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Mozambique’s tangled web of debt

By Tom Bowker and Alexandre Nhampossa in Maputo
Posted on Thursday, 16 June 2016 08:07

The discovery in April of two state-guaranteed loans worth more than $1bn, taken out by shadowy companies linked to the intelligence services, has triggered an economic and political crisis unprecedented since peace and democracy returned to Mozambique in the early 1990s.

the Frelimo government must be obliged to tell the whole truth about its hidden practices

The newly discovered loans mean the government of Armando Guebuza approved more than $2bn in secret guarantees for companies set up by the intelligence services and the defence ministry, including the controversial Empresa Moçambicana de Atum (Ematum) deal, whose $850m loan came to light in 2013.

The disclosure of the massive borrowing has led to the International Monetary Fund (IMF) and Western donors cutting off aid even while Mozambique is facing an economic crisis that is not so much of its own making.

Falling commodity prices have hit revenue from exports – coal, aluminium, gas – but perhaps more importantly also the value of future projects, in particular offshore gas developments in the north of the country.

Within the country, however, there is little doubt that blame for the severity of the overall situation lies with the government, still led by the former liberation movement, the Frente de Libertação de Moçambique (Frelimo). And even within Frelimo, recriminations are flying, leading some to wonder whether the party’s unity might not survive this crisis.

Former president Guebuza is widely held to be the key figure responsible for the troublesome debts. But the question being asked is whether he and a circle of accomplices can and will be held to account.

The first signs of cracks came when the government, forced by the IMF to come clean about the scale of the debts, emphasised that they were taken out by the previous administration – that is, before Guebuza handed over power to President Filipe Nyusi in January 2015.

Nyusi was defence minister during Guebuza’s second term, the time when this dodgy defence procurement was carried out. Questions are being asked about his role. But since a press conference on 28 April –when prime minister Carlos Agostinho do Rosário, fisheries minister Agostinho Mondlane and visibly chastened finance minister Adriano Maleiane offered clarifications about the scale of the debt to the public – the government has largely gone quiet on the issue.

Ministers sit tight

Jorge Matine, a researcher at public transparency watchdog Centro de Integridade Pública, says the press conference “was important, but offered no guarantees that there is a need for further clarifications to the public about the details of the debt and what are the consequences for society.”

Moreover, expected reshuffles in government have not materialised. Despite a disastrous trip to Washington DC by finance minister Maleiane, where IMF sources say he repeatedly lied to them, he remains in his position – as does the governor of the central bank, who also denies prior knowledge of the loans.

Guebuza retains the leadership of a powerful faction within the ruling party – particularly inside the political commission, the 18-strong steering committee from which Nyusi and his government are supposed to take their cues.

There is also little precedent for internal ruptures in Frelimo, according to Fernando Lima, founder and chairman of Mozambique’s oldest independent media house, Media-coop. He says the only time anything like that has happened was “when a number of historical Frelimo cadres were accused of planning a plot against President [Joaquim] Chissano in the 1980s.” This case is not similar, he says: “At this juncture, it will be very hard to see the names the people are mentioning publicly exposed as responsible.”

There are conflicting views on how to deal with the debt scandal within the ruling party, Lima says. “There is an ‘ethical side’ of Frelimo asking for the whole issue to be cleared, including people held responsible to be brought to justice,” he says. But “in general, these are prominent figureheads with no responsibilities in government.”

Among the ‘ethical figureheads,’ perhaps the most prominent is Sérgio Vieira, a former security minister and central bank governor who called the deals a “crime against the country” in his regular television show in early May.

Vieira is increasingly outspoken about corrupt deals and as a result has come in for a number of attacks in Frelimo-owned media. One line of attack is to claim that his son was a bodyguard for apartheid-era South African military chief Magnus Malan. Another is that he stole gold from the central bank while he was governor. He strenuously denies both accusations – neither of which have been made with any supporting evidence.

But while these respected members of the old guard wield no real power, members of the current government who also want to see the guilty parties held responsible “do not have the same ability and power to express themselves in public,” Lima says.

Ultimately, Lima says: “I am very sceptical that leading figures within Frelimo or the former government will be held responsible. However it should be noted that international partners of Mozambique are increasing their pressure in order for individuals to be presented as responsible for the debt, and they have significant leverage at this point.”

Before the April revelations, the government already had to reschedule its Ematum payments because it could not come up with the cash. The other loans were uncovered before the bulk of this year’s general budget support (GBS) was disbursed.

Sources say that the 2016 GBS was due to total around $250m, of which only a very small amount had been paid out by the end of March. Now, the group of 14 GBS donors have agreed to freeze disbursements. Some have also frozen sectoral support that is channelled through the government.

For Shawn Barber, Canada’s high commissioner to Mozambique, the revelations about the hidden debt have been “one big punch to the stomach” towards the end of his three-year stint in Maputo. He says donors “want to see a level of accountability for whoever was involved in these transactions”. They are also demanding transparency and democratic accountability. He adds: “Not just we, but the people of Mozambique, need to understand who it was that authorised these clandestine loans; who it was who made the decision to keep them hidden from public and parliament scrutiny; and where did the money go?”

Barber has the sympathy of Ivone Soares, the leader of the Resistência Nacional Moçambicana (Renamo)’s parliamentary bloc and the niece of party leader Afonso Dhlakama. For her, “the Frelimo government must be obliged to tell the whole truth about its hidden practices, return all the funds that were used for impermissible ends and its leaders must be held criminally responsible for impoverishing the country and the people.”

Call for demonstrations

Renamo is calling for people to take to the streets but may need to coordinate its call for demonstrations with other organisations. A rumoured general strike and unofficial demonstrations failed to materialise on 29 April – although the police and military took to Maputo’s streets with an impressive show of force just in case. The no-show by demonstrators has been put down mainly to a lack of coordination, with no organisation publicly taking responsibility for calling the demo.

Another issue the opposition has had to contend with is the complex nature of the scandal for most Mozambicans, but the crisis is now making itself felt on the streets. The donor and IMF freeze means that the government is reining in public sector spending and there are questions over how much longer the central bank can hold the exchange rate even at its current level after it fell by 50% against the dollar in the second half of 2015.

Now, two smaller opposition parties have called for a popular demonstration in Maputo on 21 May. It remains to be seen what traction they will gain from other civil society groups and the main political opposition. But if it is co-opted by Renamo and the other main opposition party – the Movimento Democrático de Moçambique – the demonstration could be big, and potentially enough to shake Nyusi out of inaction. Mozambique is holding its breath. ●