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Massive Debt Revelation Another Blow to Mozambique’s Economy

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Mozambique is a parliamentary democracy, but the same ruling party, Frelimo, has been running the country for the last 49 years since it gained its independence from Portugal in This means that checks and balances have been sorely lacking in Maputo. Unfortunately, the government had not disclosed the existence of the massive debt to its other lenders, nor to the World Bank and the International Monetary Fund IMF , even though Mozambique gave a sovereign guarantee that the state would repay the loans if the company that received the funding defaulted. The Mozambiquan navy and the state-owned tuna fishery were unable to maintain and manage the vessels, which were left neglected alongside the quay for want of fuel and crew. Of course, there was no cashflow to pay back the loans. When the existence of the loans came to light in , there was a full-blown financial panic in Mozambique. Recriminations began immediately. They were also shocked, shocked , that the state enterprises appeared to have paid excessively high prices for the equipment purchased for the fishery project and the fast patrol vessels. Who would have guessed? And you thought you had a problem with international charges when you used your card on holiday this summer! Those investors who had bought the loans were also not at all happy, and these included crucial American investors, which gave the US courts the ability to act on the case. The investors thought they were buying bonds with a sovereign guarantee to support a new fishing industry, not to pay bribes and purchase ships and equipment that could not be used. The size of the problem in such a poor country as Mozambique meant that it could not be brushed under the carpet, especially as oil and gas revenues are still much lower than hoped due to project delays. Legally, the government of the country — and therefore its taxpayers and population — were still obliged to service the unjustly incurred debts. His lawyer said he will appeal the conviction and that he did not receive the alleged bribes. Mr Chang faces up to twenty years in prison now that he has been found guilty by a federal jury. According to the Mozambican government, Mr Safa orchestrated a vast chain of bribes to key politicians in Maputo to approve the deal. Therefore, the state sought to recover the funds from the shipbuilder in a lawsuit in the UK. Iskandar Safa, who passed away earlier this year , had always denied all knowledge of any corruption associated with the contracts. In February, the English High Court had ruled that President Nyusi enjoys immunity due to his status as a sitting head of government. Privinest says it will sue him when he steps down as president next year. The case will grind on, but these latest cases mean that many of the key players have faced judgement in court in London, New York, or Maputo. The cases have taken time to reach trial and judgement — almost the same ten-year period as the Bourbon tax bribery cases in Marseille , which we covered last month. Still, better late than never. The Tuna Bond story has many salutary warnings for other developing countries, especially those about to embark on major oil and gas developments. In , Mozambique seemed to on the cusp of becoming a liquefied natural gas LNG producer after Anadarko had made a series of deepwater gas discoveries in the Indian Ocean. Until an operator can bring a project into production, discovered reserves sitting in the ground cannot service debts or pay for roads and schools; just ask the Falkland Islands , waiting more than a decade for its offshore oilfield to be developed, and still waiting. However, not only do oil and gas revenues make countries vulnerable to that cash being syphoned off by the crooked, as we have seen in Venezuela , Nigeria and Angola , but oil and gas discoveries make it easier for governments to borrow. If you think investment bankers are selfish, greedy, and immoral individuals, the English High Court ruling provides much support for that view. The Financial Times has reported how three former Credit Suisse bankers who had arranged the loans pleaded guilty in to handling the bribes. A Brooklyn jury acquitted Jean Boustani of Privinvest at the same time. The Swiss bank pled guilty in a federal court in Brooklyn in to a single charge of conspiracy to commit wire fraud. Credit Suisse agreed to waive part of the Mozambican debt in The IMF made it a condition of further loans and support that the country pursued the malefactors within the government who had been involved in corruptly proposing and illegally financing the project in secret. The country was rapt to live broadcasts of the trial as he appeared in court in orange prison coveralls. They received between ten and twelve years in prison apiece. Isabel dos Santos may fume against the Angolan government from her luxury serviced home in Dubai, but she has her freedom at least in the Bulgari Residences. Many defendants in the Mozambique corruption case gave testimony in the trial that President Nyusi himself was involved in the approval of the Tuna Bonds, and by implication may have received, er, benefits. However, the Mozambican judge presiding over the case rejected their statements, and ignored the evidence they presented in court in Maputo. So often, transparency, political struggles, and corruption cases are intertwined. The contrast between the accountability in Mozambique and what has gone on in the Glencore bribery case is stark. At the time, we observed that the fine was a drop in the ocean for a company that earned that sum every two months as profits, and that until the individuals paying and receiving the bribes were held to account, there was no real incentive to change. We should stress that this is a simply a charge, not a conviction. Mr Beard faces two counts of conspiring to make corrupt payments to government officials and officials of state-owned companies in Nigeria between and and in Cameroon between and Mr Gibson and Mr Wakefield are accused of conspiracies to make corrupt payments to officials in Nigeria, Cameroon and the Ivory Coast at various times in the period from to , and for falsifying documents. Mr Hopkirk and Mr Labiaga are charged with one count of conspiring to make corrupt payments to Nigerian officials between and On Friday last week, the SFO said it was preparing to make indictments against two additional people, who live outside the UK, but who have also been asked by the agency to attend court in London with the other defendants on September 10 to answer written charges. The Tuna Bond scandal in Mozambique showed that bribe-paying also means bribe-taking. We emphasise that she has only been charged, and has not been convicted of any crime in the English courts. But within Abuja, Abidjan, and Yaounde, no measures appear to have been taken against those who received any payments from Glencore, even though Glencore has been fined for paying those bribes, and whose former staff will now stand trial for their alleged involvement in that corporate wrong-doing. Until countries like Nigeria, Cameroon, and Ivory Coast are willing to put their own officials on trial in orange jumpsuits like Armando Ndambi Guebuza, and to issue Interpol Red Notices against the relatives of even the former head of state, as Angola did against Ms dos Santos, nothing is going to change. The Tuna Bond scandal was devastating to Mozambique, but not prosecuting bribe takers and not being willing to investigate even the presidential family for corruption is even more devastating. It is a sign that countries like Nigeria, Ivory Coast, and Cameroon are not ready to change and will remain mired in under-development and poverty until they can enforce the rule of law against even their own officials. In the longer term, bribery, embezzlement, and procurement fraud destroy countries. Transparency and accountability in oil and gas producing states are sorely needed. Our coverage of the Tuna Bonds is available here. Hieronymus Bosch. Published on: 12 Aug , am. Would that other oil and gas rich kleptocracies could start to hold their rulers accountable. The Tuna Bonds — canned history Mozambique is a parliamentary democracy, but the same ruling party, Frelimo, has been running the country for the last 49 years since it gained its independence from Portugal in A billion-dollar hole is too big to hide Recriminations began immediately. Now, some key protagonists finally received the legal consequences. What can we learn? Off the hook for the unjust debt? Happily, the country has also reached a settlement to remove the unjust debt from its books. No comment. Glencore case shows others prefer to ignore corruption The contrast between the accountability in Mozambique and what has gone on in the Glencore bribery case is stark. Finally, that has now happened. Diezani K. Where are the cases in Nigeria, Cameroon and Ivory Coast? But where are the cases against the people receiving the bribes in their own countries? United Arab Emirates. Indian Ocean. Ivory Coast. Mozambican Navy.

Mozambique buy blow