Moçambique on-line

English version of an article published in
metical nº 1077 - September 21, 2001 and expanded here

Killing the goose that laid the golden eggs (Part 4)
BCM - from metal working to banking

Banco Comercial de Moçambique (BCM) was the largest commercial bank in Mozambique and had a reasonable system of local branch banks. It had more than $100 mn in foreign deposits, much of which could be transferred to accounts in the parent bank. The hope was that this would make it attractive to a foreign partner.

BCM also had chaotic accounts and administration, which could be an advantage or disadvantage, depending on your interests. And it had a huge bad debt portfolio and a history of responding to political demands. Banco Português de Investimento (BPI) coordinated the privatisation process, and its sale memorandum said that $22 mn of its loans should be treated as bad debts, and that a further $13 million in bad debt provisions was required. The government said that the Treasury (effectively BdM) would assume this liability. This was in addition to the Mt 650 bn (then more than $100 mn) that Finance Minister Tomaz Salomão said had been put into BCM between 1992 and 1996.

Despite World Bank optimism, there was little interest in BCM. As IMF and World Bank pressure grew, a proposal came from António Carlos de Almeida Simões, who was from an old Portuguese industrial family which had had a small company in colonial Lourenço Marques (now Maputo), Empresa Metalúrgica de Moçambique (EMM, Mozambique Metalworking Company). EMM was still operating and Simões came to Maputo and proposed to unify and modernise the metal-working sector. This won the backing of the then Industry Minister António Branco and of Octávio Filiano Muthemba, then vice-minister in charge of heavy industry and who later replaced Branco as minister. At the time, Branco and Muthemba had been serious about promoting private sector industrial development and wanted to set up an industrial development bank.

Simões expanded rapidly. EMM and the state jointly set up CSM (Companhia Siderúrgica de Moçambique, Mozambique Iron & Steel Company, taking over the old Cifel) and Trefil (Companhia Moçambicana de Trefilarias, Mozambican Wire-drawing Company). Inocêncio António Matavel was administrator of CSM. António Branco was administrator for the State in Trefil.

EMM also set up a transport company Transmap (Transporte Rodoviário de Maputo) with Levy Filiano Muthemba, brother of Octávio Muthemba. Inocêncio Matavel is an important Frelimo-linked businessman who owns Proinvest (Projectos, Investimentos e Consultoria) which in turn owns the exchange bureau Proinvest Câmbios.

In 1991 the state monopoly on insurance was ended, and in 1992 António Simões set up an insurance company Impar (Companhia de Seguros de Moçambique, Mozambique Insurance Company). Lead shareholders were Simões, Matavel, EMM, Proinvest, Madal (which António Branco joined after ending his term as minister), and BPD (then headed by Hermangildo Gamito). Portuguese investors included Companhia de Seguros Império, which was controlled by Banco Mello and which provided technical support.

With the support of Branco and Muthemba, Simões borrowed money to import equipment to modernise CSM and develop Trefil. Between 1992 and 1994 CSM and Trefil received $17 mn in highly concessional long-term loans with aid money from Norway, France, Germany, Sweden and Switzerland. In addition, Simões' companies owed at least $1 mn to BPD. But the metal industry was not revitalised. The equipment proved to be very expensive and some of it was never installed. CSM functioned for only a few months after privatisation. Simões soon had no money for raw materials or wages.

But in 1996 Simões led a consortium to take over BCM. Carlos Cardoso wrote in Metical (182): "CSM was never rehabilitated, leading informed sources to suggest that Simões used part of the $20 mn to buy BCM." Government and bank sources have never been willing to say if those loans were repaid.

The loan agreements were signed for the government by Ricardo David, National Treasury Director (Director Nacional de Tesouro), and several are specifically authorised by the vice minister of finance, then Boaventura Celestino Langa Cossa, or the minister of finance, Eneas Comiche. On the company side, agreements were signed by Simões, Branco, and Matavel.

Ricardo David went to work for Simões, first at Impar and then as an administrator at BCM. Comiche eventually became PCA (chair) of BCM. Boaventura Cossa replaced Hermengildo Gamito as PCA of BPD and oversaw the privatisation there. Muthemba became PCA of the privatised BPD. Mario Machungo, who was Prime Minister at the time, became PCA of his own bank (BIM, Banco Internacional de Moçambique, International Bank of Mozambique) and by 2000 had become PCA of BCM as well, with Comiche as his deputy. In 2000, Oldimiro Baloi, Minister of Industry 1995-99, joined the BCM board and Branco became chair of the BCM annual general meeting.

There were actually two proposals to take over the 51% of BCM that was on offer. One was a consortium put together by Simões which was 50% Impar, 35% National Merchant Banks of Zimbabwe, and the rest Banco Mello of Portugal. An NMBZ official told us quite openly that he was "fronting for a group of people in Mozambique", and that the Ministry of Finance told him what to do at BCM meetings. Senior banking figures insist that NMBZ represented the Chissano family.

The other prospective bidder was Caixa Geral de Depósitos of Portugal.

The whole process was heavily personalised and politicised. Banco Mello had no interest in Mozambique, but Simões was friends with Vasco de Mello, chairman of Banco Mello, which eventually agreed to give cover to Simões' bid, without providing much practical support. Meanwhile Caixa Geral dos Depositos suddenly dropped out; several sources told us that Simões used his political connections to convince Almeida Santos, president of the Portuguese parliament (Assembleia da República), to in turn convince Caixa Geral dos Depositos that it was politically unwise to compete against a privatisation bid that included the President of Mozambique.

Fermino Santos, now BdM director of the Section for Operations, Treasury, Law, and Notary (Administrador do Pelouro Operações, Tesouraria, Juridicos e Cartório Notarial), strongly opposed the Simões bid. He wanted more time to try to develop a proposal with an alternative Portuguese bidder, Banco de Fomento e Exterior. The World Bank opposed this, both because it would cause delay and because Banco Fomento was linked to BPI which was carrying out the privatisation process.

This left only one bidder - Simões. Banco de Moçambique (BdM) officials, notably Fermino Santos, strongly opposed his bid on the grounds that Simões was already considered a bad debtor. But the World Bank backed Simões, assuming that BdM and Frelimo were simply trying to prevent privatisation. A World Bank official went to BdM Governor Maleiane and "read him the riot act", telling him that BCM had to be privatised to the only bidder that was left. On 26 July, BCM was formally privatised to the consortium, which had offered $107 mn for 51% of BCM - although it is not clear how much of this was paid.

Simões and Banco Mello named José Eduardo Lopes Palma as president (PCA). Of the top five BCM officials, only two remained in their posts - Teotónio Comiche, chosen by the government, and Alberto Calú, retained by the new owners. António Simões kept a low profile within BCM, but he took over the top floor of the BCM building, including the old BCM president's office, as the office of his metalworking companies EMM, CSM and Trefil.

The new owners of BCM never did the required due diligence audit of the bank, so there was never a clear picture of what bad debts had been carried forward. One new official of BCM began looking at the books and found a wide range of frauds. "The bank needed a total clean up. But it never happened. The share-holders told us not to." In fact, proper controls were not introduced until 1998.

Simões hoped to use his new bank to make loans to his metalworking companies. But Firmino Santos blocked this. He issued orders to all banks that they should report weekly on the state of Simões accounts, and not grant him credit without permission. But Simões continued to have some supporters, and permission was granted for substantial BCM loans to Simões pay for imports; these needed approval of the state-appointed administrator, Teotónio Comiche. Other more subtle tricks were used. One BCM borrower repaid a loan with lorries instead of cash, and these were given to CSM.

BCM was soon in trouble again, with large frauds and deficits. Mozambican officials brought pressure on Vasco de Mello to take a more active role. In early 1998, Simões unexpectedly sold his shares in Impar to Banco Mello for $20 mn. It was a year before the government and BdM finally agreed the sale, in February 1999. A new president nominated by Banco Mello, Manuel Ortigão Ramos, finally took over in April 1999 and Alberto Calú left the bank.

António Simões left Mozambique with a devastated metal working industry, a devastated bank and very large debts. But some people seem to have profited from his involvement.
(Joseph Hanlon)

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