The special credit line of 10 billion meticals, recently launched to support the economic recovery of companies affected by the post-election tension, is being received with reservations by the business sector. Despite recognising the importance of the initiative, businesspeople warn that the conditions imposed could hinder access to finance and compromise economic recovery.
Among the main obstacles is the 15 per cent interest rate applied in the first year, which is considered high for companies facing financial difficulties. Evaristo Madime, chairman of the CTA’s Industry Department and of the Board of Directors of the Pharmaceutical Industry of Mozambique (INFARMA), argues that financing should offer reduced interest or even a non-repayable model, in order to guarantee the effective recovery of companies.
‘For those who have to reinvest from scratch, thinking about an interest rate of 15 per cent is a challenge. How do you pay that cost and still keep the company running?’ Madime asks.
Another contested criterion is the exclusion of companies that have a record of non-compliance with the Bank of Mozambique, the National Social Security Institute (INSS) and the Tax Authority. Onório Manuel, managing director of Moz Parks, believes that this condition should be reviewed, since many companies began to face difficulties after October, due to the post-election context.
‘If a company was already in default before October, it’s understandable that it should be left out. But those that faced difficulties only after the post-election tension should have flexibility,’ argues Manuel.
Economist Hélio Cossa recognises that the established interest rate is lower than the market average, but points out that the impact of the financing will depend on each company’s ability to generate enough revenue to cover operating costs and service the debt.
For his part, economist Dimas Sinoia emphasises that for financing to be effective, the Bank of Mozambique must intervene, facilitating access to foreign currency to avoid difficulties in importing goods that are essential for companies to operate.
‘If companies are able to obtain financing but face import difficulties due to a lack of dollars, the impact will be small,’ he warns.
Informal sector excluded and angry
The exclusion of the informal sector, which represents a significant slice of the Mozambican economy, is also generating outrage. Data from the National Statistics Institute (INE) for 2021 indicates that the informal sector contributes around 45 per cent of the country’s GDP, which shows its weight in the national economy. However, this segment was not included in the credit line announced by the government.
The decision was poorly received by informal traders, who consider the measure to be unfair discrimination and an obstacle to economic balance.
‘If it doesn’t cover the informal sector, then it’s discrimination. The demonstrations affected everyone, no-one escaped. It was essential that this funding also included us, because at the end of the day, we are the ones who carry out a visible activity that has a direct impact on the consumer,’ said one informal trader.
In addition to exclusion, informal workers also criticise the high interest rates, claiming that they make the business environment even more difficult and reduce the chances of reviving the small activities that support thousands of Mozambican families.
Another concern is access to credit: in order to obtain funding, companies will need to present bank guarantees, which automatically excludes a large part of the informalised, who don’t have formal documentation or assets to offer as collateral.
The government has established that the period of access to credit will be from 1 March to 30 September, but with so many restrictions, there is a growing fear that only a small proportion of those affected will actually be able to benefit from the line of financing.
With the economy still fragile, entrepreneurs and informal workers are calling for more inclusive and flexible measures to ensure that the credit actually fulfils its purpose and contributes to the recovery of the country’s entire economic fabric.
