Letting the Crown Jewels Fall into Private Hands

Abstract

In 1997, recognizing the importance of upgrading the transport infrastructure within the “Maputo Corridor,” the Government of the Republic of Mozambique invited bidders to tender for the Port of Maputo with a view to privatization under a long-term concession. Despite a feasibility study indicating that the project would increase trade and jobs for Mozambique and provide a reasonable return on equity for the sponsors, financial closing was not achieved until five years from the date of the initial tender. Among the challenges the project consortium and its advisers faced were risk related to the public sector fulfilling its obligations, risk related to the solvency of national rail and port operator, the need to ensure the project company's rights to the land, the need to value the assets to be conceded and those to be transferred back at the end of the term, and negotiating with the very entity to be privatized through the concession process. Successful placement of the most important strategic asset of the Mozambican economy in private hands will encourage the government to continue with its policy of privatization using the concession model.