Mozambique Hidden-Debt Companies' Head Defiant After Audit

(Bloomberg) -- The head of the three Mozambican state-owned companies at the center of an audit into their previously undisclosed debts was defiant after the probe criticized his leadership.

Antonio do Rosario, in a letter seen by Bloomberg that he authenticated, said Kroll LLC auditors personally attacked him in the report that was published on June 24. He also said he chased Kroll auditors from his office when they were conducting the probe “because they wanted details of questions about state security.”

Kroll’s spokeswoman didn’t immediately respond to a voicemail left outside normal business hours requesting comment on Do Rosario’s statement.

Mozambique defaulted on its debt in February, 10 months after the government revealed $1.4 billion of debt it had previously hidden. It’s missed two other interest payments since then, as it seeks to restructure the loans. State-owned companies in the southeast African country failed to account for about a quarter of the proceeds of $2 billion in loans they took on in the past five years, according to the audit.

Do Rosario is chairman of tuna-fishing company Empresa Mocambicana de Atum SA, or Ematum, which borrowed $850 million that was converted into a Eurobond. He also heads security company ProIndicus, which received $622 million, and Mozambique Asset Management, which got $535 million.

‘Person A’

The audit raised questions about the pricing of the assets that Ematum and ProIndicus bought from shipbuilder Privinvest Group, which was the main contractor for the projects the loans funded. Privinvest said in a statement on June 25 the questions were unfounded and that what it charged was in line with other customers.

Do Rosario identified himself in the letter as the ‘Person A’ referred to in the audit report, which doesn’t include the names of the people involved. Information about that person in the audit summary includes:

  • Person A and other senior officials were responsible for signing supply contracts on behalf of the three Mozambican state-owned companies -- Ematum, ProIndicus and MAM
  • Person A declined to provide some information to Kroll saying it was “classified” and not available
  • There were inconsistencies between explanations provided by Person A, the Ministry of Defence and Privinvest over the use of $500 million of proceeds from an $850 million loan taken out by Ematum
  • Person A mismanaged the three Mozambican companies, delaying delivery of the projects
  • Person A refused to provide any information relating to other suppliers that were considered or what due diligence was undertaken on Privinvest, citing “national security” reasons
  • Person A told Kroll that invoices for tuna-fishing vessels concealed the purchase of other assets. Privinvest said this was “completely untrue and potentially very damaging” to the company
  • Person A was involved in negotiating the approval for government guarantees for the three companies

Do Rosario said the management of the companies faced some hurdles that were outside of their control.

“For Kroll, we know who they really are and what they want,” he said in the letter. “I am happy to see the very negative way they attack me, because this proves that we do not give in to pressure and we are not afraid.”

A group of key Mozambique bondholders has called for the liquidation of all three companies, according to a statement emailed on Thursday. It also said the government should revoke guarantees taken by ProIndicus and MAM.

Do Rosario said management of the companies will do whatever is necessary to make them successful, and that the boats purchased with the loans were necessary to protect the country’s 2,800-kilometer (1,740-mile) coastline from pirates.

Do Rosario said criticism was coming from people he didn’t identify who “desperately” want Mozambique’s defense and security forces, which own the three companies, to fail.

“Today our economic independence is at stake,” he said. “The fight continues! Economic independence or death, we will win!”