After Mozambique agreed the $2 bn secret debt deal with Privinvest, Nigeria rejected a very similar deal proposed by Privinvest, the finance minister at the time, Ngozi Okonjo-Iweala, revealed in a book published last year, Fighting Corruption is Dangerous. (MIT Press)
Privinvest had been in discussion for months and had signed a memorandum of understanding with the Nigerian navy when the finance minister joined the discussion in 2014. When she asked for a business plan, Okonjo-Iweala was told there was none. She found that the plan to set up a modern shipbuilding and repair facility required a government guaranteed loan of $2 bn. And she points out that in Nigeria, a government guarantee of a loan requires approval of parliament.
In the book, Okonjo-Iweala points out the similarities to the Mozambique $2 bn secret debt, and says by refusing the deal, "we saved the country from what could easily have become an embarrassing and burdensome fiscal situation."
She has good reason to know the Mozambique situation. Mozambique was an early backer of her candidacy to be World Bank president in 2012, and she later became the Africa candidate, but was beaten by the US candidate, Jim Yong Kim. Noticias (27 Mar 2012) pointed to her "excellent relations with Mozambique" over a long time.
Okonjo-Iweala later became a senior consultant for Lazard Bank and is credited with gaining Mozambique's agreement to use Lazard to negotiate with secret debt bondholders (Indian Ocean Newsletter, 2 Sept 2016), which led to a proposed settlement that was unexpectedly generous to the bondholders.
Mozambique not paying
Prime Minister Carlos do Rosario stressed to parliament in statements and response to questions on 13, 14 March that Mozambique is not making any payments on the secret debt. He also stressed again the inclusion of the secret debt in the 2015 state accounts in no way constituted a legalisation of the debt, but was required by the 2002 financial administration law to be listed as a possible liability. (Savana, Noticias 15 Mar) This point is expanded in a leaflet on Mozambique's debt published by MEF on 28 February, which includes $1.9 bn of the secret debt in the "public debt stock" but which stresses that the $1.1 bn syndicated loans remain illegal and unconstitutional. http://www.mef.gov.mz/index.php/documentos/sala-de-imprensa/folhetos/1610-ultima-versao-folheto-sobre-a-divida-publica-ii-28-02-19
But there are clearly differences in government as to whether or not to pay. In his presentation on 14 March Finance Minister Adriano Maleiane stressed that "the guarantees exist" and must be "respected" and thus the government needs to negotiate with creditors. But he also pointed to the legal action being taken in the High Court in London. The loan contracts say the English court will decide any dispute based on English law, and thus the London court must decide if the guarantees are valid. (Lussa 14 March)
Comment: We have noted in this newsletter that based on a recent ruling, the English High Court would be likely to decided that that government guarantees on the $1.1 bn syndicated loans, signed by Manuel Chang without parliamentary authorization, are not enforceable. ih
Security head's wife's sudden wealth
The secret debt was negotiated with three companies owned by the security services (Servico de Informacao e Seguranca do Estado - SISE) and its then head Gregorio Leao, was arrested in Maputo on 19 February, followed by his wife Angelina on 7 March. With the pair in jail, Savana (15 Mar) could tell the tale of Angela Leao's ostentation, starting in 2013, when she suddenly had a lot of money. She bought luxury cars and flats and in 2013 brought the rapper 50 Cent to Maputo (at a cost said to be near $1 mn).
Manuel Chang's hearing on extradition to the US takes place Monday 18 March in Kempton Park, Johannesburg.