Recently, the Mozambican government announced a set of measures aimed at revitalizing the private sector, especially companies affected by natural disasters and economic instabilities. In an interview with Profile, Eduardo Sengo, Executive Director of the Confederation of Economic Associations of Mozambique (CTA), shared his insights on these initiatives, highlighting both their merits and the inherent challenges in their implementation.
Financing Lines: A Necessary but Insufficient Response
Among the announced measures is the creation of a financing line of 10 billion meticais, approximately 150 million dollars. This fund, with a fixed interest rate of 15% in the first year, aims to support companies in difficulty. Sengo acknowledges the significance of this amount, considering it “quite significant” to assist in the recovery of affected companies. However, he warns that the associated conditions, such as the interest rate, may not be the most suitable for a business rescue scenario. “15% is very good for normal life, but for rescue it may not be the most appropriate,” he observes.
Adequacy of Eligibility Criteria
Another point of reflection concerns the criteria that define what constitutes a small or medium-sized enterprise. Current legislation classifies companies with more than 100 employees as large, which may not reflect the reality of sectors such as agriculture. Sengo emphasizes the need to review these parameters to ensure that companies truly in need can benefit from the proposed measures.
Implementation Challenges: Bureaucracy and Tight Deadlines
The operationalization of these credit lines faces significant challenges. The stipulated period for submission and approval of applications, from March 1 to September 30, may be insufficient given the current pace of banking processes. “The approval processes for bank loans have been very slow lately,” says Sengo, suggesting that banks increase the frequency of their credit committees to respond to potential demand.
Restructuring Existing Loans: An Urgent Need
In addition to new financing, many companies already have ongoing loans and have been severely impacted by recent crises. The possibility of restructuring these debts is seen as crucial. However, Sengo highlights the importance of the Central Bank alleviating or not requiring the reinforcement of provisions by commercial banks during this process, in order to make restructuring more viable and less burdensome for financial institutions.
Security: The Fundamental Pillar for Economic Recovery
Stability and security are essential for any economic recovery effort. Sengo emphasizes that for support measures to be effective, it is imperative to restore security conditions in the country. “For these lines, all these supports to work, it is necessary that, in fact, this situation is observed,” he reinforces, referring to the need for a stable environment for companies to operate and thrive.
The Need for Alternative Funding Sources
While current initiatives represent a positive step, Sengo suggests that additional solutions from alternative funds could offer more favorable conditions to recovering companies. Previous experience with lower-interest credit lines, such as during the COVID-19 pandemic, demonstrates that it is possible to structure more accessible support packages when resources are mobilized from different sources.
Final Notes
The measures announced by the Mozambican government reflect a commitment to revitalizing the private sector. However, the effectiveness of these initiatives will depend on their practical implementation, the adequacy of eligibility criteria, and the creation of a safe and stable environment for businesses. Continuous collaboration between the government, financial institutions, and the private sector will be crucial to overcoming challenges and promoting sustainable economic recovery in Mozambique.
