Mozambique Scrambles to Contain Debt Fallout as Vote Looms

(Bloomberg) -- 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.

Mozambique Scrambles to Contain Debt Fallout as Vote Looms

“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.

U.S. Indictment

“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. The strategy could backfire if it causes major fissures in Frelimo, he said. The party didn’t respond to an email seeking comment.

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. Mozambique has since also formally requested Chang’s extradition, said Max Mpuzana, a spokesman at South Africa’s department of justice.

The request to have Chang sent home may be an attempt to limit further political damage, according to Jonker.

‘Protecting Guebuza’

“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,” he said.

How the extradition applications are dealt with could depend on whether Mozambique is deemed to be a so-called “associated African state,” according to Anton Katz, a Cape Town-based advocate who specializes in extradition law.

For requests from associated states, the magistrate decides on whether or not to grant extradition, Katz said. For an unassociated state, such as the U.S., the magistrate decides whether the accused person is extraditable, and the justice minister makes a final decision on the request, he said.

The timing of the competing requests doesn’t matter under law, and it’s up to the prosecutor which to pursue more vigorously.

“The one with the less risk of not succeeding is the one I’d pursue,” Katz said. The recent arrests in Mozambique “should have absolutely no bearing whatsoever” on the nation’s bid to have Chang sent home, he said.

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