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FNB Promotes Discussion on Economy and Sustainable Finance

FNB Promotes Discussion on Economy and Sustainable Finance

On 30 October, First National Bank (FNB) held a Business Breakfast at the Indy Hotel in Maputo with RMB (the corporate arm of the Firstrand Group, of which FNB is also a member), where it discussed the local and global economic outlook, ESG and Sustainable Financing, the central themes of this meeting.

The event was attended by nearly a hundred participants, including clients, guests and FNB employees.

Daniel Kavishe, Economist at Rand Merchant Bank (RMB), focused on the global economic outlook, the risks currently affecting developing countries, with special emphasis on Africa. Daniel also highlighted the growing geopolitical tension and its effects on the global economy, referring to the conflict between Russia and Ukraine, which has been at the centre of economic discussions, and the tension between Israel and Palestine.

Kavishe also pointed at the persistence of the current situation, i.e. “we are still trying to recover from the high financing costs and suddenly, at the end of the year, we see a new rise in oil prices”.

The economist also emphasised another situation: “Inflation has not completely vanished worldwide. Inflation is likely to continue, not just this year, but throughout next year. Mozambique has managed to show quite strong growth, despite some weakness that we have seen in various companies and sectors, but it has turned out to be much stronger, given that agriculture is in full recovery mode.”

Another of the scenarios mentioned by Daniel Kavishe relates to the path of the African Continental Trade Area: “There is a lot of enthusiasm, which is good, about the dynamisation of the African economy, and Mozambique will be part of this context”. This is because the country “has signed bilateral agreements with ESKOM to continue supplying energy to these regions. I therefore think this is a huge opportunity for Mozambique over the next few years.”

Alfredo Mondlane, head of Economics and Market Research at the FNB, explains that in March they released the Mozambique Outlook, which stated that the Mozambican economy would remain resilient and would grow by around 5%. “In fact, throughout the first half of 2023, the economy showed strength, with growth of around 4.6 per cent, very much in line with what was expected.

This year, LNG will drive at least 90 per cent of all growth in the extractive sector, which is largely due to FLNG, which was not produced in October last year.”

“Agriculture experienced slower growth, it should be noted that this sector experienced strong growth of around 5 per cent last year and this year, due to Cyclone Freddy, there was a considerable reduction of around 3.4 per cent. We predicted that agriculture would probably grow by 4 per cent, but 3.5 per cent isn’t necessarily bad and is very much in line with historical growth,” he concluded.

As for the financial sector, Alfredo Mondlane said it was “the sector that concerns us all. In the first quarter, it grew by around 7 per cent. However, following the increase in compulsory reserve rates from around 10 per cent to 39 per cent, the sector is facing a liquidity challenge. And this has translated into an additional cost of financing the economy. As a result, the sector slowed its growth in the second quarter. However, even with this slowdown, the financial sector is expected to remain resilient and to keep growing.”

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The Head of Economy and Market Research at FNB added: “Inflation is expected to rise, but still to remain below double digits, and the expectation by the end of the year is that it will remain below 7 per cent.”

Moving on to the other central theme of this session, Cara Lishman, representing the RMB’s ESG Advisory and Sustainable Financing team, focused on the relevance of sustainability: “this has predominantly been driven by three factors: regulatory pressure, where we are seeing greater regulation of information standards and disclosure requirements, allowing transparency and comparability of sustainability data for stakeholders.

The second driving force centres on consumer pressure. More than ever, consumers are questioning where and how they spend their money with a new lens on sustainability. These decisions determine how corporates think about their products and services to cater for this growing need

Finally, investors are equally sensitive to this issue, and are catering for the growing demand of ESG consideration in investment choices by both by fund managers and individuals.”

Cara Lishman also referred to the two new instruments that will soon be implemented: the IFRS (International Financial Reporting Standards) for environmental reporting in companies and the TNFD (The Taskforce on Nature-related Financial Disclosures), which is currently in the pilot phase and includes the disclosure of information on the environment. These mechanisms emphasise the way in which business activities influence the environment and, consequently, make responsible decisions aimed at improving the environmental situation.”

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