Mozambique: Hidden Debts

Maputo — Judge Efigenio Baptista, of the Maputo City Court, on Thursday postponed for the second time the session of the “hidden debts” trial that would deal with the Public Prosecutor’s request for the seizure of property from several of the 19 accused.

The matter should have been dealt with on Monday, but lawyers for the accused complained they had not been properly notified, with all the relevant documents. That problem continues – by Thursday it seems that the prosecution had not yet been able to gather all the documents that tie the accused to each of the properties it wishes to confiscate.

For example, the prosecution hopes to seize 40 buildings owned by Antonio Carlos do Rosario, the former head of economic intelligence in the security service, SISE, or by companies that he controls. But to do this, it must show documents such as title deeds, which prove that Rosario is indeed the owner.

So Baptista announced that the prosecution’s seizure orders will be discussed at a date to be announced later by the court – and possibly after the prosecution and the defence have summed up their cases. These final arguments will be presented as from next Thursday, 3 March.

Prosecuting attorney Sheila Marrengula will present her summing-up first, followed by the lawyers for reach of the 19 defendants.

The properties Marrengula wants seized are in addition to goods confiscated during the initial stage of the investigation.

According to a report by the anti-corruption NGO, citing the government’s Central Office for the Recovery of Assets, by August 2021 (i.e. just before the start of the current trial) the goods seized amounted to about 15.6 per cent of the total value of the illicit loans to the fraudulent companies Proindicus, Ematum (Mozambique Tuna Company) and MAM (Mozambique Asset Management).

Although CIP repeats the oft-cited figure of 2.2 billion dollars, the true amount of the loans, and of the guarantees illicitly issued in 2013 and 2014 by the government of the then President Armando Guebuza, is 2.07 billion dollars. The prosecution is demanding that the accused compensate the Mozambican state to the tune of 2.9 billion dollars.

It’s not enough. A report from CIP last year put the true cost of the hidden debts, up to the end of 2019, at 11 billion dollars, and continuing to climb. This figure covers not just the loans from the banks Credit Suisse and VTB of Russia, but the huge costs to Mozambique’s credibility and reputation.

By late 2019, Mozambique had only paid creditors the relatively small amount of 674.2 million dollars. But If Mozambique is obliged to go on servicing the debts, there will be an additional 3.93 billion dollars to pay up to 2031.

Much worse was the loss of donor support. The CIP report noted that “When rumours about hidden loans began to circulate, Mozambican ministers lied to the IMF and ambassadors of Mozambique’s development partners, denying the existence of any loans. When the Wall Street Journal revealed the hidden debt in April 2016, the anger was extreme. Donors and lenders had kept the country afloat, and they pulled the plug”.

All the 14 donors and funding agencies who had provided Mozambique with direct budget support, suspended further disbursements, and to this day, five years later, they have not resumed. The loss of this foreign aid in 2016 cost Mozambique 831 million dollars, in comparison with 2015, and these losses have continued to cascade down the years.

The CIP report notes that the ensuing financial crisis meant that “the government became unable to pay its bills, there was a major currency devaluation, foreign debt became unpayable, the economy slowed down sharply, real GDP per capita fell, unemployment soared and poverty increased”.

CIP put a figure on this damage. It calculated the fall in the value of Mozambique’s GDP at 10.7 billion dollars between 2015 and 2019. This is a loss that cannot be recovered, and it will continue to grow, year after year. The report puts the total economic losses over this four year period at 11.33 billion dollars – or a loss of 403 dollars for every man, woman and child in the country.

The goods seized from the defendants up to August 2021 come nowhere near this sum. In money, the prosecutors seized 53.2 million meticais (831,000 dollars, at the current exchange rate), plus the almost derisory sums of 110,238 dollars, and 15,505 euros.

The vehicles seized from the accused are valued at 415,000 dollars and 803,000 South African rands (52,400 dollars). 27 houses, flats and other properties were seized valued at 16.9 million dollars, and a further 10 properties valued at 182 million meticais (2.8 million dollars).

All these goods, the prosecution argues, were obtained from the bribes paid by the Abu Dhabi based group Privinvest, which became the sole contractor for Proindicus, Ematum and MAM.

The prosecution has identified bribes amounting to about 62 million dollars and one million euros. But much of this money never reached Mozambique – the recipient of the largest sum, 33 million dollars, was Ndambi Guebuza, the oldest son of President Armando Guebuza and, according to the prosecution, he spent much of that money on properties and luxury vehicles in South Africa. Recovering assets stashed away outside of Mozambique’s borders will prove problematic, to put it mildly.

Mozambique’s best hope for recovering a larger slice of the money lies in the court cases against Privinvest and Credit Suisse that are now being heard in London.