Mozambique: Credit Suisse Protests Its Innocence

Maputo The bank Credit Suisse has claimed that the loan of 622 million US dollars that it extended in 2013 to the fraudulent Mozambican company Proindicus is legitimate, and the Mozambican government must pay up for defaulting on the loan.

Credit Suisse was replying this week in a London court to the case made by the government that the loan was illegal, and that it is Credit Suisse that should reimburse Mozambique, and not the other way round.

According to a report by the Portuguese news agency Lusa, Credit Suisse argues that the Mozambican government guarantee for the Proindicus loan is binding, and that the bank is entitled to the payment of damages.

There were three loans obtained in 2013 and 2014 from Credit Suisse and the Russian bank VTB, totalling over two billion US dollars. In addition to Proindicus, the loans went to Ematum (Mozambique Tuna Company) and MAM (Mozambique Asset Management).

The stated purpose of the loans was to boost Mozambique’s coastal protection capacity and to build a tuna fishing fleet. None of this happened: there is no improvement to coastal protection, very little fishing was done, and most of the Ematum boats are inactive in Maputo fishing port. The three companies are effectively bankrupt, and cannot repay the loans.

The loans were guaranteed by the government of the day, headed by the then President Armando Guebuza. The guarantees were signed by Guebuza’s finance minister, Manuel Chang – who is currently in a South African prison, fighting against extradition to the United States.

US prosecutors want to try Chang on charges of conspiracy to commit money laundering, wire fraud and securities fraud. The evidence gathered by the prosecutors shows that at least 200 million dollars of the loan money was spent on bribes and kickbacks, paid by the sole contractor for the three companies, the Abu Dhabi based group Privinvest.

The money from Credit Suisse was never sent to Mozambique, but went directly to Privinvest. An independent audit of Proindicus, Ematum and MAM in 2017 showed that Privinvest had overcharged Mozambique by over 700 million dollars for the boats and other assets it had delivered.

The protestations of innocence from Credit Suisse ring hollow, partly because three Credit Suisse bankers who handled the Mozambique loans, Andrew Pearse, Detelvina Subeva and Surjan Singh, have already admitted taking bribes from Privinvest.

Furthermore, had Credit Suisse made the slightest attempt to familiarise itself with Mozambican law, it would have known that the guarantees signed by Chang were invalid.

Every year, the budget law passed by the Mozambican parliament, the Assembly of the Republic, stipulates a ceiling for the amount of loans that the government is allowed to guarantee. The guarantees for the Proindicus, Ematum and MAM loans smashed through that budgetary ceiling in both 2013 and 2014. The guarantees signed by Chang were thus illegal.

They were also unconstitutional. A clause in the Mozambican constitution states that only the Assembly of the Republic can authorise the debt represented by the three loans. But the full scale of the loans was hidden from the Assembly, and the very existence of the Proindicus and MAM loans did not become public knowledge until April 2016.

Proindicus, Ematum and MAM were very recent creations, and so had no track record at all. The driving force behind the three companies was the Mozambican Security and Intelligence Service (SISE), and the senior SISE officers involved in the loans are now in jail.

No self-respecting bank would loan hundreds of millions of dollars to companies which had never done any business and were run by security agents. But Credit Suisse ignored all the basic rules about due diligence, and lent the money on the strength of Chang’s guarantees – and because key figures in the bank were receiving bribes.

The Mozambican government not only wants the London court to declare the Proindicus loan null and void, but also demands that Credit Suisse pays for the losses Mozambique has suffered because of the financial crisis precipitated by the illicit loans. These losses are enormous – they include the sharp devaluation of the Mozambican currency, the metical, in 2016-17, the suspension of financial assistance from Mozambique’s foreign partners, and the collapse in the country’s credit ratings.

Source: Agencia de Informacao de Mocambique