VZCZCXRO7047
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHTO #0980/01 2451347
ZNR UUUUU ZZH
R 021347Z SEP 09
FM AMEMBASSY MAPUTO
TO RUEHC/SECSTATE WASHDC 0664
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEHLO/AMEMBASSY LONDON 0474
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHDC
RHEHNSC/NSC WASHDC

UNCLAS SECTION 01 OF 03 MAPUTO 000980 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EIND EINV EINT PGOV EWWT PREL ETRD MZ SF
SUBJECT: BUSINESS COMMUNTITY PROTESTS PORT CARGO SCANNING 
FEES 
 
REF: A. MAPUTO 797 
     ¶B. MAPUTO 713 
 
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 
million. 
 
------------------------------- 
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. 
 
------- 
COMMENT 
------- 
 
¶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. 
CHAPMAN