Cablegate: Business Communtity Protests Port Cargo Scanning

DE RUEHTO #0980/01 2451347
R 021347Z SEP 09



E.O. 12958: N/A


This cable is a collaboration between Embassy Maputo and
Embassy Pretoria and is part of a series of reporting on
regional transport infrastructure developments.

1. (SBU) Summary: In 2005, the Government of Mozambique
(GRM) awarded a 20-year concession to Kudumba Investments to
provide an integrated border and cargo security solution.
The concession is based on the principle of "build, operate,
and transfer" that requires no capital outlay from the GRM.
Kudumba recovers its costs by directly charging businesses.
The Mozambican business community stresses that trade volumes
do not justify the scanning fees or level of technology
implemented by Kudumba and has called on the GRM to carry
some of the financial burden. Kudumba management has
deflected criticism about the scanning fees and describes its
public-private partnership with the GRM as a "win-win
solution" that provides Mozambique with a modern turnkey
security solution that the GRM could not afford otherwise.
Kudumba management further asserts that privatizing the
non-core screening functions has led to a drastic reduction
in inspection and cargo processing times, which facilitates
trade in the long-run. The GRM faces a trade-off between
improving security screening and managing costs for
implementation of new technology. It will have to address
business concerns regarding the transparency, management, and
cost of the concession if it hopes to continue expanding
trade flows to Mozambique. Given the current global economic
downturn, businesses might choose to channel trade via
neighboring ports if cargo scanning fees seem unfair or
unnecessarily high. End Summary.

2. (SBU) Emboffs recently met with Kudumba management to
discuss the controversy surrounding its fee structure and to
tour its scanning and training facilities in Maputo. The
first phase of the concession between the Ministry of
Finance/Customs and Kudumba called for the deployment of
X-ray screening equipment at the Maputo International Airport
and the Port of Maputo cargo facilities. Kudumba is also
implementing biometric access control at the seaport and
airport entry points. The second-phase will include the
installation of scanners at Mozambique's two other main
seaports, Beira and Nacala, and at the Ressano Garcia border
crossing with South Africa. Kudumba's total investment cost
expenditure for equipment and training is estimated at $42

Business Community Critical of
Concession and Costs

3. (SBU) CTA, an umbrella group for the Mozambican business
community, has been critical of the Kudumba concession and
high scanning fees. CTA reps told Emboffs that importers
initially threatened not to pay Kudumba's $100-per-container
fee and to leave their containers uncollected in protest.
CTA officials complained that even empty containers are being
scanned and charged $20. CTA also raised questions about
Kudumba's ownership structure and potential conflicts of
interest. Kudumba's main shareholder Chassan Ali Ahmad, a
naturalized Belgian of Lebanese origin, owns a 40 percent
share. Mozambican holding company (and FRELIMO front
company) SPI owns 35 percent and the remaining shares are
held by Alima Jose (15 percent) and Rafique Sidat (10
percent). CTA questioned the concession process pointing to
the ruling Frelimo party ownership interests in Kudumba
through the SPI holding company. CTA representatives also
alleged that Chassan Ali Ahmad had been kicked out of Angola
for shady business dealings and could not be trusted to run a
legitimate business in Mozambique.

4. (SBU) Selected Scanning Fees Charged by Kudumba:

---------------- ------
Type of Shipment Tariff
---------------- ------
Import containers $100 per container
Export containers $70 per container
Empty containers $20 per container
Transit containers $45 per container
Bulk cargo $0.25 to $1.90 per ton

MAPUTO 00000980 002 OF 003

5. (SBU) CTA officials agreed that scanners and new
technology had to be implemented to increase security and
facilitate trade. However, CTA criticized the fact that the
business community was bearing all of the costs of the
upgrades. Businesses are forced to pass on the scanning
costs to consumers, they said, which reduced the
competitiveness of Mozambique,s rail and port corridors.
CTA said the GRM should be bearing the costs of the upgrades
due to the financial benefits improved screening bring to
Customs. CTA also asserted that the number of scanners at
the airport overwhelms passenger and cargo flows. They
argued that the previous system of physical inspection, even
if time consuming, was free and it was the GRM's duty to
absorb the cost of the new system.

Privatization Allows GRM to Reach
International Screening Standards

6. (SBU) Kudumba management deflected criticism from the
business community regarding its fee structure, saying that
as the concessionaire for the GRM their role was only to
provide the services the GRM had outlined in the contract.
They did not feel that it was necessary for Kudumba to
publicly address the business criticism and instead said it
was more appropriate for the GRM to review Kudumba's fee
structure and decide whether the GRM or private businesses
would bear the cost burden of the new system.

7. (SBU) According to Kudumba management, "the GRM would not
be able to afford the technology Kudumba has installed, let
alone the maintenance costs or the long-term training
required to operate it efficiently." Kudumba has upgraded
facilities and provided non-intrusive security at all
frontier borders in a manner that does not disrupt trade
flows with lengthy processing delays. Kudumba has instituted
U.S. and European Union-level safety and security standards.
Kudumba is utilizing the latest X-ray detection technology
developed by Chinese manufacturer Nuctech. According to
Kudumba management, the Nutech scanners are currently the
only ones on the market that can separate organic from
inorganic material in both bulk and compounds, which improves
detection rates. Each scanner costs between $3-5 million.
(Note: Nuctech was headed by President Hu Jintao's son and
the company has recently been involved in a
ontracting/bribery scandal in Namibia and the Philippines.
End Note)

8. (SBU) Over 80 percent of the upgrades to the new Maputo
international airport cargo facility have been completed.
Kudumba has installed seven state-of-the-art cargo X-ray
machines and about 60-70 percent of air cargo is currently
screened. The airport handles approximately 250,000-300,000
international passengers per year. To address concerns
regarding drug smuggling on international routes, Kudumba has
included full-body scanners as a part of the technology being
deployed at the airport. Kudumba management said high
implementation costs partly resulted from the need to install
electrical and telecommunications wiring at the international
airport, which sorely lacked this infrastructure. Kudumba
had to lay fiber-optic cables to connect the airport's
communications systems (control tower, 73 CCTV cameras, etc)
to appropriate government response departments. (Note:
According to Kudumba, electronic data of all scanned items
and persons at the Maputo port and airport are collected a
central data warehouse for GRM review. Also Mozambican
Intelligence (SISE) has seconded an officer to the airport
scanning control room to review incoming scanning-related
data. End Note)

9. (SBU) According to Kudumba officials, about 60 percent of
maritime cargo is now being scanned. Kudumba was careful to
point out several times that Customs officials decide which
containers to scan based on risk analysis and intelligence.
Former senior customs official Edna Matusse is now the Deputy
Managing Director of Kudumba. Customs officials also decide
which cargo containers to flag for secondary physical
inspections based on the results of the scanning. The
scanning also detects discrepancies in customs declarations,
which theoretically allows Customs to control smuggling and
generate additional customs revenue. Kudumba management
noted that quicker screening and processing times at the Port
of Maputo allow businesses to avoid the higher port access
and utilization fees they would be charged at the neighboring

MAPUTO 00000980 003 OF 003

Port of Durban, which takes substantially longer to screen
and process cargo.

Training Major Factor in Improved Screening

10. (SBU) Skills development and transfer are a major
component of the contract Kudumba has signed with the GRM.
Kudumba management emphasized that without adequate training
the equipment it has deployed would be useless. They said
other African countries, such as Uganda, have invested a lot
of money in new technology that sits in boxes because there
is no local expertise to utilize and maintain it. Kudumba
has developed a training center in Maputo where it trains
over 600 customs officers on equipment operations, personal
security, and detection of nefarious products. Mozambican
engineers are also being trained to maintain the new
screening equipment. The objective is to make Mozambican
officials operationally self-sufficient in the long-term.

11. (SBU) Much of the training Kudumba has implemented is the
same as Transportation Security Administration-approved
training used in the United States. Kudumba has recruited
leading international experts who have years of experience
working on border security and response systems in the U.S.
and European Union to conduct this training. Computer-based
modules are also included to individualize pace of training
and allow trainees to gain simulated experiences before
operating the new equipment. A similar mobile training
center is being set-up to train customs officials in northern
Mozambique. Kudumba has set a target of training 500
officials per year.


12. (SBU) The ownership structure of Kudumba and its reliance
on Customs to provide risk analysis and intelligence mean
that Kudumba only provides the appearance of secure borders.
Nonetheless, Mozambique is joining countries around the world
that are working to improve their cargo and passenger
screening systems in response to aviation and maritime
security breaches and potential terrorist threats. It is
unclear if the GRM has the political will to limit illicit
activities at its ports, to include narco-trafficking
(reftels). Improving cargo screening and processing times is
a major goal for the GRM as it is hoping to expand trade
capacity and volumes at all of its major ports. The GRM
could not afford to implement the level of technology,
integrated response system, and skills development Kudumba is
providing. However, some of the technology that has been
deployed by Kudumba in Mozambique is still not a part of
cargo and passenger screening systems used in some first
world countries. The number of scanners and the type of
technology implemented might be excessive given the
relatively low-level of cargo volume that transits through
Mozambican ports. The GRM faces a trade-off between
improving security screening and managing implementation
costs. It will have to address business concerns regarding
the transparency, management, and cost of the concession if
it hopes to continue expanding trade flows to Mozambique.
Given the current global economic downturn, businesses might
choose to channel trade via neighboring ports if cargo
scanning fees seem unfair or unnecessarily high.

© Scoop Media

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