Mozambique: PGR attempts to halt closure of Mozal – AIM report

The Mozambican Attorney-General’s Office (PGR) has ordered the management of the Mozal aluminium smelter, on the outskirts of Maputo, to halt all preparations to put the smelter into a “care and maintenance” regime, which would end all production of aluminium ingots. “Care and maintenance” is not quite the same as closure – in theory, the smelter could be restarted, but so far no buyer has expressed an interest in taking over from the current majority shareholder, the Australian company, South32. A letter from the PGR to the chairperson of the Mozal Board, Samuel Samo Gudo, claims that the decision to put the smelter into care and maintenance as from 13 March violates Mozambican company law and Mozal’s own statutes, The Mozambican State is a minority shareholder in Mozal, and through the government’s Institute for the Management of State Holdings (IGEPE), it had warned, on 6 March, that the management decision was taken “outside of the applicable legal, statutory and contractual framework”.

The suspension of all, or a substantial part, of the smelter’s activities was a decision that could only be taken by a general meeting of Mozal shareholders. The PGR argued that the decision could not be taken unilaterally by South32, even though it is the majority shareholder. According to the PGR, the Mozambican Commercial Code, passed into law in 2022, states that suspending the company’s activities, requires a unanimous decision by the shareholders at a General Meeting.

Furthermore, Mozal’s own statutes state that the suspension of a significant part of the smelter’s activities requires the agreement of all shareholders who hold at least 25 per cent of the shares. The Industrial Development Corporation of South Africa (IDC) owns 32.48 per cent of Mozal’s shares, and so ought to have been consulted, but it was not. The PGR points out that, under the general principles of company law, company directors “are bound to the fiduciary duties of diligence, loyalty and acting in the best interests of the company”.

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The decision to put Mozal into care and maintenance violated these principles “with potential legal implications for the company bodies involved”, warned the PGR. The PGR ordered the Mozal management not to implement the decision to put the smelter into care and maintenance. Mozal must inform the PGR, within five days, of “the measures taken to restore legality or provide the explanations deemed necessary”. The PGR warns that failure to comply with this deadline “constitutes the crime of disobedience”.

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