Killing the goose that laid the golden eggs (Part 6)
Collapse of both banks

Both Banco Comercial de Moçambique (BCM) and Banco Austral faced crises in 2000 and needed major restructuring.

In January 2000 Jardim Gonçalves' Banco Comercial Português (BCP) took over Grupo José de Mello in Portugal, which gave it control of BCM in Mozambique. Finally, auditors were sent in to do proper accounts of BCM.

On 4 October 2000 BCM announced that a study of its accounts had shown the need for an additional $114 in bad debt provision. Shareholders would have to put in $106 mn in extra capital. The government's share was $52 mn, in the form of government bonds.

In a statement on 22 March 2001, BCM announced a loss of $27 mn for 2000. It said that 33% of the total credit portfolio was now considered non-performing (vencido), and that a further provision of $48 mn for bad debts and "other items" ("diversos") was required - bringing the total bad debt provision up to $162 mn.

BCP already controlled Banco Internacional de Moçambique (BIM, International Bank of Mozambique). There was concern about Gonçalves dominating the Mozambican financial sector, and he was in Maputo four times for meetings with ministers and bank officials. Finally at a 24 October 2000 press conference in Maputo, Gonçalves said the government had accepted BCP control of both BIM and BCM. In exchange BCP would put up its $54 mn needed to recapitalise BCM. He then said he knew where the losses had occurred, but would not explain this to the press because the losses had occurred in 1999 and earlier, before BCP controlled the bank, and thus were not his responsibility. Gonçalves and the government had obviously reached a deal - a curtain would be drawn over the past. Nothing would be said or done about losses and fraud before 2000, and the two sides would simply plug the hole. In exchange, Gonçalves could dominate the Mozambican banking system.

António Vaz, BCP Director of External Communications, said that BIM and BCM together have more than 50% of Mozambican deposits and loans. The 4 October BCM shareholders meeting elected Mário Machungo chair, and Eneas Comiche became his deputy, meaning Machungo was chair of both banks. By mid-2001, there was agreement that the banks would merge.

Meanwhile, at Banco Austral

In October 2000, the Banco Austral board agreed with BdM to increase the capital and begin cleaning up the bank by 31 March 2001. But by then, Southern Bank Berhad (SBB) was no longer interested. Through 1998 and 1999 the Malaysian government had been working to restructure its badly shaken financial system, including setting up a company to take over $10 bn in non-performing loans from the Malaysian banks. Finally on 18 February 2000, the government announced that the 58 banks and finance companies were to be combined into 10 "anchor banks". SBB was selected as the smallest of these, and by late 2000 had expanded through enforced takeovers from 1% to 4% of the Malaysian banking business. Digesting this complex merger was the priority, and a difficult bank in Africa was no longer of interest. By the end of 2000, SBB had written off its investment in Banco Austral, and taken a loss of $18 mn (equivalent to 5% of its capital).

But it was not until the board meeting on 3 April 2001 that Investil announced it was not prepared to put in new capital; instead, it simply handed back its shares to the government. The Malaysian staff of the bank distributed an anonymous document to the press headed "Reasons for Southern Bank Pull Out From Mozambique". In slightly erratic English, it argued that "Mozambicans have poor repayment culture. In particular the elite. If you deny them the loans your are damned. If you give them the loans, you are also damned because they don't repay." And it attached a list of alleged non-performing loans given to politically well connected people. The three owners of Invester - Octávio Muthemba, Jamú Hassan, and Alvaro Massinga - each had personal and company loans in excess of $2 mn from Banco Austral, according to the list. The KPMG report and a list of bad debtors published by the new management suggest that for all three, roughly half their loans were being repaid and half were non-performing.

Most senior government figures simply wanted Banco Austral closed, because that would be the easiest way to bury the corrupt history, as had also been done with BCM. Surprisingly this was backed by the World Bank and most donors, who did not want to see more money being thrown at the bank. But the IMF and key figures in the Ministry of Planning and Finance opposed closure, on the grounds that it would actually be more expensive and because it would destroy faith in the banking system.
(Joseph Hanlon)

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metical - archives 2001