EXX Africa, a specialist intelligence company that delivers forecasts on African political and economic risk to businesses, has launched an investigation into the risk of spill-over of a Mozambique debt scandal into Angola.
Mozambique’s ongoing debt crisis was caused by secret loans that were backed by the country’s financial minister without parliamentary approval.
The loans were borrowed by state-owned companies in 2013 and 2014 and arranged by Credit Suisse and VTB, a Russian state-owned lender. The revelation triggered a default and currency collapse when international donors cut support for the state budget in response. The country now owes at least $2billion to financiers.
In October 2016, Mozambique announced that it was seeking relief on its debts. This came months after revealing it had concealed $1.4 billion worth of loans for maritime security projects from the International Monetary Fund (IMF).
On 25th January, 2019, Mozambique’s Parliament requested that the country’s former Finance Minister, Manuel Chang be held in preventative custody while he awaits extradition to the United States following his recent arrest in neighbouring South Africa.
According to EXX Africa, here are growing indications of involvement by senior Angolan political leaders in the scandal that have so far not been fully uncovered.
These emerging affiliations and business deals risk undermining the Angolan government’s popular and high-profile anti-corruption drive, while also embarrassing senior Angolan politicians and pose new reputational risks for investors in Angola.
“There are a number of red-flags around Privinvest’s deals in Angola that have come up over the course of our investigation, some of which signal reputational risks for Angolan President Joao Lourenco,” EXX Africa said in a statement.
The group was referring to Privinvest, a world leader in naval shipbuilding present in over 40 countries. Privinvest specializes in innovative naval, commercial and super-yacht design and engineering with state-of-the-art facilities across Europe and the Arabian Gulf.
According to a US indictment, the Mozambique scandal emerged after large bribes and fraudulent payments were made to the various accused bankers and Mozambique government officials. All accused have so far denied the allegations.
Now, Mozambique’s government is currently seeking to restructure its loans. In November, the country’s government struck a deal with most of its creditors to restructure a $726.5 million Eurobond loan. The agreement includes extending maturities and sharing future revenue from offshore gas projects.
The agreement confirms EXX Africa’s forecast that creditors would not seek punitive measures against Mozambique, but would rather restructure debts while leveraging the country’s gas revenues as collateral. Mozambique has vast gas reserves and hopes to be a global leader in the energy industry in the coming years.
On the other hand, the research group has noted that Angola’s President Lourenco has been working to weed out corruption in his country, though ties to Angola may complicate the process.
“Angola’s relations with the IMF and the prospect of an economic recovery in 2019 face new challenges as investors are exposed to emerging reputational risks as the Mozambique debt scandal spills over,” EXX Africa concluded.