Unlocking SA corruption conundrum: Mozambique scandal has clues – FT

EDINBURGH — Mozambique is in the grip of a scandal that has erupted on the world's front pages: Former finance minister Manuel Chang has been accused of approving a scheme for government officials to siphon off at least $200m of international borrowings by front companies, as the FT reports. But the problem goes much wider and deeper than Chang and his Credit Suisse bankers. Many powerful people have been tainted by the loans and bribery scandal, including the former president who is pulling the strings of the incumbent. Investors are watching closely to see how Mozambique works to fix its tarnished reputation, which will inevitably require hanging former friends out to dry – a problem that also vexes South Africa's President Cyril Ramaphosa. – Jackie Cameron.By Thulasizwe Sithole.Mozambique's ruling party has closed ranks since US officials indicted the southern African nation's former finance minister and ex-Credit Suisse bankers over a $2bn hidden loans and bribery scandal, reports the Financial Times (FT). .Under President Filipe Nyusi, the Frelimo party has been largely silent since Manuel Chang was detained and sought for US extradition over one of Africa's biggest corruption cases, it says.."An indictment this month accused Mr Chang, a sitting Frelimo MP, of approving a scheme for government officials to siphon at least $200m from a series of international borrowings by front companies, including a tuna fishing company, which took advantage of investor enthusiasm for vast offshore gas finds.".___STEADY_PAYWALL___.But, writes Joseph Cotterill for the FT, it is unlikely that Mr Nyusi will follow the examples of Malaysia, which is trying to claw back billions of dollars from its 1MDB scandal, or Angola, whose president has unexpectedly pursued the former ruling family over allegations of corruption. ."I don't see him cleaning the system like the Malaysians or the Angolans, but rather a survival strategy," he quotes Adriano Nuvunga, head of ADS, a Mozambican civil society group, as saying. ."Here we are discussing the survival of Frelimo as a political party and as a government. You have to take that into account." .Analysts and activists see Frelimo, which has governed Mozambique ever since its independence in 1975, as more likely to maintain an omerta-like system of loyalty and patronage than to punish its own ahead of polls this year, according to the FT. ."Under pressure over its inaction compared with the US, last week Mozambique's public prosecutor did name individuals it is investigating over the debts. But the list shows why it might not ask too many tough questions. ."The names include a former central bank governor, intelligence chiefs and civil servants who served under Armando Guebuza, president when the hidden debts were issued. He remains a powerbroker overshadowing Mr Nyusi. Only financial penalties are being sought, as opposed to criminal charges," continues the FT..Mozambique is opposing Mr Chang's extradition in favour of trying him at home — something few believe Frelimo would actually allow, says Cotterill. ."The origins of the scandal point to the opportunities for corruption that were created when a poor country discovered gas in 2009. Just two years later one of the world's largest shipbuilders, Abu Dhabi-based Privinvest, pitched officials an ambitious project to secure the country's shores," explains the FT correspondent.."The plan would eventually span coastal radar and patrol vessels, as well as tuna boats. Mozambique does have one of Africa's longest coastlines — and plentiful tuna. But it also has security forces that are politicised, opaque, and welded to Frelimo patronage by the legacy of the country's long post-independence civil conflict.".The US indictment describes an unnamed official telling Jean Boustani, an agent of Privinvest: "There will be other players whose interest will have to be looked after eg ministry of defence, ministry of interior, air force, etc … In democratic countries like ours people come and go, and everyone will want to have his/her share of the deal while in office, because once out of the office it will be difficult." Boustani arranged bribes worth $50m for officials, reports the FT..They were allegedly clumsily concealed as 50m "chickens", it notes. Meanwhile this sum was only part of the kickbacks and bribes that were eventually laundered with the help of the Credit Suisse bankers, according to US prosecutors. ."The $200m is probably an understatement of the level of looting. A forensic report by the risk consultancy Kroll in 2017 could not account for where $500m of the amount raised by the loans had gone," points out the FT. ."The tuna boats have lain rusting in a harbour in Maputo, the capital, for years. Privinvest has denied overpayment, and is examining the allegations made by the US, its spokesperson said. Mr Boustani denies wrongdoing, his lawyer told a US judge. There has long been speculation in Mozambique that Mr Nyusi, a defence minister under Mr Guebuza, must have known of the looting. Nyusi denies wrongdoing. ."At stake is repairing the economic damage left by the hidden loans. The IMF, a major funder, cut ties when the debt's full extent was uncovered in 2016. It set off a financial crisis. The debts went into default. ."The government has made progress on a restructuring programme, seen as crucial to unlocking financing for gas development where international majors such as Exxon and Anadarko are investors. But the US case has revived uncertainty.".While Frelimo is likely to back Nyusi to run again in this year's poll, analysts tell the FT that Guebuza retains the loyalty of many of its members in parliament, which ruled the hidden debts were legal in 2017. Outsiders may also have an interest in avoiding a divided Frelimo. Oil interests also play into the challenges, with one school of thought that the US is unlikely to pursue Guebuza directly lest it risk retaliation against the US firms that are increasingly betting on the country's gas.

Unlocking SA corruption conundrum: Mozambique scandal has clues – FT

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