Over the past two years, the dizzying escalation of Mozambique's maritime security and hidden debt controversy has lent itself very well to dramatization in the press.
Traditional fishing boats sail as Mozambique’s tuna fleet sits in dock beneath Maputo’s skyline in August, 2015
In 2013 the Mozambican government stepped into media limelight after issuing USD850 million in high-yield bonds through state-owned tuna-fishing enterprise EMATUM. Just three years later, in 2016, it announced net-losses at EMATUM and a default on this debt—since most of the loaned money had been channeled into maritime defense purchases and not aquaculture. And, just one month after that, this was overshadowed by an even more shocking announcement: the government had incurred a further USD1.4 billion of hidden debt in loan deals signed unbeknownst to its international funders.
Countless articles relate Mozambique’s fall from grace. The Economist and Financial Times both chart a sorry story of the so-called “African rising star” that became one of the continent’s biggest basket cases. The Wall Street Journal, similarly, paints Mozambique as the poster boy for why not to invest in any of the world’s riskiest economies.
And all these cautionary tales are full of fish-related puns, as plentiful as the tuna uncaught by the fictional nets of EMATUM.
However, regardless of what you do with them, the facts remain the same, and the outlook for Mozambique appears pretty gloomy. The World Bank’s biannual Africa Pulse report put it bluntly last week, reminding audiences that the discovery of hidden debt—now believed to amount to over USD2 billion—has derailed Mozambique’s growth, leading to the “rapid deterioration” of the economy.
In the wake of the debt revelation, 14 donors suspended disbursements that had been contributing to the national budget. The funding agencies are expected to withhold their support until the ins and outs of the affair have been fully unearthed by Kroll, the US firm hired to investigate the case. Pre-scandal GDP growth rates had held steady at 7% YoY since the early 2000s, but these fell to just 4.7% after the hidden debt bombshell. Mozambique’s credit rating was slashed from B- to CCC, while the metical continued to depreciate over the course of 2016. Government reserves halved during this period, and annual inflation now stands at over 20%. Last week’s reports show that minimum wage has fallen below USD60 per month, the lowest it has been in over a decade.
To sum it all up, on April 10, 2017, the Bank of Mozambique released a statement saying: “the outlook continues to be negatively affected by weak domestic demand, sustained by lower consumption and investment, as well as by less favorable financing conditions for the economy.”
Apart from such dire forecasts, this month has also heralded three new developments. Firstly, the government elected to retrospectively include the EMATUM loan, along with two other disputed loans, in its 2015 budget statement. This move has induced heated speculation as to whether this means the government intends to pay back the money owed or not. Further confusion has been generated by the fact that the government is repeatedly failing to provide investigators with necessary documentation.
Meanwhile, one of President Nyusi’s closest allies, Land, Environment and Rural Development Minister Celso Correia, has been pushing for an extension of the logging ban implemented in March 2017. The ban represents an attempt by the government to reduce illegal activity in the sector, which translates into a loss of approximately USD200 million per year for the country. The Environmental Investigation Agency (EIA) revealed in 2013 that 93% of Mozambique’s logging trade was illegitimate, with illegal exports mostly destined for China. Since the ban began, a whopping 153,000cbm of wood have been seized by the government.
These two apparently unconnected developments may well be linked. A public admission of the fact that these loans exist, coupled with an outright crackdown on corruption in state-driven sectors of the economy, could be part of the government’s genuine determination to reinstate investor confidence.
On the other hand, these events might constitute nothing more than well-orchestrated smokescreen to hide the involvement of officials in the debt scandal.
Just two weeks ago, the news service Canal de Moçambique (CanalMoz) leaked documents that implicate President Nyusi in the controversy surrounding the bond release. A 2014 contract and letter signed by the President and addressed to then Finance Minister Manuel Chang, awarding a concession to provide maritime security to ProIndicus, one of the two other state-owned enterprises involved in the original scandal of 2013, were published on Facebook.
Nyusi’s signature seems to confirm suspicions that he was involved in the clandestine misspending of the borrowed money, though, as Minister of Defence at the time of the deal, there has never been much doubt that he was party to the illicit purchasing of security equipment that equated to roughly 25% of the national budget.
Critics of the recently enforced logging ban also wonder why there is a need for this kind of systems overhaul at all. Economic and political analyst Moisés Mabunda maintains: “it is not in all countries that you hear about such governmental campaigns against corruption. The logging ban represents a necessary and profound reflection on the way in which our state functions.”
Mabunda’s comments highlight that, despite the President’s apparent attempts to show his government’s newfound commitment to accountability, there are in fact two kinds of illegal logging going on in Mozambique. And, moreover, despite Kroll’s best efforts to date, the burning question of where the money ended up, thanks to the government’s diversion tactics, remains unanswered.