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Mozambique’s hidden debt scandal: Where did the $2bn go?

By Marie Toulemonde
Posted on Friday, 22 October 2021 08:45

Mozambique’s “hidden debt” scandal is one of the biggest corruption scandals on the continent and involves some of the highest-ranking government officials. This case, part of which is currently at the centre of a resounding trial in Maputo, is particularly complex.

In 2016, Mozambique realised it was facing the biggest corruption scandal it had ever known. Now, five years later, the trial has finally opened in Maputo. Since 23 August, the 19 Mozambican defendants – including the son of the former president, Armando Ndambi Guebuza – have appeared before Judge Efigenio Baptista. The latter is presiding over the hearings, which are due to be held until 2 December at a prison in the capital. Filipe Nyusi, the current president, who was minister of defence at the time of the events, is cited by several of the accused as a key figure in the case. However, he will not appear before the court and continues to deny any involvement.

The scandal has plunged the country into an unprecedented financial crisis. It was caused by three Mozambican companies that secretly and illegally took out a loan of more than $2bn – $2.7bn, which was guaranteed by the state, according to the Maputo judicial court.

The money, which was paid between 2012 and 2013, was supposed to be used to finance a vast shipbuilding, fishing and maritime surveillance project headed by the French construction company CMN (Constructions Mécaniques de Normandie), owned by the Lebanese group Privinvest Holdings.

Pot of roses

By 2015, the house of cards had started collapsing as one revelation followed another. Parliament, which was supposed to guarantee the loan, was never consulted. The project, which was supposed to be development-oriented, was in fact mainly military-based. The companies were never fully operational and over $713m in overbilling has been identified.

This was a complex set-up designed to feed a sprawling corruption system in which some of the most senior figures within the circles of power are involved. In addition to three Swiss bankers and a Lebanese intermediary, some 15 very senior Mozambican officials are suspected of having shared more than $200m in bribes.

The country’s economy, which was already in a state of collapse, is suffering. The direct and indirect consequences of this fraud have already cost $11bn, or $400 per capita – the equivalent of 70% of GDP in 2019 – according to the Chr. Michelsen Institute, a Norwegian organisation, which estimates that more than 2 million Mozambicans have been plunged into poverty.

What planning went into this scheme? Who are the main alleged beneficiaries of this large-scale corruption scheme? What were the economic consequences of this scandal?

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