African countries need to watch the conclusion of the case regarding the secret loans to Mozambique Asset Management (MAM) and Proindicus. It probably has implications for how they could deal with debts incurred by corrupt politicians without authorisation.
The Mozambican Constitutional Council recently nullified two loans from 2013, $622 million to Proindicus by Credit Suisse for maritime security and $535m to MAM by state-owned Russian VTB, respectively.
The decision of an over-indebted African country might not count for much (or could) when the London High Court announces its verdict on the case brought before it by VTB to recover the $535m from the government of Mozambique.
The Constitutional Council, in deciding that these loans by the government of President Armando Guebuza were null and void, quoted the fact that a special parliamentary inquiry found they violated the constitution because they were not declared to parliament for authorisation. Simply put, the parliament of Mozambique should not be expected to repay the loans they never knew of.
Besides, three ex-Credit Suisse bankers admitted guilt for handling kickbacks on these loans. That was one of the reasons Guebuza’s Finance and Economy Minister Manuel Chang was arrested in South Africa in 2018, wanted in the US on corruption-related charges.
Proindicus was created under Chang’s watch as a state-owned Mozambican company to exploit Mozambique’s marine resources. The two others, Ematun, was to do tuna fishing, and MAM, had to build and maintain shipyards. Then, an offshore company known as Privinvest, based in Abu Dhabi, obtained a $366m loan from the International Monetary Fund (IMF). From there, other loans and bonds followed - leading us to the current London lawsuit.
How many African countries have been impoverished by debt-servicing costs for loans that were either unauthorised or misappropriated by corrupt politicians and government officials?
As we speak, Covid-19 just dug a deeper hole for indebted regions like East Africa and the rest of the continent. Even President Cyril Ramaphosa’s R500 billion stimulus package is heavily dependent on loans from international development finance institutions such as the IMF and the World Bank. These loans are not cheap, and defaulting countries sometimes lose national assets to creditors.
Reading reports that senior government officials were caught on tape diverting food parcels bought with these funds is an example of how only a tiny fraction of the loans end up doing what they were supposed to do. Even though these loans are not undeclared like the Mozambican loans, members of the public should not have to foot the bill for anything not used for its official purpose. In other instances, politicians accused of corruption further spend public funds to defend themselves in court.
Should the court in London rule in favour of the government of Mozambique, there will be a need for African countries to consider going the same route so that the officials responsible for corruption should increasingly be the ones to repay - not the taxpayer.
* Kgomoeswana is author of Africa is Open for Business, media commentator and public speaker on African business affairs.
** The views expressed here are not necessarily those of Independent Media.