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Biggest financial scandal in Mozambique's history proceeds to trial

A screenshot of Televisão de Mozambique's broadcast of the “Hidden Debts” trial. Source: YouTube — August 2021

Mozambique's “Hidden Debts” trial, the biggest financial and corruption scandal the country has ever known, began August 20, 2021.

There are 19 defendants on trial, including former President of the Republic Armando Guebuza's son, Ndambi Guebuza. The charges include influence peddling, passive corruption, money laundering, embezzlement, abuse of office or function, forgery of documents, and association to delinquency. 

The corruption started during Guebuza's term, 2004–2014. At the time, some officials secretly contracted over 2 billion US dollars in debt. Neither the parliament nor Mozambique's official financial entities were aware of the transactions.

The case was reported through foreign news portals such as The Wall Street Journal in April 2016. According to investigations, those involved range from the former finance minister to Armando Guebuza's son, as well as members of the Mozambique secret service.

Because of the scandal, many of Mozambique's cooperation partners, including the International Monetary Fund. suspended support for the state's budget.

According to Deutsche Welle, a study published in May 2021 indicates that the hidden debts have reduced democratic activity and created authoritarianism in Mozambique, with the education sector being affected the most.

 

About two million Mozambicans were pushed into absolute poverty from 2016–2019 due to the hidden debts, as revealed in a study by the Public Integrity Center (CIP).

The study also indicates that with the direct costs of the debt — estimated at 674.2 million US dollars — 56,000 classrooms and 898 health centers could have been built.

According to research entitled “Costs and Consequences of Hidden Debts for Mozambique,” through the direct costs alone, each Mozambican citizen paid 159 US dollars (about 10 thousand Mozambican meticals) to support the debt between 2016–2019.

Hidden debts: the beginning of the investigation

The debts were contracted between 2013–2014 with the British branches of investment banks Credit Suisse and VTB by Mozambican state companies Proindicus, EMATUM (Empresa Moçambicana de Atum), and Mozambique Assets Management (MAM). These loans were secretly endorsed by the Government, led at the time by Armando Guebuza, without the approval of the Parliament or the Administrative Court.

To better understand the case, in 2015, the Government of Mozambique and its partners carried out an audit conducted by the governance and risk assessment firm Kroll to ascertain what had actually happened. The 64-page report provides detailed explanations after an investigation into the debts incurred by the companies EMATUM, Proindicus, and MAM.

The document showed that there were discrepancies in the prices of the goods and services delivered, stating that there are still gaps in exactly how the 2 billion dollars were spent, despite considerable efforts to remedy these gaps.

Kroll, according to the report, was unable to carry out any form of reliable valuation of the goods and services supplied by the contracted companies due to the scope of three supply contracts.

The judgment and reaction of Mozambicans

In addition to the trial that is currently underway, the Mozambican Justice Department has opened an autonomous case investigating several people suspected of participating in the scheme. This includes former finance minister Manuel Chang, former directors of the Banco de Moçambique, and former executives of Credit Suisse — the banking institution that made the loans feasible.

Chang has been accused of approving loans that are illegal according to Mozabiquan law and hiding them from other cabinet members. He has been detained in South Africa for over two and a half years at the request of the United States. He has been indicted in the US for defrauding US investors. Officials are still debating whether to extradite Chang to Mozambique or the US.

The trial of the #hiddendebts case began a little after 9:00 am. Almost 1 hour passed and the judge, MP and lawyers present previous points. The focus is on the pre-trial detention deadlines, as well as the release of members of the secret services to be free pending trial.

— Alexandre (@AllexandreMZ) August 23, 2021

As for Ndambi Guebuza, the eldest son of the former President of Mozambique, denies receiving bribe money, and his lawyer claims that his detention is illegal. According to a report from the Observador, based on the uncovered scheme, Armando Guebuza's son would have received 33 million dollars in bribes to influence his father to approve a coastal protection project which was used as a pretext for the massive 2.2 billion dollar loan.

During the first few days of the trial, one of the defendants shared a revelation involving the current President of the Republic, Filipe Nyusi, claiming that he approved the maritime protection project at the center of the loans when he was minister of the National Defense.

Since the trial started, it has provoked widespread debate about the fairness of the trial and the lack of independence within Mozambique's Justice Department. The Center for Public Integrity called the trial itself a victory for the country.

The judgment of the hidden debts case:
– A victory for the CIP in the fight against corruption
Read the full text: https://t.co/yQMaZZasu8

— CIP-Mozambique (@CIPMoz) August 23, 2021

But not everyone is so optimistic. Some assert that powerful people and their families — such as the former President's son — unfairly benefit from Mozambique's laws and governance structure.

Upon hearing what is being said in the judgment of #HiddenDebts, society should question the rights of the children of the presidents, on account of the protection they have as if they were the children of kings. It hurts all of us who pay taxes.

— RAFAEL MACHALELA (@rafaelmachalela) August 31, 2021

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