GDP growth lower, at 3.8% from 7% in the past decade, Mozambique does not need a disruption of this magnitude.
The economic downturn was aggravated, according to the ADBG, by the governance crisis of 2016, reduced external financing and donor support. It shall be recalled that the government, under president Armando Guebuza, took out loans of $2billion secretly in 2013/14. The debt was uncovered in 2016, when Felipe Nyusi replaced him. This, among others, forced the International Monetary Fund to pause its Standby Credit Facility. About 14 donors followed suit, depriving Mozambique of about $500million a year.
This, plus a worsening tiff between the government and Renamo, a fall in commodity prices, withdrawal by some key investors in the resources industry slowing the GDP growth to 4.7% last year. AFBG projects growth of 5.3% this year as coal production and agricultural activity rise.
The government ought to have been more vigilant. A country’s banking system is like blood flow through the veins of the economy. Disrupting it threatens the stability of not only Mozambique but a large chunk of the SADC.
The only possible escape route, apart from the more expensive and time-consuming over-the-counter transactions, would have been cellphone payment.
Head of Standard Bank in Mozambique was quoted in the O País newspaper: “I am certain that we will not reach Christmas with this difficult situation.” Christmas? One would fancy a much higher sense of urgency in an emergency.
* Victor Kgomoeswana is the author of Africa is Open for Business, media commentator and public speaker on African business affairs.
** The views expressed here are not necessarily those of Independent Media.