Tuesday, April 23, 2024

Bots-Mozambique rail project not (yet) insured against war

Unfazed by the nascent conflagration in Mozambique, the transport ministers of Botswana, Mozambique and Zimbabwe will be meeting early next year to discuss the construction of a US$7 billion deepwater port and rail project.

Botswana’s minister of transport and communication, Nonofo Molefi, made this revelation on Friday, adding that the current civil strife between rebel group Renamo and the Frelimo government never really affected the schedule. The only delay there has been, he added, was occasioned by the Zimbabwean elections.

“We are not anticipating any delays. One thing to keep in mind is that the problem in Mozambique is confined to the north while the project will be carried out in the south,” said Molefi.

Increasingly nowadays, countries in trouble spots insure projects against political risk through policies offered by the Multilateral Investment Guarantee Agency – MIGA as it is more commonly known. This body, which is closely associated with the World Bank, provides political risk insurance or guarantees against losses caused by non-commercial risks to facilitate foreign direct investment in developing countries. Botswana, Mozambique and Zimbabwe are member countries.

Between now and 2022, ABC Holdings in Botswana will be insured “against the risks of transfer restriction, expropriation, and war and civil disturbance” in Botswana. Likewise, for the next five years, Comzatel Mozambique, a small internet service provider that provides internet and data service to businesses and individuals, is insured against similar risks. However, the Botswana-Mozambique-Zimbabwe rail project and deepwater port does not appear on the list of projects that MIGA has insured.

This may have to do with the fact that it was conceived at a time that the Mozambique civil war appeared well and truly over. However, the security situation in that country was never the most ideal because Renamo never fully disarmed, maintaining a “presidential guard” in the central districts of Maringue and Cheringoma.

Last month, as the rivalry between Renamo and the government intensified, The Africa Forum of Former Heads of State and Government, castigated Renamo for being “the only political party in Africa, and indeed in the world, which demands to have its own army and has repeatedly refused to fully cooperate with the government in the process of disarmament and reintegration.”

On such basis, the rail and port project would appear to be a natural candidate for MIGA’s insurance against political risk but it is not even on the list of proposed projects.

To the question of whether the countries partnering in the rail and port project would seek MIGA insurance, Molefi said that the project would be undertaken by the private sector and that role of the three governments would only be facilitate access to land.

It would be up to those private sector players to decide whether to apply for MIGA insurance. At this stage, the governments have not revealed the source of the funds for the project which will take 10 years to complete.

MIGA insures eligible projects against losses relating to currency inconvertibility and transfer restriction; expropriation; war, terrorism and civil disturbance, breach of contract; and non-honouring of financial obligations. This is partly done through “deterring harmful actions” and “resolving disputes.” At 38 percent of MIGA’s outstanding gross portfolio, the infrastructure sector is a priority focus for the agency.

This year alone, MIGA – which, issued a record US$2.8 billion in political risk guarantees, underpinning investments across diversified sectors and regions. It has insured projects in Iraq, Afghanistan, Nigeria, Lebanon, Egypt, West Bank and Gaza and the Democratic Republic of Congo.

MIGA’s programmes and activities are guided by a Council of Governors and a Board of Directors from member countries. Its corporate powers are vested in the Council of Governors, which delegates most of its powers to a Board of Directors.

The directors meet regularly at the World Bank Group headquarters in Washington, DC, where they review and decide on investment projects and oversee general management policies. One of MIGA’s current directors is Denny Kalyalya, a former deputy governor of the Bank of Zambia who, among other African countries, was elected by Botswana, Zambia, Mozambique and Zimbabwe.

RELATED STORIES

Read this week's paper