Cahora Bassa finally in Mozambican hands

This “final redoubt of foreign domination” on Mozambican soil formally passed from Portugal to Mozambique with the signing of the final agreement transferring majority ownership on Tuesday.

Cahora Bassa dam was the last major Portuguese investment in Mozambique that did not fall into Mozambican hands in 1976 when the ruling Frelimo party, under the leadership of the late president Samora Machel, nationalised all property belonging to the former colonial master and its citizens.

Perhaps the main reason for the non-nationalisation of the dam was an understanding emanating from the Lusaka Accord signed in 1974 between Frelimo and Portugal that the ownership structure of the dam operating company, Hidroel’ctrica de Cahorra Bassa (HCB), would eventually be altered through the years as the Portuguese government recouped on the investment made.

Until 31 October, the Portuguese state held 82 percent of the shares and its Mozambican counterpart held 18 percent. This was the ownership structure at the time the company was set up in June 1975 when Mozambique became independent. After years of wrangling, Mozambique and Portugal signed in Lisbon on 2 November 2005 a Memorandum of Understanding that would substantially alter the ownership structure of HCB.

However, implementation of the MoU was stymied because Eurostat, the European Union statistics agency, was still investigating the deal to verify whether EU rules on budget deficits had been complied with by Portugal.

Eurostat’s initial concerns stemmed from the fact that it viewed the deal as debt forgiveness ‘under EU rules, debt write-off enters the book as transfer of capital, which meant that it would burgeon the Portuguese budget deficit.

The deal stated that Portugal would write off over half the estimated US$2 billion it claimed HCB owed its treasury, and instead collect US$950 million from Mozambique by selling two-thirds of the dam. The new ownership structure would leave Mozambique to hold 85 percent of the HCB shares, with the remaining 15 percent for Portugal

The delay in implementing the MoU bred some impatience on the Mozambican side, a fact which was pointed out by President Armando Guebuza after the signing ceremony. The delay caused “public impatience, expressed by citizens, by the media, by political parties and civil society organisations, as well as by friends of Mozambique and its people.”

Guebuza added that the negotiations had been complex but there had always been a belief that an agreement would not only strengthen relations between Mozambique and Portugal, but that “its conclusion would be irreversible.”

Clearly, control of the dam was a first step towards “speeding up our journey to achieve the well-being of Mozambicans.”

Control of the dam meant that rural electrification, already underway, can be stimulated in order to continue improving the living conditions of more Mozambicans, as well as spearheading the implementation of other energy projects, able to create wealth, and generate jobs.

Guebuza might as well have been speaking about the proposed M’panda Nkua dam downstream on the Zambezi, which when implemented is likely to boost the southern African region’s capacity to generate power.

The HCB is currently selling 1,100 Mw of power to South Africa and 450 Mw to Zimbabwe, but the tariffs are very different due to the historical agreements made between Portugal and South Africa.

When HCB initiated operations in 1975 the young Mozambican government and its Portuguese counterpart had an understanding that the shares would be transferred to Mozambique as soon as debt incurred in building the dam was paid off which was estimated at a period of three years at the time. However, this did not take place as the former rebel movement Renamo destroyed hundreds of pylons carrying power to South Africa. This meant that HCB remained unprofitable as it could not sell power to its main client, the South African utility company, Eskom.

No sales meant further debts for HCB and the Portuguese state ended up claiming that the company owed to its treasury more than US$2 billion. There was no way Mozambique would ever pay this debt and hence the new arrangement.

Thus under the MoU Mozambique is the majority shareholder, but will have to pay up the US$950 million ‘ US$250 million to be paid by HCB and US$700 million from the government.

Portuguese Prime Minister, Jos’ Socrates, said that the agreement was “closing the final chapter of the history of the past, and opening the first chapter of the history of the future.”

Guebuza agreed with the assessment saying that it meant “breaking with the past, and the drawing of a new era in the relations between our two countries.”

The agreement “removes from our soil the final redoubt, the landmark of 500 years of foreign domination.” ‘

November 2006
« Oct   Dec »