TheEconomistAugust 24th 2019 271T
he latestexhibition by Nelsa Guambe,
an artist from Mozambique, is a start-
ling chronicle of her country’s predica-
ment. Strange faces stare from a collage of
newspaper headlines about corruption.
“Sharks of Maputo”, reads a clipping pasted
onto the tie of an unnamed government
minister. A grotesque beast—captioned
“the monster of the West”—looms over a
city, grasping at a shoal of fish.
The inspiration for these jarring images
is a colossal debt scandal, which has sunk
Mozambique’s economy and rocked its po-
litical elite. Between 2013 and 2014 three
state-backed companies took on more than
$2bn of questionable debt, guaranteed by
the government (equivalent to about 13% of
gdp). Some $1.2bn of it was borrowed in se-
cret, behind the backs of parliament and
the public. The hidden loans were revealed
in 2016, but only now is justice catching up
with the alleged conspirators, who are ac-
cused of pocketing millions. A string of
court cases this year has drawn in a billion-
aire shipbuilder, a trio of ex-Credit Suisse
bankers and a former finance minister.
The context for the three deals was that
interest rates in the rich world were low. In-
vestors could find better returns in Mo-
zambique, where huge natural-gas re-
serves had been found offshore. A plan
evolved across three continents. In Mo-
zambique a clique of officials created three
companies, ostensibly to build shipyards,
police the coast and catch tuna. They
bought trawlers and patrol boats from Pri-
vinvest, a shipbuilder headquartered in
Abu Dhabi. The purchases were paid for
with loans arranged by Credit Suisse, vtb
and bnpParibas, three European banks.Fishy business
Only one of the deals was made public: an
$850m loan for a fishing fleet. The loan was
chopped up and sold on to investors. In
2016 the government agreed with investors
to swap this “tuna debt” for a conventional
bond, issued directly by the state. At the
time it said little about the other, secret
loans—but admitted their existence weeks
later. Foreign donors were horrified, and
stopped contributing to the budget. The
imfpacked its bags. Mozambique’s curren-
cy lost more than a third of its value againstthe dollar in six months. Inflation surged
and the central bank hiked interest rates.
Growth collapsed. The companies made no
profit; the trawlers caught few fish.
Uncovering the alleged corruption has
been difficult. The same party that oversaw
the scandal is still in power. President Fi-
lipe Nyusi was, until 2014, head of the de-
fence ministry, which had links to the
tainted companies. An audit of the loans,
funded by the Swedish embassy and pub-
lished in 2017, complained that it had not
been given access to relevant documents
and was unable to trace $500m in bor-
rowed funds. Debt campaigners say that
their phones are tapped, their houses bro-
ken into and their meetings spied on.
Pressure has come from the American
Department of Justice, which dug into sus-
picious payments wired through American
banks. Last December it filed an indict-
ment charging eight people with crimes re-
lating to bribery, wire fraud and money-
laundering. The conspirators created the
maritime projects, it alleges, “as fronts to
raise money to enrich themselves”. The
companies bought equipment from Privin-
vest at vastly inflated prices, it claims. In
return, say prosecutors, Privinvest di-
verted more than $200m into bribes and
kickbacks, including over $150m to Mo-
zambican officials and some $50m to the
bankers who arranged the loans.
The indictment touches three points of
a triangle. First, it names the three ex-Cred-
it Suisse bankers: Andrew Pearse, Detelina
Subeva and Surjan Singh. It says that theyCorruption in Mozambique
The net tightens
MAPUTO
A $2bn loan scandal sank Mozambique’s economy. Justice is finally catching up
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