Does Corruption in Mozambique Follow the Pattern?

By Eugen Iladi

The world has seen this pattern before. Rich bankers take advantage of a developing nation, providing it loans it doesn’t need and then skimming some of the proceeds for themselves.

Accusations like these are swirling in Mozambique. Credit Suisse employees have been charged with crimes related to the financing of ships and systems for the southeastern African nation. The systems aren’t working and the country is in default on $2 billion in loans.

That situation sounds familiar, but it requires selective amnesia to fit it all neatly into the usual pattern. While parts of the transactions might have been questionable, there is evidence that Mozambique bought and received equipment and systems that it really needed and, in fact, still needs. It is reasonable to question whether Mozambique took advantage of the benefits it received.

The story starts in 2010. The government decided, based on its intelligence service findings and endorsed by the World Bank, that Mozambique needed to build a modern fishing fleet and a coastal monitoring and surveillance security system to control its offshore Exclusive Economic Zone.

Few questioned this desire. It was widely recognized at the time that the impoverished nation needed to take advantage of its valuable fisheries and its newly discovered, huge offshore oil and gas reserves. Mozambique also needed to protect territorial waters from piracy, illegal fishing, and drug and arms traffickers, not to mention terrorists.

To advance these goals, the Mozambican government set up state-owned enterprises to purchase and operate the necessary tools. After receiving multiple offers from companies to provide the systems and equipment, the Mozambican companies chose Privinvest Group. This also wasn’t a surprise. Privinvest, a leading shipbuilder with yards in Germany, France, and the Middle East, had and still has a reputation for reliability. It has built ships for 40 navies around the world.

Mozambican officials contracted the company to design and build an integrated maritime system, including naval patrol and tuna-fishing vessels, patrol aircraft, satellite coverage and related equipment, maintenance, and training. Mozambique also asked for and received technology and intellectual property so that its citizens could maintain and build ships for themselves and their neighbors as an ongoing business.

Was this too much for the developing nation to absorb and use? Should it never have been so ambitious? Did Mozambique order a seafaring program that it didn’t really need? Looking back, it would seem so. But at the time, the effort made perfect sense.

Mozambique was seriously talked about then as the next Qatar in energy resources, with a fishery that needed only protection to produce huge profits.

The government and the International Monetary Fund wrote or talked publicly about the loans. The projects were celebrated with public ceremonies in France and a parade in Maputo, Mozambique’s capital.

Privinvest delivered 65 vessels and a range of systems and services. Credit Suisse, which gave the project financing a green light after a thorough vetting, did an audit and verified that the ships and systems had been delivered.

Then the problems began.

Privinvest tried to operationalize its deliveries by providing training and other services, but the Mozambicans didn’t respond well. Eventually, they all but abandoned the effort. Ships and radar systems sit unused to this day.

Worse, Mozambique didn’t pay its bills. The main reason: Oil and gas prices plummeted. What had looked like a sure bet on a steady source of money became an impossible dream. Mozambique ultimately defaulted on $2 billion in loans for the projects and was accused of hiding most of the debt from the IMF, which suspended its assistance to the country.

The deal now looks tainted, and some of it probably was. Charges have been filed in New York and Mozambique against a range of people, including two Privinvest employees (who deny the charges) and Mozambique’s former finance minister. Litigation is likely on three continents. In the end, someone will bear the blame.

But until the bottom fell out of commodity prices, people forget that Mozambique was genuinely on the rise. It was seen as a place with a real chance to end decades of stagnation and poverty with petro-wealth and boundless fisheries. All it needed was a way to protect its good fortune.

Who knows? In the end, the story of Mozambique’s unused navy might fit the pattern of a developing nation being taken advantage of. But a little history lesson raises legitimate questions about that.

Eugen Iladi is a freelance reporter based in Virginia who covers politics, conflict, business and development in emerging markets. The views expressed are the author’s own.

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