Mozambique: Debts

London — Lawyers for Lebanese billionaire Iskandar Safa and his Privinvest group of companies on Friday at the High Court in London argued that Mozambique had conceived the idea of building a tuna fishing fleet long before Privinvest arrived in the country and that it was the then President, Armando Guebuza, who had approached Privinvest for help building a fishing fleet.

The High Court is hearing the closing arguments of lawyers acting for the litigants in the case of the “hidden debts’ where Mozambique is seeking 3.1 billion US dollars in damages from Privinvest and Safa. In addition, Mozambique is seeking to cancel debts held by the Russian-linked banks VTB Capital and VTB Bank (Europe), and the Portuguese bank BCP.

The case centres on loans of over two billion US dollars made in 2013 and 2014 to three fraudulent security-linked Mozambican companies (Proindicus, Ematum, and MAM) by Credit Suisse and VTB. Some of these loans were syndicated, meaning that they were offered out to other lending institutions such as BCP.

In theory, the loans were for amongst other things a tuna fishing fleet, shipyards, and maritime security. But none of these ventures ever came close to making a profit and soon became bankrupt. However, that was far from the end of the story as the project’s debts were backed by undisclosed state guarantees meaning that the government became responsible for paying off these debts.

Lawyers acting on behalf of the Mozambican Attorney General’s Office (PGR) have argued that the case is essentially “simple’. Barrister Jonathan Adkin told the Court on Wednesday that “Mr Safa and Privinvest offered and paid bribes to public officials and associates to obtain signed transactions and guarantees. As a result of these transactions and guarantees, the Republic suffered and continues to suffer enormous losses’.

However, Privinvest’s lawyer, Duncan Matthews, stressed that Mozambique was very keen to protect its territorial waters and believed that it could fund this by charging hydrocarbon companies operating off the coast of the northern province of Cabo Delgado for security services. He claimed that Mozambique had relied on the South African Navy for protecting its territorial waters and that it wanted its build its own capacity to ensure its sovereignty.

Matthews put the current president of Mozambique, Filipe Nyusi, right at the heart of the three projects. However, he then went on to characterise President Nyusi as the individual who decided to stop the implementation of the projects as part of an alleged vendetta against former President Guebuza.

He argued that Privinvest did everything possible to make the projects a success including offering to extend the Proindicus loan without cost, to give training for Ematum personnel without charge, and to provide a training school and equipment for MAM without cost.

No evidence for any of this was presented at the trial in Maputo in 2021-2022 of 19 people accused of involvement in the hidden debts.

Perhaps Matthews’ strongest argument was to ask why Privinvest would fail to provide successful projects when it was very keen to maintain relations with both Mozambique and the banks. Privinvest has supplied equipment around the world, he said, and asked why would they not want the Mozambique projects to be a success.

However, it could equally be argued that if President Nyusi had been at the centre of the genesis of the projects why would he want them to fail? If they had been successful, they would have brought thousands of jobs, increased sovereignty, and made Mozambique a regional pole for shipbuilding.

To get closer to the truth of whether Privinvest were committed to the success of the three projects, we can look at just one example of the equipment supplied – the interceptor vessels that were intended to protect Mozambican waters from pirates and illegal fishing. Expert witnesses, including Rear Admiral Jean Louis Barbier who gave his opinion on behalf of Privinvest, agreed on many points that the equipment sold for protecting the Exclusive Economic Zone was unsuitable.

For example, Rear Admiral Barbier accepted in cross-examination that the intercept vessels – which were among the fastest in the world – did not have any onboard weapons which prevented them from taking offensive action. So, they could rush at great speed out to the dhow or skiff that was posing a threat but would then have to loiter at a safe distance.

Privinest could make a great deal of money on the corrupt deals by overcharging for the assets it sold to Proindicus, Ematum and MAM. An independent audit of the three companies in 2016 showed that the fishing boats, patrol vessels, radar stations and other equipment provided by Privinvest were vastly overpriced. The auditors put the over-invoicing at over 700 million dollars.

Matthews admitted that it was a strange case where the accused acknowledged making payments to many of the key players. But he argued, as Privinvest has from the start of the scandal, that the company never paid any bribes. The company has released to the Court details of approximately a hundred payments that Mozambique claims are bribes. But he argued that these were all either legitimate consultancy fees, campaign contributions, or investments in Mozambique.

As far as Mozambique is concerned, these are all just euphemisms for bribes.

Privinvest admitted that it paid the then Finance Minister, Manuel Chang, seven million US dollars. Two million dollars were sent to the company Genoa for “joint investments in real estate’. A further five million dollars were sent to the company Thyse for “investment in a bank and/or Sovereign Wealth Fund’.

Privinvest accepted that none of these investments materialised and argued that the funds were then repurposed to fund Chang’s campaign for the Assembly of the Republic in the 2015 elections.

Chang was indeed elected to the Assembly from the southern province of Gaza. But he had no campaign of his own, separate from the campaign of the ruling Frelimo Party.

Central to the Mozambican case is that Chang overstepped his authority to obtain this payment from Privinvest. It has shown that the guarantees he signed hugely exceeded the ceiling on guarantees fixed by the 2013 and 2014 state budget laws and that these ceilings are mandatory.

Mozambique’s case, as presented by Adkin was that the project would not have gone ahead without the bribes. Indeed, earlier in the trial, he pointed out that it is immaterial whether the payments were bribes or “investments’ if the purpose was to induce government officials to adopt to the projects.

Closing arguments in the case will continue until 21 December, but Judge Robin Knowles is expected to take several months before announcing his decision