February 3, 2021

Africa

MOZAMBIQUE: Debt court case backfires against president

BY Anne Frühauf

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( 4 mins)
  • While accountability in Mozambique’s infamous USD 2bn debt scandals has been elusive for years, for the first time President Filipe Nyusi has been directly linked to the scandals in an ongoing court case in London.
  • Even if the legal ramifications will likely be very limited for now, politically the revelations could weaken Nyusi in the remainder of his second term in office.

The London civil case was brought by Mozambique’s Attorney-General Beatriz Buchili in an attempt to nullify the country’s own controversial government guarantee for the USD 622mn ProIndicus loan – arranged by Credit Suisse and with Privinvest, the controversial Abu Dhabi-based shipbuilding company, as contractor – on the grounds that the loan represented a “fraudulent scheme”. However, the attempt to dodge legal liability for the debt might have backfired as Privinvest founder Iskander Safa has now revealed in court documents that it made payments worth USD 1mn to Nyusi (at the time presidential candidate) and ruling party Frelimo in 2014. The company also provided a Toyota for his presidential campaign.

While the Mozambican authorities have only investigated the scandals reluctantly and at a glacial pace in recent years, court cases both in the UK and in the US have implicated key Frelimo luminaries. In September 2020, Credit Suisse named ex-president Armando Guebuza as a third party in the UK case. Ex-finance minister Manuel Chang has been in prison in South Africa for more than two years while awaiting a decision on whether he will be extradited to the US or Mozambique. Safa has admitted to paying Chang USD 7mn. Privinvest claims neither the USD 1mn payment to Nyusi nor the USD 7mn to Chang were bribes but rather campaign donations permitted under Mozambican law. The company filings claim that if the payments to Chang were bribes, then those to Nyusi would also constitute bribes. “Nyusi himself received and/or benefited from payments made by Privinvest, with the consequence that it is dishonest and/or misleading to now present them as bribes unless the republic is to suggest that the payments to President Nyusi were also bribes.”

Court filings further claim that Nyusi in his capacity as defense minister was “at the very center” of the deal and involved in the project’s conception, and goods and services procured. According to Safa, it was Nyusi who instructed Chang to sign the loan guarantee (an assertion that Chang has made repeatedly).

Nyusi’s spokesperson has aggressively defended the president claiming there was nothing unlawful about the donations. Perhaps the presidency expects that the news will blow over, particularly if the legal consequences end up being limited while he remains in office.

However, even if Nyusi’s involvement may have been a badly kept secret in Maputo all along, direct payments to him becoming a matter of court record may change the equation for various stakeholders. Within Frelimo, the political fallout for Nyusi could begin to render him a lame duck president ahead of elections in 2024. Although the succession race has yet to get under way, Frelimo might face a greater impetus to search for a fresh, untainted candidate, and may undermine Nyusi’s ability to anoint a candidate. Having tried to push the blame solely onto Guebuza, Nyusi could face a fightback. The next Frelimo Central Committee meeting will almost certainly be heated.

For aid partners, it may become harder to restore relations that nosedived in 2016 in the wake of the debt scandal. While a new crop of diplomats in Maputo is keen to look ahead, improving relations – and increasing aid budgets, even if it is program aid rather than direct budget support – may now become harder to justify. Even the IMF, which has been building up to an eventual reengagement since it suspended its program in 2016, might feel less urgency to pursue talks around fresh financing program (though Maputo’s own appetite for non-emergency financing has also been in doubt). Lastly, for LNG developers, the revelations signal reputational risk but probably not be a game changer. Yet the medium-term outlook for first LNG production has already deteriorated markedly over market uncertainty and insurgency threats.

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