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Mozambique's future will depend on how elites deal with its debt crisis


Die vier Präsidenten Mosambiks von 1975 bis heute
A mural at the central hospital in Maputo depicting Mozambique's four presidents since 1975: Samora Machel, Joaquim Chissano, Armando Guebuza, and Filipe Nyusi—all members of the "Frente de Libertação de Moçambique" (FRELIMO). CC BY-SA 2.0, Cornelius Kibelka, via Flickr

Mozambique has been hit by a debt crisis since early 2016, soon becoming the epitome of a failure of the ruling political elite. This was symbolized by the so-called “hidden debts case”, illegal loans involving a two billion US dollar debt contracted by three companies (ProIndicus S.A, Empresa Moçambicana de Atum S.A (EMATUM), and Mozambique Asset Management S.A -MAM). Officially, they were said to have been created to provide the means to protect the state’s sovereignty over its Exclusive Economic Zone (EEZ) and explore the natural resources within it. The arrangers of these hidden loans were Credit Suisse International and the Russian Investment Bank VTB Capital PLC. An independent audit established, among others things, that 500 million of the EMATUM loan simply disappeared. The US also produced an indictment implicating the Mozambican MP and former finance Minister Manuel Chang and several other high-ranking state officials.

This scandal has put Mozambique’s ruling party to a serious test. In January I projected four possible scenarios, two of which I will discuss here. Either Mozambique will confirm its recent classification as an authoritarian state (Scenario 1) or the regime will try to stage some “progress” in the criminal investigation of the hidden debt case and use it to build up internal party cohesion (Scenario 2).

Following its previous classification as a hybrid regime, the country was classified by the Economist Intelligence Unit as an authoritarian regime. Whereas in my analysis authoritarian practices were a response to domestic and international pressure to resolve this case, for the Economist, Mozambique’s deteriorated classification was triggered by a disputed municipal election in October 2018.  They believed these elections risked destabilizing the peace process between Frelimo and the armed opposition party Renamo. I personally think that this has not yet materialized. Progress in the negotiation process for disarmament, demobilization, and reintegration has taken place and both parties still appear committed to peace.

I argued that, in an effort to protect the political and economic interests of the ruling elite, Frelimo would close Mozambique to the world, making it difficult for international and national media to cover local events particularly associated with the case. I also predicted that Mozambique would oxygenate the G-40 Group (a group of government-appointed commentators to defend the ruling party’s policies and practices) and expand state repressive apparatuses such as the police and the military. These strategies back up my understanding of authoritarian practices.   

A second scenario would be that the ruling party allows some space for the Mozambican Attorney General to “investigate” or even take the “small fish” to court, but leave the “too big to jail” outside—a common practice in countries where the legal system is governed by the interests of the ruling elites. The revelation of this case prompted the IMF and others to immediately suspend further loan payments to Mozambique, nearly resulting in bankruptcy. I also suggested that this move by Frelimo would allow for the necessary internal cohesion inside it, allowing the party to go the October 2019 general elections undivided. I predicted that the country would use this “progress” in the criminal investigation of the hidden debt case to try to regain trust from the international community and “unfreeze” financial assistance. But if Manuel Chang, the former Finance Minister currently awaiting extradition in South Africa to either Mozambique or the United States, were to be sent to US it would be evidence of a lack of progress in the investigation in Mozambique. In fact, Mozambique’s Attorney General is already accusing some countries (the US included) of a lack of cooperation in its investigating.   

What Is the State of the Art of the Mozambique’s Democracy Four Months Later?

Does Mozambique’s approach to this case confirm its status as an authoritarian regime as I predicted, or does it now reflect more of a move towards an effective democracy? 

Contrary to the Economist’s view, my indicators for authoritarianism where not the outcome of the 2018 elections.  Not only because I drafted my scenarios after the fact, but also because I focused more on the responses by the ruling party. The enormous domestic and international pressure, after a very long silence coupled with efforts to ensure this issue could not be widely and freely discussed domestically, led to 21 people including two former high-ranking officials of the secret services and a son of the former president Armando Guebuza being preventively arrested. On the South African side, the MP Manuel Chang, after his detention at Oliver Tambo International Airport in Johannesburg on 29 December 2018, went to a relatively long trial process by the request of the US judicial authorities, which confirmed the legality of his arrest. A South African court recently concluded that Chang is extraditable both to the US (first applicant) and Mozambique (second applicant). By 25 May 2019 it is expected that the South African Minister of Justice and Correctional Services, Michael Masutha, will send Manuel Chang back to Maputo or to the US. Other than these developments nothing more deserves to be mentioned in relation to this case.

Given these developments, I'm more inclined to assume that confirmation of authoritarian practices would have to be a product of a combination of factors. For example, completely ignoring this case or pretending to have a legitimate interest in seeing perpetrators face justice as a response to popular pressure would amount to authoritarianism. While restrictions on the public to discuss the case have diminished (along with public initiatives), it is widely believed that the efforts the government is currently making—allegedly to see justice against the people involved in the illegal debt case—are not sincere.

However, developments on the ground still reflect a combination of facts comprising moves to legally address the hidden loans case, an easing of repression against pressure by civil society on the government to address this case, and a normal functioning of institutions post-2018 local and highly disputed elections. But, more importantly, there are still enormous expectations as to how the Mozambican state will address the hidden loan case—either with de facto authoritarianism or in a democratic manner, soon it will be confirmed.

Fredson Guilengue works for the RLS Southern Africa Office in Johannesburg, South Africa.