Companies whose business depends on imported goods and services are already considering the possibility of losing customers. Some are resorting to the informal foreign exchange market. The future is uncertain.
Augusto Martilho Álvaro, chairman of the company AMA Equipamentos, based in the city of Beira, has a contract to import fertiliser from Zambia worth 50 thousand dollars. At the moment, he needs to bring 600 tonnes of those substances to Mozambique, but the national financial system is unable to guarantee the availability of foreign currency.
‘The banks don’t have any foreign currency, and I’ve had to resort to the informal market, where the dollar costs 75 meticals [compared to around 63.5 at commercial banks].’ This increase in production costs, due to exchange rates, will inevitably raise the final price for the consumer. ‘I’ve been trying to find a solution for a fortnight,’ the businessman laments.
The solution he has found is to send letters to customers, asking them to be patient until he can obtain the necessary foreign currency to buy in Zambia. However, this entails the risk of losing customers to suppliers who don’t face these difficulties.
Also supplying equipment to sectors such as health and the railway industry, the businessman criticised the banks, accusing them of taking deposits in foreign currency without guaranteeing a response in times of high demand. ‘Mozambique doesn’t have a banking system committed to supporting entrepreneurs,’ he said.
Crisis in the medicines sector?
Evaristo Madime, chairman of the Mozambican Medicines Society, adds: ‘For us, the manufacturers, and for the importers, the problem is the same: without access to foreign currency, the population’s health is at risk.’ He explains that the difficulties in importing raw materials are hampering the pace of production. ‘There are systematic delays in paying invoices abroad, and this affects our production,’ confirms Madime.
“We’re working in extremis because we don’t have stocks for much longer.We have import processes paralysed in the banks waiting for foreign currency”
The causes, according to economists and businesspeople, include the mandatory reserve rate, set by the Bank of Mozambique at 39.5 per cent. ‘This level is unusual in the region; many countries have single-digit rates. Considering our macroeconomic indicators, the Central Bank should adjust this rate,’ he suggested.
Stock at the limit
Due to these difficulties, Sociedade Moçambicana de Medicamentos is operating at its limit. ‘We’re working in extremis, without stock for much longer. We have import processes stuck in banks waiting for foreign currency. In the pharmaceutical industry, orders for raw materials are placed in advance and take months to arrive, considering the production and logistics time,’ he explained.
Resuming subsidies
For Evaristo Madime, other structural measures that could stabilise the foreign exchange market include resuming support for fuel import transactions, previously supported by the Central Bank, and resolving the kidnappings of businesspeople. ‘The fuel bill weighs heavily on our economy, and the suspension of the subsidy has forced commercial banks to bear these costs,’ he said.
Measures to combat money laundering have also reduced foreign currency liquidity. The kidnapping crisis contributes to disinvestments and loss of capital. ‘These factors combined reduce the availability of foreign currency, something we haven’t experienced in the last 20 to 30 years,’ he lamented.
Speculation in informal exchange
Augusto Álvaro reports that, using the informal exchange rate, he pays around 75 meticals per dollar in Beira – 11 meticals above the banking average. E&M visited the Central Market in Maputo, where the rate is 70 meticals per dollar, an increase on the usual 65-66 meticals, due to the difficulty of accessing banks.
Evaristo Madime explains that the informal market is not a solution for industrialists, who move large volumes. ‘Production would be much more expensive, making the final price unaffordable for consumers. This market is only suitable for small importers,’ he said, highlighting the incompatibility with financial compliance standards.
“This is a situation we’ve never experienced before, at least not in the last 20 to 30 years.Even at the time of the hidden debts, there was no shortage of foreign currency at this level”
Generalised concern
The issue of foreign currency shortages was widely discussed in the 15th edition of the Economic Briefing of the Confederation of Economic Associations of Mozambique (CTA). ‘This issue seems small, but it’s not! Often we have a bill for 50,000 dollars to pay outside the country and we can’t – we’re not talking about millions, but 50,000 dollars,’ emphasised Almir Eduardo, the CTA’s head of Construction.
Crisis in aviation
The aviation sector is one of the most sensitive to the lack of foreign currency. Ethiopian Airlines has already reported difficulties in repatriating capital obtained from ticket sales. ‘The situation is worrying and, if it persists, we could suspend flights to Mozambique, damaging the local economy.’ Air France and Cathay Pacific have given up operating in the country, fearing they won’t be able to repatriate foreign currency to cover operating costs.
Problems in the fuel sector
Puma and Vivo Energy, companies in the fuel sector, are facing difficulties in paying invoices and are considering reducing operations if the situation persists. Both companies are calling on the Bank of Mozambique to lower the foreign reserves rate and adopt measures to facilitate the circulation of dollars in the national economy.
