Mozambique Scrambles to Contain Debt Fallout With Vote Looming

JOHANNESBURG (Capital Markets in Africa) – Mozambique’s government is scrambling to contain the fallout from a U.S. investigation into the country’s $2 billion hidden-debt scandal, ordering a series of high-profile arrests in the past week.

The detentions signal concern among Mozambican authorities that the U.S. probe may reveal more corruption by ruling Frelimo party officials as they prepare to compete in general elections in October. Those arraigned so far include the ex-head of intelligence and a son of former president and high-ranking Frelimo official Armando Guebuza.

“The investigation and prosecution by the U.S. attorney general is the biggest crisis for Frelimo since multiparty elections started in 1994,” Darias Jonker, Africa director at Eurasia Group, said by email. “Although it is unlikely that former President Armando Guebuza will himself be arrested and prosecuted, the detention of his son shows how desperate Frelimo is to contain the crisis.”

Six Arrests
Since Feb. 14, Mozambique authorities have detained at least six people in connection with the case, including:

• Ndambi Guebuza, the son of former President Armando Guebuza, who was in power when the debt deals were done
• Inés Moiane, Guebuza’s private secretary
• Antonio do Rosario, who was chairman of the three state-owned companies that contracted the loans
• Gregorio Leao, who was fired as head of the southeast African nation’s intelligence services in 2017

Making the arrests will enable President Filipe Nyusi to tell the electorate that those suspected of corruption have been apprehended, said Domingos do Rosario, political science professor at Eduardo Mondlane University in the capital, Maputo. They may also be an attempt to appease foreign donors that the state is acting to stamp out graft, he said.

“The main idea is to clean the image of the party, not only because of the general elections, but also before the Americans and donors,” Do Rosario said.

U.S. Indictment
The detentions follow the arraignment by South African authorities of former Mozambican Finance Minister Manuel Chang in December on a U.S. indictment. Chang is accused of taking at least $5 million in bribes and conspiring to commit securities fraud in connection with the hidden-debt scandal.

None of those arrested has been found guilty of wrongdoing. Guebuza senior hasn’t been formally accused of wrongdoing. Arguments in the Johannesburg case for the extradition of Chang, who last week lost his bid to be granted bail, are scheduled for Feb. 26.

“Preventing Chang from extradition to the U.S. is key to protecting Guebuza senior and preventing an all-out expose of who all was involved in the scandal,” Jonker said.

Source: Bloomberg Business News