CTA proposes arbitration to avoid "Legal War" with TotalEnergies

The Confederation of Mozambican Economic Associations (CTA), the country's main employers' association, advocated Wednesday that problems between oil company TotalEnergies and Mozambican companies be resolved in local arbitration to avoid a "legal war."

"That we opt for a local arbitration center to avoid that, due to exhaustion, some of these cases gravitate to legal forums," said Simone Santi, president of CTA's Natural Resources and Energy portfolio, at a press conference in Maputo.

"We have to avoid it being a legal war where obviously small and medium-sized businesses can disappear," and taking into account that "most cases can be solved at the negotiation level," he added.

At issue is the suspension of the Cabo Delgado gas project, which was the largest private investment underway in Africa, and the resulting losses for local companies supplying goods and services, with investments made, goods bought, and loans taken out with the bank.

A total of 28 Mozambican supplier companies that CTA says have overdue payments from TotalEnergies or its contractors responded to an inquiry by the confederation - acknowledging CTA had hoped to have about 40, but several firms did not provide information.

The 28 that did so said they had signed contracts totaling $115 million, mostly relating to construction work, the building materials industry, and health and safety. 

Of the amount, "38 million dollars already had purchase orders issued, 20 million dollars have already been paid and 18 million dollars remain outstanding," said Gulamo Aboobakar, vice president of Natural Resources and Energy.

On the other hand, TotalEnergies has yet to comment on $43.6 million worth of "imported or purchased goods that are in storage and others that have been ordered, produced," he added.

"It is a situation that is not yet resolved" and the amount is still "under discussion," he said.

The total amounts in dispute may be higher, as more Mozambican SMEs are involved in the gas project.

The suspension of the development came after the March 24 attack on the village of Palma, a district headquarters less than ten kilometers from the shipyards, and the lack of security in the region, which has been targeted by insurgent armed groups for three years.

The CTA also defended that the oil company and its subcontractors clarify, together with the Mozambican small and medium enterprises (SMEs), the status of the contracts and issue a direct communication to the creditor banks to "minimize their pressure on the SMEs.

A pressure that Simone Santi said is "suffocating" Mozambican companies.

"SMEs are not clear whether their contracts are suspended or terminated," he noted.

According to Santi, TotalEnergies has asked for up to 10 days to respond to CTA's proposal.

In response to questions posed in writing at the last general meeting in May and quoted by the Zitamar portal, Total said that to limit the impacts of the force majeure decision - with which it suspended the project - it had terminated 62 contracts related to its gas operations in Mozambique, 45 of which were with companies registered in the Lusophone country.

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