The main opposition’s rejection of election results is based on credible evidence of voter intimidation and ballot manipulation which EXXAfrica flagged three months ago. However, the results are unlikely to be overturned by the courts and a return to civil war or sustained widespread violence is unlikely. Violent demonstrations are however expected in urban hotspots in coming weeks and months.
In a three-part analysis briefing series, EXXAfrica explores specific threats to the aviation sector in Africa. In part one, we examine how the risks of war and terrorism may manifest via an explosive device attack, assault on an airport, or shoulder to air missile attack.
The governing party is set to be re-elected this month although a fall-out over suspected voter manipulation is expected. After the elections, the Mozambican economy will benefit from a restructuring of its debt burden and anticipated capital gains tax revenues from the gas sector. However, local security forces are struggling to contain a northern insurgency that threatens to derail this improved risk outlook.
With 54 countries and a continental coastline of 30,500 km that spans the Mediterranean sea in the north, the Suez Canal and the Red Sea in the northeast, the Indian Ocean in the east, and the Atlantic Ocean in the west, Africa’s borders are both numerous and vulnerable. EXX Africa delves into the primary threat actors taking advantage of these vulnerabilities to further their own objectives across the continent. The report will be submitted the United Nations General Assembly this month and is pre-released to our clients ahead of the publication.
The pope’s visit to Mozambique will shine the spotlight on peace, climate change, and perhaps even the country’s debt restructuring process. But the debate is likely to almost ignore the Islamist insurgency in the gas-rich north where various new trends can be spotted in the militant’s tactics and security forces’ counterinsurgency strategy, including the arrival of privately contracted attack helicopters that may further strain relations with foreign donors.
EXX Africa takes a closer look at the idiosyncrasies of some of the prominent internet shutdowns on the continent over the last year, exploring the causes and consequences of this repressive technological tactic.
The use of internet shutdowns by African governments to suppress popular dissent is becoming increasingly common. So far in 2019, there have already been reports of internet shutdowns in at least 12 countries. The states most affected usually have few internet providers, which makes it easier to implement a ban. Although such shutdowns may be contrary to local law, they are often detrimentally effective before they can be challenged in court. Furthermore, there is a lack of a binding international legal framework to hinder governments from acting with impunity.
These partial or near-total internet blackouts are most often implemented in anticipation, or in the wake, of anti-government protests, particularly around elections. However, governments also use targeted blocking of certain websites to restrict access to specific information during critical periods, such as national examinations. We explore some recent case studies from the past 12 months in this latest briefing. We also examine the impact such shutdowns have on commercial operations and the wider economy in African countries.
This briefing follows on from EXX Africa’s special report published at the beginning of the year and updates the key forecasts established in that report (See SPECIAL REPORT: THE COST OF INTERNET SHUTDOWNS IN AFRICA).
Sudan: Prolonged shutdowns to control unrest
Internet blackouts have become a staple during the past 12 months in Sudan, particularly from December to April as protesters took to the streets to oust former president Omar Al Bashir from power. During this period, the government intermittently blocked access to Facebook, Twitter, Instagram, and Whatsapp. However, it was the near-total shutdown instituted in June until July, following particularly violent unrest in the capital, which garnered the most attention (See SUDAN: HARD-LINE DARFURI MILITIA SEIZE CONTROL OF THE CAPITAL).
On 3 June, the Sudanese Transition Military Council ordered a partial internet shutdown amidst reported paramilitary attacks on pro-democracy demonstrators in Khartoum, during which an estimated 100 people were killed. To begin with, the ban targeted mobile networks before escalating to encompass fixed-line connections on 6 June. From 6 June to 9 July, a near-complete blackout was implemented, cutting the population off from the outside world. According to NetBlocks, a web freedom group, the internet disruptions under the rule of the Council were “more severe” than those imposed under Al Bashir at the time.
The Council’s actions contributed to significant condemnation from local and international watchdogs, in turn spurring social media campaigns. For example, throughout June, international social media campaigns, #BlueForSudan and #IAmTheSudanRevolution, were launched in an attempt to gain attention for the massacres and censorship being perpetrated in Sudan.
Locally, a lawyer, Abdel-Adheem Hassan, challenged the shutdown in court. On 23 June, Hassan was successful in ordering his telecoms operator, Zain Sudan, to restore connectivity. Yet, while his win was widely publicised and celebrated in the belief that the internet would be restored countrywide the next day, the operator only restored connection to his personal line.
According to Human Rights Watch, the near-total blackout in Sudan resulted in “wide-ranging harm”. Notably, it prevented activists and residents from reporting critical information regarding paramilitary forces, who were responsible for the attacks in Khartoum and previously for violent campaigns in Darfur, Southern Kordofan and the Blue Nile. Medical professionals further added that it made it difficult to organise ways to provide care.
The internet was only fully restored on 9 July after a further court challenge and a formal denouncement of the shutdown by the UN.
Chad: The longest night
Although Chad has a very low internet penetration rate – with only 6.5 percent of the population reported as having access to the internet as of 2017 – the country was recently subjected to the longest-running internet blackout on the continent. In March 2018, President Idriss Déby announced a partial internet block that affected major sites including WhatsApp, Twitter, Instagram, YouTube, and Facebook, as he prepared to amend the constitution to remain in office until 2033. Sixteen months later, the ban was lifted on 13 July 2019 (See CHAD: CREATING A DE FACTO MONARCHY AMID MULTIPLE CHALLENGES TO POLITICAL STABILITY).
According to the government, the ban was implemented for security concerns over terrorism threats. While this justification was challenged in local courts, all appeals were ultimately unsuccessful. The government only lifted the ban following a sustained international campaign, led by Internet without Borders, which included diplomatic pressure, protest action, as well as the sponsorship of VPN access for Chadians.
Long-term social media blackouts are common in Chad. Previously, in 2017, the government cut connections for ten months following controversial elections. These long periods of internet blackouts have severe economic consequences for the already impoverished country. According to the ‘Cost of Shutdown Tool’ by NetBlocks, the 2017 blackout cost the government an estimated USD 163 million. It is estimated that the most recent blackout cost upwards of USD 253 million.
Moreover, during the blackout, the country’s largest ISP, Millicom, a Swedish telecommunications company, was subject to substantial adverse media in Sweden regarding the company’s alleged failure to honour its UN commitments to protect free expression. In the early days of the blackout, the company claimed that the outage was due to technical problems before later admitting that the government had ordered the blackout. In June 2019, Millicom completed the sale of its operations in Chad to Maroc Telecom, a Moroccan telecommunication company. Although part of wider strategic disinvestment from Africa, Millicom’s withdrawal was likely impacted by the reputational damage it faced following the Chad blackout.
Mauritania: Internet shutdowns and propaganda campaigns
Mauritania held its presidential elections on 22 June. When violent protests broke out on 23 and 24 June in the capital Nouakchott, challenging the initial election results, the government moved to disrupt the internet before instituting a near-complete ban on both mobile data and fixed-line connections by 25 June. All of Mauritania’s consumer ISPs – Mauritel, Chinguitel, and Mattel – were impacted by the government’s decision.
By suppressing social and news media, the government was able to provide its own account of the protests through a false propaganda campaign. On 26 June, the state television broadcaster paraded a group of foreign nationals who alleged to take full responsibility for the protests. Only after the internet services were fully restored on 3 July did a more accurate picture of the post-election situation emerge.
Contrary to state propaganda, a number of Mauritanian political activists were reported to have been arrested for participating in the protests. Moreover, it was revealed that during the blackout, the state had detained two prominent journalists without charges. Lastly, once connectivity had resumed, delayed reports of civil unrest in the immediate aftermath of the elections from outlying rural areas began to emerge (See MAURITANIA: NATURAL GAS AND MINING BONANZA WILL MITIGATE INVESTMENT RISKS).
Ethiopia and Somalia: Shutdowns for exams
Internet shutdowns are not always instituted for political reasons. In Ethiopia and Somalia, they have also been implemented during national exams to prevent cheating. While internet access is occasionally restored in the evenings during these periods, the impact of such shutdowns is significant. According to Netblocks, a one-day shutdown of the internet costs Ethiopia at least USD 4.5 million and has a long-term impact on investor confidence in the host country.
The latter is particularly true in the case of Ethiopia as newly elected Prime Minister Abiy Ahmed has sought to privatise the national telecommunications provider, Ethio Telecom. Nevertheless, while such government interference is likely to concern potential investors, the anticipated establishment of an independent regulator is expected to provide appropriate checks and balances (See
Countries to watch
Protests in Zimbabwe have also been met with internet shutdowns in recent months. In January 2019, for example, the government imposed a “total internet shutdown” amid violent protests against a dramatic fuel price increase. Access to the internet and social media apps like Facebook, Twitter and WhatsApp were intermittently blocked as the country’s largest telecom company, Econet, sent customers text messages relaying the government’s orders and calling the situation “beyond our reasonable control”. As the situation has continued to decline over the past few months, with reports of load shedding of up to 16 hours a day, food shortages, and the outlawing of anti-government protests, further unrest and associated internet clampdowns are expected.
Tunisia is scheduled to hold the first round of its presidential elections on 15 September 2019. The country has enjoyed relatively free access to the internet since widespread blackouts during the Arab Spring in 2011. After transitioning into a democracy, a key test for the budding democracy will be whether or not these elections are free and fair. Any internet shutdowns during the election season, which the government would likely justify by appealing to the threat of terrorism, will instead be an indication of the state’s democratic integrity.
Burundi is expected to hold presidential and parliamentary elections in May and June 2020. In 2015, as President Pierre Nkurunziza, sought to seek a third term ahead of the country’s elections, messaging services including Facebook, Whatsapp,Twitter, and Tango were shutdown. Actions by the government since then have further pointed to little tolerance for media freedom. In March 2019, for example, the government renewed its suspension of Voice of America and withdrew the BBC’s operating license. As such, it is highly likely that next year’s elections will be accompanied by an internet shutdown and near-total blackout.
Tanzania is expected to hold multiple elections in 2020, including presidential and parliamentary votes. With current President John Magufuli having cracked down on online media over the last year (See EXX Africa Special Report: The Cost of Internet Shutdowns in Africa) it is likely that he may move to control messaging ahead of and during the elections by implementing partial bans on the internet and removal of anti-government sites. Indeed, during an August 2017 meeting with leaders from China, the Tanzanian Deputy Communications Minister praised his counterpart for blocking social media platforms and replacing them with “homegrown sites that are safe, constructive and popular”.
Each case of those in power using internet blackouts to control information, and therefore people, has its particularities. However, one constant in all of these cases is the economic impact of the blackouts at both a macro- and micro-economic level. Decreased productivity, lack of email communication, disruption to online sales, decreased online advertising; these are a few examples of the consequences of internet shutdowns for commercial entities. At a national level, a recent Global Network Initiative report indicates that the loss of internet connectivity has a pronounced effect on a country’s daily GDP. The report estimates that an average high-connectivity country stands to lose at least 1.9 percent of its daily GDP for each day of a total internet shutdown. For an average medium-level connectivity country, the loss is estimated at one percent of daily GDP, and for an average low-connectivity country, the loss is estimated at 0.4 percent of daily GDP.
Activist groups like NetBlocks and Global Network Initiative are creating awareness of both the prevalence of internet shutdowns around the world and their associated economic impact. This awareness is vital for the media, NGOs, and international organisations to try to combat the increased use of shutdowns across the African continent. Indeed, internet access and the guarding against the abuse of it by those in power are fast becoming a key frontier for the protection of international human rights. However, the fight against the abuse of freedom of expression is expected to be prolonged in Africa, as more and more leaders are turning to this form of control to suppress dissent and manipulate access to information. In the interim, businesses and the wider economy are expected to bear the brunt of these decisions.
SEE COUNTRY OUTLOOK: ALL COUNTRIES
Two months out from elections, Mozambique’s government has secured a peace deal with the armed opposition and agreed on debt restructuring with most of its creditors. These are crucial steppingstones as the country seeks massive gas-related investment inflows and a potential new IMF programme. However, an intensifying Islamist insurgency, suspected electoral manipulation, and lack of progress on bringing perpetrators of the hidden loans scandal to account remain key obstacles towards longer term stability.
The risk of violent protests by opposition supporters over reports of electoral manipulation poses a higher threat of commercial disruption than the northern insurgency, which might even simmer around the October elections. However, any threats by the main armed opposition to suspend the peace agreement are unlikely to be implemented and a resumption of conflict seems unlikely.
Evidence for an Islamic State attack last month in northern Mozambique seems spurious, although the group’s claim will have symbolic value for the Islamist insurgency in the gas-rich region. The conflict is increasingly posing a risk of attack on NGO assets engaged in post-cyclone recovery, as well as to local businesses that are targeted in extortion and kidnap raids. However, EXX Africa continues to assess that any mooted aspiration to attack gas assets remains subdued by fears of a more heavy-handed retaliatory counter-insurgency.
The largest ever foreign direct investment into sub-Saharan Africa has been secured by Mozambique, and even more commitments in the LNG sector are underway. The country’s long-struggling economy is already witnessing signs of a recovery in anticipation of more foreign exchange revenue. But in order to participate fully in its own LNG sector, the government will have to restructure its debts, nullify some loans, and bring in IMF support.
On 18 June, US energy firm Anadarko Petroleum Corp confirmed it had given final investment decision (FID) on a USD 20 billion gas liquefaction and export terminal in Mozambique. Anadarko has agreed to be taken over by Occidental Petroleum Corp. Once that deal goes ahead, Occidental has agreed to sell assets including the Mozambique LNG project to French oil major and large LNG trader Total SA.
Anadarko’s FID marks the largest single LNG project approved in Africa, with 12.88 million tonnes per year (mtpa) production capacity. Natural gas use is growing rapidly around the world as countries seek to meet rising energy demand and wean their industrial and power sectors off dirtier coal. Earlier this month, the International Energy Agency said global gas demand is expected to grow at a rate of 1.6 percent a year until 2024, fuelled by Chinese consumption which will account for over a third of the demand growth during the period. The Asia-Pacific region will remain the largest source of gas consumption growth in the medium term with an average rate of 4 percent per year and will account for around 60 percent of the total consumption increase until 2024.
Anadarko’s project has committed long-term supplies to utilities, major LNG portfolio holders, and state companies around the world, including a co-purchase agreement with Tokyo Gas and Centrica. The liquefaction plant will be able to sell LNG to both the Asian market, which accounts for 75 percent of global LNG demand, and to the European market. Anadarko’s partners in the Mozambique LNG project are Mitsui, Mozambique state energy company Empresa Nacional de Hidrocarbonetos (ENH), Thailand’s PTT, and Indian energy firms ONGC, Bharat Petroleum Resources, and Oil India.
Last year, the USD 8.6 billion Coral South Floating LNG project operated by Italy’s Eni brought together some 16 commercial banks to raise USD 4.63 billion debt for the project. ENI’s partners in Coral South are ExxonMobil, the China National Petroleum Corporation (CNPC), ENH, Kogas, and Galp Energia. However, Anadarko’s project for the development of the Golfinho/Atum fields faces a different risk outlook as it is onshore. Attention is now turning to when ExxonMobil will make FID on its even larger 15.2 mtpa LNG project. Expectations are this will happen before presidential elections in October.
The establishment of an extractive industry has been a key political priority since the 2010 discovery of approximately 20 million barrels worth of LNG deposits in Rovuma by the Anadarko and ENI oil consortiums in areas 1 and 2 of the basin. Mozambique’s economic decline in subsequent years has only served to hasten the imperative of such an industry. The FID on Anadarko’s project, and the impending decision by Exxon, come at a critical time for Mozambique, which is recovering from a lengthy economic and financial crisis and has recently been hit by twin cyclone storms.
According to assessments by Standard Bank, estimated stocks of LNG – which are only a fraction of the total resource endowment – could inject approximately USD 39 billion into the Mozambican economy. For a country that ranks among the poorest in the world, with a GDP of approximately USD 11 billion and public debt in excess of that amount, the windfall could fundamentally transform the country’s economic landscape. This is not to mention the potential residual benefits in employment, infrastructural development, and general economic welfare in proximate communities. The government of Mozambique believes the Anadarko project is expected to create more than 5,000 direct jobs and 45,000 indirect jobs.
The impending influx of dollars is already making itself felt — with the Bank of Mozambique last week cutting interest rates for the first time in 2019, thanks in part to the anticipation that investment in the LNG project will eradicate future foreign exchange shortages and calm inflation. Mozambique’s international reserves currently stand at over USD 3 billion, which amounts to six months of import cover of goods and services, excluding the transactions of the foreign investment mega-projects.
The government aims to create a sovereign wealth fund to channel LNG sector revenues, which has calmed investor fears that state revenues might be squandered. The metical local currency has been gradually appreciating against the US dollar and the South Africa rand, which reflects the improvement in the current account deficit in the first quarter of 2019, combined with the measures taken by the central bank to ensure greater discipline and transparency in exchange operation.
There remains a risk from declining state revenues due to the twin cyclone storms that hit devastated parts of northern and central Mozambique earlier this year. International donors pledged to contribute USD 1.2 billion to help rebuild areas and infrastructure destroyed by cyclones Kenneth and Idai in Mozambique. However, much of these pledged funds have not yet been disbursed and the timeline for disbursement remains uncertain. Even so, the pledged funds remain insufficient for recovery efforts. Mozambique needs a total of USD 3.2 billion for post-cyclone reconstruction in the provinces of Sofala, Manica, Tete, Zambézia, Inhambane Nampula, and Cabo Delgado, where Anadarko’s gas project is located. Meanwhile, the central bank has acknowledged that it may struggle to find sufficient funds to finance this year’s elections due in October (See SPECIAL REPORT: THE LONGER TERM IMPLICATIONS OF CYCLONE IDAI IN MOZAMBIQUE).
Meanwhile, the government is trying to close a deal on a USD 2 billion package of financing for state petroleum company ENH, which will require a sovereign guarantee. The risks of ENH defaulting is low, yet it still adds another USD 2 billion in sovereign–guaranteed debt to Mozambique’s already strained debt burden. Mozambique’s bondholders will be reluctant to agree to a restructuring that would allow Mozambique to take on even further debt. French financial consultancy Lazard Freres is advising the government on its debt restructuring, including the ENH debt requirements to develop its concessions.
Debt restructuring progress
Earlier this month, Mozambique’s Constitutional Council ruled that a government-guaranteed USD 850 million Eurobond issued by state-run tuna-fishing company Ematum in 2013 was illegal, since neither the bond nor the guarantee were ever appropriately noted in the country’s budget. In 2016, Mozambican officials agreed to swap the bond’s outstanding USD 697 million for a sovereign Eurobond. The court judgment may frustrate efforts by the Mozambican government to restructure the bond again. Even though the ruling was made by the country’s highest court, bondholders do not expect any impact on the bond’s restructuring process currently under way. The restructured Eurobond bonds had been approved by the country’s parliament in line with the constitution and within the limits of the budget law.
A few days before the ruling, Mozambique’s finance ministry said it had reached a restructuring deal in principle with holders of its defaulted 2023 bonds (See MOZAMBIQUE: NEW DEBT DEAL INCHES FORWARD). According to the proposal, Mozambique’s government will issue a USD 900 million bond maturing in September 2031, paying a 5 percent coupon rate until 2023, after which the coupon steps up to 9 percent. Mozambique will also make a cash payment to eligible bondholders of up to USD 40 million. This includes a consent fee and an exchange payment. The restructuring of some USD 726.5 million of Eurobonds is expected to be completed by 1 September, according to the ministry. That timeline may now be frustrated by the Constitutional Court ruling since the restructuring negotiations may face further legal challenges.
According to the latest proposal, bondholders will no longer get access to the country’s future natural-gas revenue. A previous proposal included extending maturities and sharing future revenue from offshore gas projects through implementing a new Value Recovery Instrument (VRI) capped at USD 500 million. However, the Mozambican government has been reluctant to proceed with the initial proposal and has lobbied bondholders to ditch the VRI. The main difference between the agreements is that the government will no longer pay bondholders about USD 500 million of earnings from liquefied-natural-gas projects, while the coupon rates have also changed. Essentially, the VRI has been replaced by a shorter maturity and higher coupon past 2023.
Under the previous deal reached in November, the government would have paid back the bond’s USD 900 million principal in five equal annual instalments, starting in September 2029 and ending September 2033. The new agreement envisages eight equal semi-annual payments of USD 112.5 million from 2028 to 2031. At least four creditor committee members have agreed to the proposal. Together these institutions control around 60 percent of Mozambique’s 2023 bond. Support from creditors holding 75 percent of the bond will be needed to activate the collective action clauses. The fifth group of creditors had been due to review the initial agreement, although the timeline may now be delayed given the court ruling.
The FID on Anadarko’s massive foreign direct investment, as well as the expected decision by Exxon, will mark a highly significant turn-around for Mozambique’s failing economy. Low prices for the gas in previous years prompted fears FIDs such as Anadarko’s would be delayed or scrapped. But the US company has gathered enough long-term buyers to underpin the financing of the project. The takeover of the project by the highly experienced French major Total may also be a positive indicator for the project.
Initial indicators show that Mozambique’s economy is recovering on the back of the FID, given the expected boost to foreign exchange levels derived from direct royalties, taxes, carried interest, and other financial contributions, as well as indirect benefits to the broader economy. A sustainable recovery path will also depend on progress in restructuring the debt deals. The deal is also being motivated by a stronger desire by the Mozambican government to reengage with the International Monetary Fund (IMF), because the state needs billions of dollars in loans to fund its own participation in the natural gas concessions. The Fund is considering giving Mozambique a shadow programme, which would be a step towards securing financing from the IMF after the freeze in 2016. The IMF has insisted that any agreements with holders of previously undisclosed debts should be consistent with returning Mozambique’s debt position to a sustainable path.
That provision will shift the attention towards a restructuring of a USD 535 million loan to Mozambique Asset Management (MAM) and a USD 622 million facility for ProIndicus, a state-owned maritime security company. Bondholders complain that loan arranger Credit Suisse was not transparent with them about its other lending commitments to Mozambique, only revealing its loan to Proindicus when forced to do so during the 2016 debt exchange. Mozambique’s Attorney-General has filed a lawsuit in the UK to nullify the alleged criminally obtained government guarantee to the loan contracted by ProIndicus. Last month, a former Credit Suisse banker pleaded guilty to a US charge that she helped launder money. Meanwhile, the IMF says that Mozambique’s restructuring discussions with Russian lender VTB over the loan to the state-owned MAM are ongoing.
Moreover, the IMF insists that Mozambique should hold officials accountable for previously undisclosed debts, which may remain a real stumbling block to any eventual new credit facility. The IMF still insists on the need for Mozambique to fill the information gaps before any progress can be made towards re-engagement. The Fund is unlikely to change its stance until the full completion of an audit. Yet the audit remains stalled, not least by Attorney General Beatriz Buchili, who claims the audit is being frustrated by a lack of cooperation from other western countries. There is a lack of political will in Mozambique and among donor countries to continue the probes into Mozambique’s previous borrowing practices and allegations of embezzlement, as the momentum for investment into the natural gas sector accelerates.
This briefing does not mention the security challenges facing the LNG sector in northern Mozambique, which have been covered extensively by EXX Africa in a series of briefings in recent months. Another update is due next week (See SPECIAL REPORT: ISLAMIST INSURGENCY RESUMES IN NORTHERN MOZAMBIQUE AFTER CYCLONE).
SEE COUNTRY OUTLOOK: MOZAMBIQUE
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