Can Frelimo And Its Backers Continue To Profit From The Resource Curse And A Failing State?

3 August 2020

The sentencing last week of the former Malaysian prime minister Najib Razak to 12 years in jail for involvement in a $4.5 bn fraud, should provoke some deep thinking by Frelimo, Mozambique, and Mozambique's international partners. Najib was the son of a liberation leader and himself became Defence Minister and then Prime Minister and he personally stole huge amounts of money. He was voted out in 2018. Because of the scandal, the government realised it needed high level trials to demonstrate change.

This is a familiar story in southern Africa. In both South Africa and Zimbabwe, entrenched and corrupt liberation leaders were pushed out by their comrades. But corruption is now so embedded they are having serious problems cleaning up the mess. Inflation of over 250% has returned to Zimbabwe because President Emmerson Mnangagwa cannot control arbitrage - privileged people are allowed to buy US dollars at official rates, which they sell on the parallel market, buy more US$, and so on, and that is enough to drive hyper-inflation. Mnangagwa built a coalition to overthrow Robert Mugabe, but it contains those able to drive inflation, and he cannot control them.

Internationally, the two biggest government-involved bank scandals are Malaysia's $4.5 bn 1MDB scandal and Mozambique's $2 bn secret debt. Mozambique also faces a civil war in Cabo Delgado, driven by growing poverty and inequality. As in its neighbours, liberation leader Armando Guebuza was pushed out - more gently than in the neighbours by being prevented from standing again. He was replaced by a son of liberation, Filipe Nyusi, who seems unable to control his Frelimo party. which is dazzled by the coming billion dollar gas bonanza. The result is Mozambique becoming another state where resources are a curse rather than a benefit for most people.

Nyusi's dubious landslide re-election last year was made possible by strengthening the Frelimo patronage network created by Guebuza. This can be seen at three levels. At the top is a group of mini-oligarchs who control land, contracts, illegal trade in heroin and timber, and shares of international loans.

At the next level officials earn smaller but still significant rewards that come from servicing the big beasts by facilitating their land concessions and contracts. And these officials can give smaller contracts to their family and friends. Construction quality is notoriously poor, but it has to be gross to be noticed - President Nyusi walked out of a school inauguration on 24 July because the school was so badly built.

And at lower level, all civil service jobs now depend of Frelimo membership. Teachers can impregnate school girls, demand money for exam passes, and not show up to teach - if they work hard enough on the elections. Police and others assume bribes are part of their salary.

A few strong sectors of the civil service, notably health, survive. But for the most part, there has been little economic development in years. All the statistics show growing poverty, inequality, and child malnutrition. Cabo Delgado has become a flash point, with thousands of families having no livelihoods after being displaced by ruby and graphite mines and the gas project. Young people see a few gaining from the mineral wealth and see well paid outsiders coming in to work on the gas, and they also see most local people not benefitting. Islamic militants are attracting willing recruits in exactly the same way that Frelimo attracted its recruits in the same places 50 years ago, by promising a fairer sharing out of the wealth of the province. Too many young people now view Frelimo as their grandparents saw the colonial administration, and the new civil war is the result.

The international community is now choosing sides. As well as international banks, eight export credit agencies, including the US and UK, on 17 July backed a $4.9 bn loan for the gas project. IMF Representative in Maputo Ari Anson in a press conference Wednesday 29 July said it was "very positive" that the Mozambique government received such strong backing despite the Cabo Delgado insurgency and the $2 bn secret debt scandal. Profits from gas contracts are more important; international finance is now firmly backing the Frelimo leadership.

There is a growing wave of support for foreign military intervention in the Cabo Delgado war. If the grievances remain unresolved, this will not end the war. The most likely outcome is that as in Afghanistan and elsewhere, private security companies will be paid to guard the economic installations - gas, rubies, other minerals - and cities like Pemba. In rural areas the war will continue, and the more than 200,000 refugees will increase as government tries to drain the "sea" the guerrillas swim in.

Mozambique's young people, Frelimo, and the international community face a difficult choice. Will they accept a failed state where a Frelimo elite and international companies can be walled off from the chaos and continue to profit - at least for a few more years? Will a comfortable Maputo middle class feel it can ignore what happens in far away Cabo Delgado and that the urgent priority is earn enough for private school fees and other essentials? Or is there a will to stop the headlong rush to a failed state? South Africa and Zimbabwe show how hard it is. Malaysia shows it is possible.

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