Cahora Bassa, Sonangol, Geocapital and Eximbank highlights of Lusophone African business year

26 December 2007

Cahora Bassa, Sonangol, Geocapital and Eximbank highlights of Lusophone African business year

Macau, China, 26 Dec – The year 2007 in the Portuguese-speaking business world was marked by the transfer of control of the HCB hydroelectric dam from Portugal to Mozambique, the expansion of Stanley Ho’s Geocapital, the increased presence of Angola’s Sonangol in Portugal and a new credit deal between China’s state Eximbank and Angola.

Mozambique described the formal handover of HCB on 26 Nov as a “second independence”. Transfer of the dam’s ownership gives Maputo control of the second largest company in the country, which is also southern Africa’s biggest hydro in a region with increasing energy shortages. South Africa and Zimbabwe are among the states that depend on power supplies from HCB.

HCB’s full power potential has to date not been fully exploited and Mozambique can now fully reap the benefits of becoming a regional power exporter, in similarity to Angola’s rising economic influence due to its oil sales.

Andrew Etzinger, a board member of South Africa’s state power company Eskom, which began to suffer fresh supply shortages in 2007, told Business Report shortly after HCB’s transfer that four new projects are being negotiated with Mozambique with combined outputs of 4,650 megawatts, twice the capacity of HCB.

Among these new ventures is the north HCB generating plant and the dam at Mpanda Nkuma, with respective capacities of 850 and 1,300 megawatts.

Eskom is also interested, according to Etzinger, in contributing to two short-term projects in Mozambique: the building of a gas power station in Temane, in Inhambane province (1,000 megawatts) and a coal-fired generating plant at Moatize in Tete province with a capacity of 1,500 megawatts.

Eskom does not want to invest directly in these ventures, he explained, but rather negotiate long-term power purchasing deals.

HCB currently has a 2,075 megawatt output, some 1,500 megawatts of which goes to Eskom. A further 200 megawatts is sold to Zimbabwe and the remaining power is consumed nationally.

Portugal reduced its 82 percent stake in HCB to 15 percent and Lisbon says it could sell off another 5 percent to a buyer approved by Maputo.

The possibility of Mozambique’s shareholding in HCB being reduced through the entry of a financial or strategic investor has been raised, but as the company is profitable and has guaranteed customers through purchase contracts the Maputo government will not be pressed to reduce its share dividends.

Another development in Mozambique’s business sector last year was the arrival of Geocapital, owned by Stanley Ho and Ferro Ribeiro, after an earlier aborted effort. Geocapital has taken a 49 percent stake in the Moza Banco bank, with Moçambique Capitais, comprising around 150 individual investors, holding the controlling 51 percent stake.

The former governor of Mozambique’s central bank, Prakash Ratilal, has been appointed as Moza Banco chairman. The new bank, geared to the needs of service and property firms, opens its first branch in 2008 in a market dominated by BIM, owned by Portugal’s Millennium BCP group.

Stanley Ho has thus brought Geocapital into a market with strong growth potential. The profits of Mozambique’s nine private banks rose last year by two-and a- half times, according to a recent report from the KPMG consultancy.

In its first attempt to enter the market, Geocapital came close to buying the BDC bank. Maputo media reported that Geocapital’s lawyer contacted President Armando Guebuza in an attempt to get the takeover approved, a procedure normally dependent on the country’s central bank.

After the breakdown in negotiations and Geocapital’s withdrawal, Montepio Geral of Portugal and First National of South Africa became frontrunners to acquire the bank.

Another Geocapital acquisition in Portuguese-speaking Africa in 2007 was in Guinea-Bissau, with the purchase of a 60 percent stake in Banco da Africa Ocidental (BAO), where Ho and Ferro Ribeiro are partnered by Guinean businessman Carlos Domingues Gomes.

In spite of the small scale of Guinea’s banking sector, BAO has added value because it is authorized to open branches in countries of the West African Economic and Monetary Union (WAEMU) – Benin, Burkina Faso, Ivory Coast, Mali, Niger, Senegal and Togo.

In August, Ho sold more than 70 percent of Banco Seng Heng to the Commercial and Industrial Bank of China, the largest Chinese bank in terms of assets.

“I sold Seng Heng because the Commercial and Industrial Bank of China was very interested in having a presence in the Portuguese market and the deal includes the new office in Portugal, which will be used as a hub to negotiate in Portugal and the African countries and Brazil,” Ho told the Lusa news agency.

The presence of Geocapital in Angola looks more uncertain, where the company has tried to launch the BANC bank in partnership with influential Angolan figures, including Luanda’s current finance minister, José Pedro de Morais.

But according to the Africa Monitor newsletter this project has been delayed by refusal to grant a casino operating license to the Rosa Linda hotel, construction of which began in July.

Some of the most significant financial deals have occurred in Angola this year, particularly in Luanda’s finance and oil sectors.

Angola’s main private bank, Fomento Angola, owned by Portugal’s BPI group, has suffered worsening relations with the Luanda authorities, which analysts say is due to delays in opening the bank to Angolan investors. The spat originated after the bank refused to participate in the issue of government bonds worth US$ 3.5 billion.

The standoff with the authorities, which media say has resulted in cancellation of many company and public accounts, comes at a time when Sonangol wrapped up an accord with Portugal’s biggest bank, Millennium BCP, under which Angola’s state oil firm acquires almost half of shares in the new Millennium Angola bank.

On the other hand, Sonangol, which has an increasing participation in Portugal’s Galp Energia, has become via its accord with Millennium BCP one of the most influential shareholders in the Portuguese bank due to investments of more than 500 million euros.

A sign of increasing concern among Luanda analysts at excess liquidity through increasing overseas assets is the opening in Portugal of Angola’s BIC bank.

Also worthy of note in the past year is the new financial accord between Luanda and Eximbank of China for US$ 2 billion, to be applied to a wide range of projects such as the completion of Luanda’s justice palace, the Agostinho Neto University, telecommunications infrastructures and building of fishing boats, according to Luanda’s finance ministry.

According to figures from Angola’s finance ministry, China’s financial support is now close to US$ 7 billion and being used among other things to build the new city of Luanda and the capital’s international airport.

Besides two credit lines of US$ 2 billion each, Angola also has finance of US$ 2.9 billion from the China Investment Fund, which could reach US$ 9.8 billion, according to World Bank estimates based on official Luanda figures.

Another Lusophone state in Africa that is keen to attract Chinese investment is Cape Verde, whose economy is experiencing the most favorable conditions in the islands’ history.

Cape Verde formally entered the World Trade Organization this year and also established a special partnership with the EU.

Cape Verde’s finance minister said recently in Macau that China should see his Cape Verde as an “economic and commercial base” for European and American markets, a project that could have results over the coming year. (macauhub)