Does Mozambique's 'Hidden Debt' Scandal Hold Up?

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The so-called Mozambique “hidden debt” scandal circulating in the international media with breathless tales of conspiracy and intrigue turns out to be a disappointment in large part because the debts weren’t all that hidden. The “scandal” goes like this: In 2012, Mozambique borrowed $2 billion from global bankers to build a tuna fishing fleet and security system for its vulnerable but valuable coastal waters. Middlemen lined their pockets. Mozambique, overburdened with debt, defaulted. All the while, the International Monetary Fund — ever watchful of client nations like Mozambique with a history of bad debts — professed to be surprised by the $2 billion in “hidden debt.”

The real story is more interesting.   

The Mozambique maritime projects and financing were researched, proposed, planned and covered by the media from the start. For example, it was widely known that Mozambique officials wanted to protect the shoreline, abundant fisheries and newly discovered oil and gas, launch a shipbuilding industry, and protect sovereign waters from pirates, drug smugglers and other maritime criminals in the Indian Ocean. The World Bank endorsed Mozambique’s intentions to strengthen its economy and lift its people out of poverty.

Mozambique authorities reviewed potential suppliers, selected a respected international shipbuilder, vetted and approved the contracts, and sought funding, all in the open. Mozambique’s then-Finance Minister Manuel Chang signed off. The shipbuilder, Privinvest, designed, built and delivered dozens of contracted vessels, systems and equipment.

But amid Mozambique’s many political changes and turmoil, authorities, in the end, abandoned the maritime projects and let the boats and equipment lay idle. Mozambique defaulted on the debt, which is sadly consistent with its history and of many other African nations. The IMF accused Mozambique officials of hiding up to $1 billion of the loans. Charges flew that money went to kickbacks and bribes. So did denials. But in the wake, IMF suspended assistance to Mozambique.

The Mozambique tuna story is a classic mystery hidden in plain sight. The IMF claimed ignorance about the Mozambique projects and debt, even though they were reported globally, from France to Mozambique to the UAE, from the time the first contracts were concluded to when the ships were delivered and points thereafter. 

Like in March 2013, before the first contract was effective, when Mozambique President Armando Guebuza and several Mozambique government ministers paid a visit to the UAE and the shipyard. This was covered by TV networks and other press in both countries.

Or in September 2013 when French President Francois Hollande invited President Guebuza to France to develop business relations between the countries. The leaders visited the CMN shipyard in Cherbourg, selected to build Mozambique’s new fleet, an event that also was announced and widely covered by the TV networks and press of both countries.  

And in September 2014, when Mozambique celebrated its June 25 National Day of independence with a roadshow and display in Maputo, the capital, ships and other equipment supplied for the maritime projects were prominently included. Again, national TV and print press covered the event as officials paraded the vessels through the main streets on trailers and arranged a demonstration in the Mozambique bay for the pleasure of the president, ministers and local dignitaries.   

Mozambican authorities also assigned a site in Maputo as a “showroom” for models of the equipment and hosted foreign dignitaries. The authorities boasted that they could soon build the boats with the intellectual property rights and related technology transfers they had acquired. The showroom was in eyeshot of the World Bank offices in Maputo.

Even Mozambique authorities who filed criminal charges related to the “scandal” made clear that the Mozambique projects were neither secret nor hidden. 

The Mozambique charging document confirms that government officials at the highest levels, including the finance minister and head of state, were involved in and were informed about the transactions. The contracts were arranged by way of publicly disclosed actions. The Mozambique filings specifically name the senior finance officials that signed each of the loans for the contracts and accuses none of the ultimate decision-makers for the projects, including the Mozambique president, central bank governor or defense minister, of any wrongdoing.

When examined closely, the Mozambique “hidden debt” scandal doesn’t hold together.  The IMF certainly didn’t look very hard if it claimed they were secret. Worse, the scandal narrative diverts attention from the important questions: Why did Mozambique borrow $2 billion for a crucial nation-building project that could help its impoverished people and then walk away? Why aren’t more Mozambique officials being held accountable?

Eugen Iladi is a freelance reporter based in Virginia who covers politics, conflict, business and development in emerging markets.

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