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Bank of Mozambique governor admits he was on both sides of murky Moza deal

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The governor of the Bank of Mozambique, Rogério Zandamela, is facing criticism after he admitted to effectively acting as both buyer and seller in the controversial sale of Moza Banco to a subsidiary of the central bank.

Zandamela said he was “surprised” by the criticism, describing the sale process as the most transparent he had ever known.

At a press conference in Maputo on Monday 19 June, Zandamela confirmed his chairmanship of Kuhanha, the company that runs the Bank of Mozambique’s staff pension fund and which has agreed to buy and recapitalise the troubled Moza Banco.

Commentators have reacted with incredulity to the announcement, with one saying it was “laughable” to describe the sale process as transparent.

Moza Banco had been taken under central bank protection in September 2016 after its liquidity fell to crisis levels.

Mozambique’s central bank ran the process to sell Moza Banco, which had been the fourth largest commercial bank in Mozambique, announcing its decision on 31 May to sell it to Kuhanha, the management company of the central bank’s pension fund.

Mozambique’s Central Commission on Public Ethics has said it is looking  into the sale, although no formal investigation has been announced.

Although bringing in Kuhanha to save Moza might put off an immediate crisis, it could also cause serious damage to Mozambique’s financial sector in the longer term. As well as damaging the central bank’s credibility as a financial sector regulator – as it is now the owner of a commercial bank, which competes with the other banks that it regulates – Kuhanha’s purchase of Moza is thought likely to require Kuhanha to withdraw deposits it has at other Mozambican commercial banks.

The track record of Mozambican public pension funds owning commercial banks is not good. Late in 2016, Nosso Banco, whose biggest shareholder was the national insurance scheme INSS, was liquidated. It is believed that in its attempts to stop Nosso Banco from going under, INSS started transferring deposits to Nosso Banco from elsewhere in the Mozambican banking system – contributing to the crisis at Moza as well as weakening other banks which have so far managed to survive. The fear is that this situation will now repeat itself, on a larger scale.

It is difficult to comprehend Zandamela’s contention that this was the ‘most transparent process ever’. His explanations do little to dispel the suspicion that the Bank of Mozambique simply raided its workers’ pension fund to compensate the central bank for recapitalising

There have been rumours of a legal challenge coming from the Bank of Mozambique’s pensioners, a large chunk of whose fund has now been devoted to recapitalising a bank that apparently failed to attract any other reputable bidder.

One banker in Maputo told Zitamar this week that the deal is reminiscent of the Robert Maxwell pension funds scandal – when the British media tycoon was found to have raided the pensions of his workers to prop up his struggling newspaper empire, which eventually went bankrupt.

The credibility Zandamela won during his first 8 months at the Bank of Mozambique is quickly draining away – he must rescue it by providing credible answers to the remaining questions around the Moza Banco affair.

Zandamela has repeatedly defended the process, insisting that Kuhanha did not initially bid for Moza Banco but was instead brought in as a “Plan B” to inject the required 8.17 billion meticais ($136m) and fend off bids that may have used the bank to launder money.

Some bidders, Zandamela said, wanted to buy just part of Moza Banco, while others could provide the money up front but could not say where it came from. “We wanted to be sure that Moza wouldn’t be used for money laundering,” he said. “There were attempts; there were investors who came with this objective.”

The law did not allow Moza to be broken up, Zandamela said, so the sale to Kuhanha allowed the central bank to avoid having to liquidate Moza Banco.

But Zandamela, who was absent from Mozambique when the decision was announced, said at the Maputo press conference this week that he was “surprised” at the uproar that the decision had caused.

Zandamela’s statement was the first from the bank since a brief press release on 1 June. The governor said he had “never known a process as transparent as this,” adding the country should take pride in the way the matter was handled.

Zandamela’s protestations of transparency may fall on deaf ears, however, with a number of questions about the process still unanswered.

Roberto Tibana, a former International Monetary Fund economist, described Zandamela’s statement as “laughable”.

Speaking to Zitamar News, Tibana added: “I’m not calling for him to resign, but he should step back and stop making these statements which are not proper of a central banker. A spokesman should come forward and give sober explanation of why this deal was transparent and the right thing to do – not just the governor saying it was right because he says it was.”

The Bank of Mozambique has yet to reply to questions sent by Zitamar News on 1 June, including whether it is advisable for the central bank as financial sector regulator to also own a commercial bank.

The scale of Moza Banco’s financial woes are still unclear as the bank has not published financial results since 2015.

Kuhanha, too, is far from a transparent entity. The company does not have a website or any online presence; it is only referred to in passing in the Bank of Mozambique’s annual reports and it remains unknown how big the fund is, or what percentage of its assets are now tied up with Moza Banco.

© 2017, Zitamar Ltd. Reproduction and dissemination prohibited without written permission.

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