In an unprecedented move, the main donors to Mozambique have united in an attempt to refute a damning indictment of donor involvement in corruption written by London- based journalist, Joseph Hanlon.
Earlier this month Hanlon presented a paper to a conference in the English city of Sheffield entitled "Are donors to Mozambique promoting corruption ?" His response was an unequivocal "Yes".
Normally, donor organisations do not bother to reply to critical articles by journalists. But Hanlon has followed Mozambique ever since independence in 1975, has written several well-received books on the country, and is regarded as a credible authority.
So this time the donors felt under serious threat. Officials from the "G10" group of donors who provide budget support to Mozambique prepared a memo attacking Hanlon.
The tactic looks like backfiring. For anyone who reads the original paper can see that the memo does not respond to its major points. Instead it embarks on a discussion concerning statistics on economic growth.
Hanlon stressed not only the familiar concept of corruption, but a newer, and altogether more ominous phenomenon - that of "state capture". This is what happens when the rule of law is replaced by the rule of crime: when the criminals take over the state.
There may be a duly elected president and parliament, progressive legislation may be passed, ministers may make the right noises about combatting corruption - but all this counts for nothing if organised crime has corroded the state, pushing the legal system into collapse, and buying off police officials, attorneys and judges.
The criminalisation of the Mozambican state is by no means complete, as can be seen from the vigorous response that Attorney-General Joaquim Madeira, and key figures on the Supreme Court are trying to mount. But the trend is clear, and donors should decide which side they are on.
Foreign friends of Mozambique can make a difference, but not if they pretend the problem doesn't exist.
Hanlon argued "that donors are rewarding what they see as 'good performance' by allowing, and thus effectively encouraging, corruption and state capture." He claimed that "donors are rejecting appeals from honest Mozambicans to do more than simply pay lip service to the need to curb corruption, because they need the myth of the Mozambican success story." Judging from the memo, it is not the argument about "state capture" that riled the donors so much as Hanlon's scepticism towards the Mozambican "success story".
The memo simply looks for statistics that prove the economy is growing, and these are not hard to find. Hanlon mentioned a "dramatic fall in GDP per capita", to which the donors reply that "real economic growth was positive over the period 1996-2001", and that per capita GDP only appears to have declined, because of the rise in the exchange rate of the US dollar.
Hanlon also noted that "growth is concentrated in Maputo and in mineral-energy enclaves". The donors try to refute this by breaking the GDP growth of 2001 down by sectors.
This doesn't work because 2001 was an anomalous year - much of the growth recorded is post-flood recovery, which accounts for much of the 53.6 per cent increase in construction, and the 35.5 per cent rise in transport and telecommunications (the restoration of the road and rail network in the south of the country).
What the donors quietly ignore is the massive contribution of the major "enclave", the MOZAL aluminium smelter on the outskirts of Maputo.
The donors put growth in manufacturing in 2001 at 10.3 per cent - but the government estimate of December was 37.4 per cent, overwhelmingly the result of MOZAL (2001 was the first year of MOZAL producing at full capacity).
And the projection for 2002 is that the construction sector will grow by a huge 132.6 per cent, due almost entirely to the doubling of the smelter's capacity in phase 2 of MOZAL.
MOZAL's aluminium is now the country's main export by far - in the first half of 2001, MOZAL accounted for 60 per cent of total export earnings, and ensured that exports covered 62.4 per cent of imports, whereas in 2000 the figure was 22.5 per cent.
MOZAL is a beacon which proves that major foreign investments in the most modern industrial technologies are possible in Mozambique - but nobody should be deluded into imagining that the success of MOZAL means that life has dramatically improved for peasant households hundreds of kilometres from the smelter.
But Hanlon's main point was not about GDP - it was about the donors' wilful blindness to corruption. His key paragraph was: "Mozambique has become a donor playground, and the Mozambican elite has become highly skilled at giving the donors what they want. The management of donor money is transparent and clear. The predatory elite do not steal donor funds; instead they rob banks, skim public works contracts, demand shares in investments, and smuggle drugs and other goods - and they ensure that the justice system does not work so they cannot be caught".
This accusation the donor memo almost entirely ignores. I say "almost", because the scandal of the near-collapse of the two privatised banks, the BCM and Austral, was so huge that the memo feels obliged to make some mention of it.
First it claims that Hanlon's estimate that 400 million US dollars was stolen from the banking system "is not based on factual evidence". There is no sign that the memo's drafters have read Hanlon's lengthy series of articles on the banks published last year in the Maputo newsheet "Metical", and, in a somewhat shorter version, by AIM. These contain plenty of evidence as to the massive nature of the frauds and theft committed.
Had those earlier articles been consulted, not to mention the list of Austral debtors made public in June 2001, the memo might have avoided its bland claim "it is not yet possible to determine how the money was lost".
But there are a couple of revelations in this part of the memo, which states "it has been agreed between the IMF, The World Bank and the government, that an assessment will be undertaken of both of the banks, to establish the reasons for the losses incurred since the privatisations".
This is one of the oldest of political tricks - when you don't want to do anything, you set up an inquiry.
To rescue the banks, the government was forced to issue high interest bearing treasury bonds - this domestic debt will be a drag on the state budget for many years to come. The memo puts the "overall contribution to the recapitalization of both banks in 2000-2002" at 165 million dollars.
But we shouldn't worry about that, since "social spending was protected at all times", claims the memo.
This plumbs the depths of intellectual dishonesty. Even for the most desk-bound of donor bureaucrats it should be obvious that 165 million dollars spent on plugging holes in banks is 165 million dollars that is not being spent on schools, hospitals or clean water supplies.
And 165 million dollars is more than Mozambique will spend on servicing its foreign debt over this period. In other words, the benefits from the HIPC (Heavily Indebted Poor Counties) debt relief initiative have been partially cancelled out by the bank scandal.
The memo notes that "the government has agreed to a transparent process of loan recovery." Indeed it has. This pleasing phrase has been on officials' lips for many months - but nobody will give any actual figures. Such as how many debtors are being dragged before the courts, and how many have simply rescheduled their loans.
When Austral was reprivatised, reporters were categorically assured that the entire portfolio of non-performing loans was acquired by the new owner, the South African bank ABSA.
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But the memo now tells us that "the government has already repurchased the loans on which commercial recovery is not a feasible option for a nominal fee, and is committed to initiate 'fiscal execution' procedures as soon as possible to aid the recovery process".
It will be interesting to see whether these "procedures" are applied to any of the parliamentarians (from both the ruling Frelimo Party and the Renamo opposition) who owed money to Austral.
What is entirely missing from the donor memo is any reference to prosecuting those who ruined the banks. Back in October, when the World Bank's Consultative Group on Mozambique met, there were repeated demands for prosecution.
For instance, the US representative, James Smith, urged the government "to pursue legal action against those who committed fraud and malfeasance in the Austral Bank's insolvency".
Daris Mans, the World Bank's country director for Mozambique, stressed the murders of investigative journalist Carlos Cardoso in November 2000, and of the interim chairman of Austral, Antonio Siba-Siba Macuacua, in August 2001. He linked the murder to the banking scandals, and said it was impossible to discuss governance in Mozambique without reflecting on these "heinous crimes".
But that is precisely what the donor memo does: its discussion of the banks makes no mention of either of these high- profile murders.
Months pass and the investigation of the Siba-Siba assassination is stalled. And no-one at all has been arrested in connection with the near collapse of Austral or of the BCM. Their directors and managers walk the streets of Maputo, as free, unconcerned and rich men.
Hanlon himself draws one major lesson from the donor memo.
In his reply, he writes "My conclusion is that donors have agreed that so long as money is recovered, corrupt bank officials, thieves and murderers have impunity and can go free".
