Mozambique: INSS Corruption Case Comes to Court

Maputo — Francisco Mazoio, chairperson of the Board of Directors of Mozambique's National Social Security Institute (INSS), on Thursday claimed that he did not have a "deep knowledge" of the memorandum of understanding between the INSS and the company CR Aviation, which is at the heart of a corruption case now being heard by the Maputo City Court.

Mazoio, Baptista Machaieie, the former general director of the INSS and Miguel Ângelo Cuado Ribeiro, the former managing director of CR Aviation and the majority shareholder in the company, face charges of abuse of office and embezzlement.

The deal between CR Aviation and the INSS goes back to the final year of the previous government, under President Armando Guebuza, when the Labour Ministry, which oversees the INSS, was run by Helena Taipo, who is now under detention in connection with several unrelated corruption scandals.

The INSS and CR Aviation signed a memorandum of understanding in 2014, which envisaged using INSS funds to purchase four aircraft for CR Aviation at a cost of 84 million meticais (about four million US dollars, at the exchange rate of the time).

Alerted to this deal by press reports in 2016, the public prosecutor's office investigated and found a damning range of irregularities which constitute criminal offences. Thus, the Memorandum of Understanding was not submitted for approval to the Administrative Tribunal, the body that inspects the legality of public expenditure.

CR Aviation had never submitted business plans explaining how the money the INSS invested in the company would be repaid. Additionally, the INSS managers decided to grant the money to CR Aviation without even consulting the INSS Board of Directors.

The public prosecutors also began proceedings in the Maputo branch of the Administrative Tribunal to hold the INSS managers responsible for the return of the money unduly paid to CR Aviation.

This case might have gone unnoticed had it not been for some investigative journalism in early 2016. Those reports said that the INSS intended to invest US$7 million in CR Aviation. Journalists discovered that the deal had not been completed, but, by the time it was made public, 84 million meticais of INSS funds had been invested in CR Aviation.

The INSS is not allowed to invest in companies unless their shares can be traded on the Mozambique Stock Exchange (BVM), which was never the case with CR Aviation.

Belatedly Mazoio, in March 2016, demanded the money back. But this did not satisfy the prosecutors.

Mazoio, the first of the accused to be questioned, tried to shift responsibility to Machaieie. He said he was only aware of the memorandum of understanding through Machaieie, who told him that everything was legal and the only thing he had to do was sign the document.

Mazoio said he had not been informed of what the next steps in the deal would be, and that his role as INSS chairperson was merely administrative.

Asked about the legality of the memorandum, Mazoio recognised that the law does not allow the INSS to have agreements with private companies that are not quoted on the stock exchange. Nonetheless, at the time the priority was to ensure the deal with CR aviation went ahead - and so 84 million meticais was advanced to allow the company to buy planes.

He claimed it was the INSS general management, under Machaieie, which had undertaken the viability study, and the job of the Board of Directors was only to approve the investment.

Mazoio blamed the Mozambican press for aborting the project. After the investment had been approved information leaked to the media which created an "unfavourable environment" for continuing the project. At that point, the INSS demanded the return of the 84 million metical advance, but to date CR Aviation has not returned the money.

When the court questioned Machaieie he flatly denied Mazoio's claim that he knew next to nothing about the deal.

He claimed that research by consultants hired by the INSS had concluded that it was not safe for the INSS to continue investing its money in banks. They recommended it should diversify its investment portfolio, and that in particular it should invest in civil aviation companies.

CR Aviation was selected as a recipient of INSS funds, and Labour Minister Helena Taipo herself told Mazoio to negotiate the memorandum of understanding with the company.

Those negotiations, Machaieie said, led to the plan to invest in CR Aviation which was then approved, first by the INSS Board of Directors, and then by Taipo. After the agreement was signed, Mazoio was kept informed of all subsequent steps, he insisted.

Machaieie also claimed it was normal practice for the INSS to buy shares in companies that were not quoted on the stock exchange.

When Miguel Angelo Ribeiro was called to testify, he told the court that the deal with the INSS had been the idea of the minority shareholder in CR Aviation, Rogerio Manuel, who owned 49 per cent of the company. Manuel was also the former chairperson of the Confederation of Mozambican Business Associations (CTA), the main organisation of the country's employers.

Ribeiro said Manuel had told him that the INSS was interested in buying shares in CR Aviation. He then agreed to sign the memorandum: Ribeiro said he only did so after taking legal advice.

But Ribeiro said that, after he had received the 84 million meticais from the INSS and had purchased the aircraft, he had disagreements with Manuel, and sold him his shares in the company in 2015. Ribeiro told the court he had been the victim of "an act of bad faith" by Manuel.

Manuel cannot answer this charge, since he died in a helicopter accident in December 2018.

The trial will continue next Tuesday.

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