DUBLIN — Some of those allegedly involved in a $2 billion fraud in Mozambique learned this week that corruption won’t fly in Africa anymore – they were arrested at the airport. Former Mozambique finance minister Manuel Chang was arrested during a layover in South Africa – he’s now awaiting extradition – while Lebanese shipbuilding executive Jean Boustani was arrested in the Dominican Republic and extradited to New York. These arrests highlight a growing international trend: those responsible for massive public frauds (like 1MDB in Malaysia) are being held to account, many of them in their personal capacity. In this episode, Alec Hogg and I discuss the wave of improved governance and accountability that seems to be sweeping Africa. We look at the contested election in the Democratic Republic of Congo and the African Union’s unprecedented willingness to intervene, as well as the arrests in the Mozambique fraud. We wrap up with a discussion of that consummate survivor, Tesla CEO Elon Musk, who this week announced mass layoffs at Tesla and warned of a difficult path ahead. – Felicity Duncan
Hello, and welcome to this week’s episode of the Editor’s Desk. This is BizNews Radio. I’m Felicity Duncan and with me on the line, Alec Hogg. Alec, it was a big week in African politics this week so let’s start with a discussion about elections in the Democratic Republic of Congo (DRC). There was an election process that was really marked by disturbances and complaints. There were reports of violence, there were reports of irregularities so, it was a troubled election and the results announced to widespread shock. This has caused a knock-on effect and what we saw this week that was very interesting was the African Union actually coming out and directly criticising what’s happening in the DRC saying, ‘look you need to delay the reporting of these election results – you need to delay any changes in government, until we can figure out what happened here.’ What does this tell you about the state of governance in the rest of Africa? Â
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Felicity, I’m very heartened by the developments there and if you just go back a little bit to understand the context. You have a guy who’s in charge, Joseph Kabila, who’s un-elected, who’s been in charge for 18-years. The Congolese people, since 2016, have been having street protests and these have been growing and growing. Forcing Kabila, who should have, by now, have stepped down. He was supposed to stepdown in December, forcing him to call an election. This is one of the richest people in the world. He is an old-fashioned tyrant. He has been plundering the riches of that country for his own benefit and for the benefit of his cronies and there are a number of multinational corporations who are involved there as well, but we’ll put that to one side for a moment. Remembering that the DRC is probably the richest country on earth when it comes to mineral resources, or certainly unexplored or undeveloped mineral resources.
So, he then calls this election and puts up his own candidate, who gets soundly thrashed. The candidate who wins is an anti-Kabila, a guy called Fayulu. He stands on an anti-Kabila platform and he wins, according to the Catholic Church, who’ve got 40 thousand observers in the field, he wins 60% of the vote. There is an opposition political leader who wins around 18%, and Kabila’s candidate, who gets even less than that. So, that’s the results of this. The Catholic Church comes out with its results. The SADC group, which also had observers there. Now, remembering that this is 16 nations in Southern Africa, where SA is the dominant player, it doesn’t say anything excepting Angola, who says, ‘there’s a problem here – we need a recount.’
The Financial Times of London then gets its hands-on leaked documents, which shows and it analyses the data. It gets all the data from the elections and it shows consistent with the Catholic Church’s results is that Fayulu also got 60%, I think they came out with 59.7% or something like that. So, here we have a very clear winner but the results are being delayed. Kabila comes through a little later and releases results to say that Fayulu did not win and neither did his own candidate but the leader of the opposition somehow is now the winner, and has been declared the winner. SA gets SADC to issue a statement, after an emergency meeting in Addis Ababa, to say that SADC will not interfere in the internal affairs of the Congolese. They must do their own thing.
What is remarkable about this was that the AU, subsequent to the SADC announcement, went against it, and went against what Ramaphosa and his pals have said, and essentially said that this election does have a false result. They sent off on Friday morning a delegation to the DRC and have said that they need to reassess all of this. Now, this is unprecedented. The AU has never done this before. First of all, it’s never overruled one of its sub-groupings, if you like and secondly, it has never interfered directly, in a case like this. But it does show you that the penny is finally dropping in Africa. That unless you get governance you are not going to be getting the support of the global investment community, or certainly the Western private investors. You might continue to get the support of Russia and China, who incidentally both came out and said, the same thing that SA said, ‘don’t interfere in the internal affairs of the DRC.’ In other words, they don’t want to give any [inaudible 0:05:11.8] to the evidence that is coming out that this election, and that the results have been falsified. So, it’s a very interesting by the AU and extremely heartening for governance on the African Continent.
I want to circle back to something you mentioned, which is the role of multinational corporations and the role of private capital in the, let’s say, the affairs of African States because we saw some interesting developments on that front also this week. Specifically, with respect to Mozambique and an alleged large-scale fraud, $2bn fraud, in that country. What we saw happening this week was a kind of global sting, if you like, where the former finance minister of Mozambique was arrested in Pretoria and they’re working on some extradition for him, out of a SA jail, and a businessman in Lebanon arrested in New York, in association with this alleged fraud, and of course, we very importantly saw three former Credit Suisse bankers arrested in connection with this growing story. So, sort of a global crackdown that really is revealing these very deep links between global financial institutions, like Credit Suisse, and corrupted politicians in parts of Africa. I think it’s not the first instance we’ve seen of this but it really is showing that there’s some sort of movement afoot in this space, which has been very long ignored.
It’s again, an extremely good development. Manuel Chang, the former finance minister in Mozambique, who is a sitting MP, was on his way to see his girlfriend in Dubai but there are no flights from Maputo direct to Dubai. So, he had to go through O.R. Tambo and when he got off the plane at O.R. Tambo to board his flight to Dubai that’s when he was arrested. So, the SA Government has been very closely involved in all of this. You might have noticed that Cyril Ramaphosa flew to Maputo before he went to the crisis meeting in the AU – he certainly has his hands full at the moment.
A busy man.
A busy guy, and he clearly would have got some kind of a discussion with his counterpart in Mozambique. But Chang is sitting in a SA jail. He’s tried to get bail but the South Africans will not give him bail. The Mozambique Government has said, ‘send him home because we will try him at home.’ The South Africans are not bowing to that so, all of that, which is an extremely strong position that SA has taken. [Inaudible 0:07:59.3] against what’s going on in the DRC, where on the one hand there’s strong support for the governance in the world or the moves towards governance and towards anti-corruption. This guy, Chang, by the way took a $5m bribe so, he’s not one of the big-fish, the total bribes that were taken were $200m so, there are lots of other people that were involved. There’s a company from Abu Dhabi, which actually got the contract in the first place to build these ships, which who knows where they are. All of this has now been followed on.
But where the problem starts is it’s a $2bn sovereign loan where international investors in the West bought the bonds and of course, they’re not going to get any repayment because the money, a lot of it, has disappeared. So, just as on the side, you have to wonder if Ramaphosa knows more about what’s going on in the DRC than we do because his behaviour in the DRC, this kind of hands-off approach, is inconsistent with what we saw in Mozambique. One must hope perhaps that he was… Well, not hope but you’ve got to know that he’s got a much deeper insight than we do so, maybe he knew that the AU was going to take a strong line. Maybe he also knows that the DRC’s own Constitutional Court is going to come out with a result, which will shock everybody because it’s packed with Kabila acolytes. Perhaps they’re going to come out as well and say, ‘the DRC election was rigged’ or that the results have been falsified.
Whatever the case is. As far as this is concerned, on the Mozambique ‘tuna bond’ scandal it reflects, it has parallels to what is going on in Malaysia, where they have their 1MDB scandal, where $6bn went missing. Again, to politicians, again international investors who put the money through an international bank, in that case Goldman Sachs. So, in Mozambique it was Credit Suisse, in Malaysia it was Goldman Sachs and this week Goldman Sachs brought its financial results out, where it has allocated already, $500m in legal fees and other compensation that its set aside against its profits, and apologised already to the Malaysian Government. Goldman Sachs is trying to say, ‘this wasn’t Goldman Sachs – it was just a crooked employee’ and no doubt, Credit Suisse are trying to do the same thing but another little angle on Credit Suisse is that Mr Thiam, who is the new CEO of Credit Suisse, who arrived after this Mozambique scandal, or the mess, had been perpetrated. He is from Cote d’Ivoire so, he is an African so, he’s taking a completely different approach towards the corrupting of African governments, and leaders, etc., then perhaps has been the norm in the Western world. All of this is incredibly good news, Felicity, when you look at the way that the wave is now changing. As I say, one really hopes that Ramaphosa knows more about DRC than we do, well, he does know more than we do but that his actions have been more based on the fact that he knows it isn’t going to help much by coming out and condemning it. But that he can in fact, because he knows that behind the scenes there is going to be stronger action from other courses.
Yes, and I think one of the things that struck me about this and I thought was very encouraging, is the strategy that the US is adapting, certainly in the case of the fraud or alleged fraud in Mozambique is they’re targeting individuals as opposed to going after the institutions because I think historically, what has happened is there’s been… The authorities would go after whatever Western-based institution is involved, and there’ll be a fine, and there’ll be promises of future better governance that you know just keeps happening over and over again.
So, perhaps if individuals are finding themselves in jail, on Rikers Island or wherever they may be, hopefully that’s going to clarify minds and get individual employees of these institutions to start making better decisions because certainly, simply applying a relatively small fine to the banks involved has historically, not really done the job. But speaking of individuals who have been seeing some consequences lately, let’s quickly touch on our good friend, Elon Musk, a CEO of Tesla who had some unfortunate announcements this week saying, he’s looking ahead to a very difficult period and that Tesla is going to be shedding about three-thousand employees.
Elon, he continues to surprise, doesn’t he? He kind of goes out there, gives certain statements that he’s being having to retract almost continuously, but what surprises me is that the share price is still $300.00 whereas you would think if you didn’t have the charisma of Elon Musk there, and this was another company bringing out these types of statements, the share price would probably be half of where it is. So, if you want to be generous, he seems to be the super optimist. He just is an entrepreneur and all entrepreneurs have to be optimistic and he wears his heart on his sleeve. He says, ‘this is what we’re going to do’ and ‘this is what we’re hoping to do,’ and people take it as gospel. He perhaps needs that dose of realism, which seems to be coming now. Remember, we’ve got a new chairman in place. We’ve got a couple of really good non-executive directors, including Larry Ellison from Oracle, who’ve played this game many times before and they would be giving Elon advice, presumably, which he’s now taking.
If you read Isaacson’s biography on Steve Jobs, he talks continuously about the alternate reality that Jobs lived in. It was a different world that he lived in. Elon Musk seems to also live in an alternative world to the rest of us, which can work in many cases because he has built this unbelievable company in electric cars. He’s also done a similar think in disrupting and transforming the whole space industry but by the same token, in a real world where people put the USD behind you, you need to be more connected to what’s going on there. Perhaps now, with this change at Tesla, with the introduction of people like Ellison, you will get a combination or a combining of the two and get the best of both.
Tesla’s share price took a big knock again this week, but remember it was at $350.00. And in September before the market crashed, it was also at $350.00 so, it recovered all of those losses. Whereas, most other companies, if you look at Amazon at $1.600k a share, it was over $2.000k. Apple was over $200.00 a share, it’s now $150.00-odd. So, somehow Tesla has managed to shake off everything thrown at it and this part week, with these announcements, which could have been terminal, but certainly very destructive to other companies. Sure, it’s gone a little bit backwards but no big deal. Musk is in charge, he’s still running the company, he’s still got his plans, he’s still got his fans and we sit on the side-lines and watch the circus.
