They profited from loans and kickbacks from overpriced services and equipment saddling Mozambique, one of the world’s poorest states, with debts of over $2b. The scandal, which dates back to 2013-14, triggered Mozambique’s financial crisis, from which it is yet to recover.
Chang has been sitting in a South African gaol since he was arrested in December 2018 at a Johannesburg Airport following a US extradition warrant. He had been en route to Dubai. Now he is trapped between the competing demands of the US justice system – where he is charged with money laundering and fraud – and Mozambique’s state prosecutors who say they want him to stand trial for grand corruption.
This case is just one of the many surrounding the tuna bonds scandal that has been linked to the ruling FRELIMO party and that involves ex-President Armando Guebuza and his son, the Franco-Lebanese Privinvest shipbuilding company Credit Suisse and Russia’s VTB bank.
$200m in form of kickbacks
In 2019, US prosecutors set the ball rolling by charging three bankers from Credit Suisse – which is quoted on the New York exchange – alongside several Mozambican officials including Chang.
They also charged Jean Boustani, an aide to Privinvest managing director Iskandar Safa, with fraud and accused him of being ‘the mastermind’ behind a scheme that extracted $200m in form of kickbacks for loans from the tuna bond projects. Privinvest, said the US prosecutors, sold “wildly overvalued” ships and maritime surveillance equipment to Mozambique.
Chang’s rights to a fair trial are being impeded as everyone has a right to have his or her case heard by an independent and impartial tribunal within a reasonable time.
With well-resourced US prosecutors, the case was meant to show how corporate executives and politicians, running complex trans-national frauds, could be brought to justice. But it has faltered badly.
Credit Suisse banker Andrew Pearse pleaded guilty to committing wire transfer fraud and his colleague Detelena Subeva pleaded guilty to one count of laundering funds.
Pearse named Privinvest’s Iskandar Safa as central to the bribe and kickback scheme, but US prosecutors failed to prove their case against Boustani, the company’s leading official in the court.
The jury in New York acquitted Boustani on all counts of fraud and money laundering: it decided that whatever Privinvest’s role in the tune bond scandal had been, it did not involve defrauding US investors. Boustani repeatedly told the court that the tuna bond project was a “crown jewel” given to Mozambique by Privinvest.
State officers involved in the scandal
Mozambique’s government now sees things differently having launched a civil case in London for compensation against Safa and Credit Suisse – which is experiencing unexpected outcomes. Mozambique says it should not repay the loans to Credit Suisse and Privinvest because they were illegal and drawn up as part of a corrupt scheme.
In turn, Credit Suisse and Privinvest joined former President Armando Guebuza to the case. Their lawyers argue that the position of the Mozambique government – blaming Credit Suisse and Privinvest for the corruption – is not genuine as there is no action being taken against officials in Maputo.
That’s not entirely true, however, as Guebueza’s eldest son, Ndambi, has been also been named in the scandal and held in a Maputo gaol along with 17 senior members of Frelimo since February 2019. The government’s position is that Ndambi Guebuza, ex-Finance Minister Chang and FRELIMO were the only state officers involved in the scandal.
But Credit Suisse and Privinvest have named current President Filipe Nyusi – who was defence minister when the tuna bond and security loans were approved – and ex-President Guebuza as prime movers of the project.
They are also counter-claiming against Mozambique for ‘breach of contract’ for refusing to repay debts linked to the project. Credit Suisse and Privinvest may be hoping that this will persuade Maputo to settle or abandon the suit against them.
Scapegoat for scandal
Whatever the next move is in the case, the role of Manuel Chang is critical. The US prosecutors want to extradite him for trial in New York, perhaps hoping for a plea bargain deal to hand over evidence and testify against the top corporate officials and politicians in the case.
But the Mozambique government wants Chang back in Maputo where it seems he would be made the main scapegoat for the tuna bond scandal. Meanwhile, Chang is in limbo. In May 2019, Michael Masutha, who was temporarily running the justice ministry in South Africa, overturned a local court’s approval of Chang’s extradition to the US.
African states need to adopt African solutions to African problems, in recognition that corruption has done almost irreparable harm to development.
His successor Ronald Lamola, the minister of justice – one of the rising stars in the African National Congress – is under pressure to resolve the issue quickly. For Chang, both options – a trial in the US or Maputo – look bad.
“Chang’s rights to a fair trial are being impeded as everyone has a right to have his or her case heard by an independent and impartial tribunal within a reasonable time,” says Arnold Tsunga Country Director NDI and Chairman of the Southern Africa Human Rights Defenders Network (SAHRDN).
Complicity between governments
South Africa has to act in the case, according to Tsunga, otherwise it will face accusations of endorsing impunity in grand corruption cases. This would be highly contentious as President Cyril Ramaphosa’s government is currently trying to bolster its credentials on local corruption cases.
“South Africa needs to lead by example,” says Tsunga. “It should demonstrate its resolve in fighting corruption, demanding transparency, and holding public officers accountable for the resources of the sovereign people.”
South Africa’s decision on Chang’s fate will test its relations both with the FRELIMO government and the US.
Some believe that Chang is being protected in South Africa because of the strong links between FRELIMO and the ANC. “This is plausible as the two governments are run by former liberation movements … [they] have bonds that go back to the struggles and it is very possible that [these] may come in the way of justice in the hidden debts matter … if Chang falls, then there could be implications on the FRELIMO government,” says Tsunga
Neither FRELIMO spokesperson Caifadine Manasse nor the ANC spokesperson Pule Mabe responded to questions from the The Africa Report.
Director of the Centro Para Democracia e Desenvolvimento, in Mozambique, Professor Adriano Nuvunga says there was “complicity between the Mozambican and the South African governments” in the handling of Chang’s case. “We think this is being given more importance than the rule of law,” says Nuvunga.
What is the US really after?
Yet Washington’s attempt to extradite Chang does not reflect “whether the US is pursuing the rule of law or exerting leverage in pursuit of foreign policy goals,” says Dave Benjamin, associate professor of development at the University of Bridgeport.
“The indictment issued by the US Department of Justice is predicated on a crime allegedly having occurred in the United States through the US banking system. However, the material elements of the alleged crime did not occur in the US, and this is somewhat troubling,” he tells The Africa Report.
READ MORE Mozambique: the anatomy of corruption
But the Mozambique government’s request for extradition looks more like a response to the US indictment and less about ensuring a fair trial in Maputo and full accountability in the tuna bond scandal.
Maputo’s indictment speaks to the far greater cause for concern, says Benjamin: “The impact of corruption – by those who hold public office – on development in the Global South.” Chang’s extradition to Mozambique “would almost certainly not be for the purpose of the exercise of the rule of law.”
South Africa’s decision on Chang’s fate will test its relations both with the FRELIMO government and the US. It would probably be President Ramaphosa’s preference to leave it to the courts to make an independent ruling on the matter. But that will be problematic after the justice ministry overturned the court’s ruling in favour of extradition to the US.
Benjamin argues the African Union should be doing much more to fight corruption. “This involves including the legal fraternity and civil society in a joint-effort to hold governments and their associates accountable.”
“It also means African states adopting rigorous, even draconian anti-corruption laws. African states need to adopt African solutions to African problems, in recognition that corruption has done almost irreparable harm to development,” he says.
Understand Africa's tomorrow... today
We believe that Africa is poorly represented, and badly under-estimated. Beyond the vast opportunity manifest in African markets, we highlight people who make a difference; leaders turning the tide, youth driving change, and an indefatigable business community. That is what we believe will change the continent, and that is what we report on. With hard-hitting investigations, innovative analysis and deep dives into countries and sectors, The Africa Report delivers the insight you need.View subscription options