Mid-January 2022, Storm Ana raged through southwest Africa, leaving a trail of devastation and loss of life in Malawi, Madagascar and Mozambique. With extreme weather events likely to occur more frequently due to climate change, countries like Mozambique, already embroiled in the biggest debt scandal of the decade, urgently need debt justice.
The Mozambique Debt Scandal
Late last year the multinational bank Credit Suisse was fined £147 million for its role in causing a debt crisis in Mozambique. The crisis was one of the biggest debt scandals of the last decade. $2 billion was lent, much of which has been stolen, paid as bribes or otherwise unaccounted for.
The London branch of Credit Suisse, which gave some of the loans, has been fined by the UK’s Financial Conduct Authority. However, the fine has not gone to help people in Mozambique hit by the crisis but has instead been given to the UK government. Under the rules set for it by the government, all fine money received by the Financial Conduct Authority gets sent to the UK government.
Campaigners in Mozambique have been working tirelessly, and at personal risk, to get the banks and politicians responsible for the scandal held to account. It’s deeply unfair that this money isn’t going to the people of Mozambique.
As Denise Namburete from the Mozambique Budget Monitoring Forum says: “We maintain that the true victims of the actions by the London branch of Credit Suisse are millions of Mozambican citizens. As a result of this fraud and corruption, our nation has lost billions.”
We can still get the money to be used to help people in Mozambique, but only if we act now.
The story begins in 2013, when the London branches of two banks – Credit Suisse and VTB Capital arranged a loan to a state-owned company in Mozambique. The loan was supposedly for a tuna fishing fleet, but the boats have hardly caught any tuna in the last decade. This was followed by a further loan for high-speed patrol boats, and then in 2014 a loan just from VTB Capital supposedly for dock equipment. Many of the loans were subsequently sold on to other speculators.
None of the loans were agreed by the Mozambique parliament – as required under the Mozambique constitution. And the second and third loans were kept secret, only coming to light in 2016.
When the true scale of the $2 billion of loans was revealed in 2016, it caused a debt crisis in the country. The local currency crashed in value pushing up the price of imports and basic goods. The World Bank said food price rises as a result of the scandal led to 2 million more people being pushed into poverty. Mozambique campaigners estimate it has collectively cost the country $11 billion - $350 per person - and could cost a further $4 billion more. Between 2015 and 2019, public spending per person in Mozambique was cut in half.
The Mozambique government has stopped repaying two of the three loans. Mozambique is now being sued in London by various owners of the debts, including VTB Capital, and is itself trying to get one of the debts declared void. These cases will only be heard in September 2023, ten years after the first loans were given.
In 2017 an independent audit revealed that at least $700 million of the $2 billion of loans was unaccounted for. The audit further revealed that Credit Suisse initially said the loans needed to be approved by the Bank of Mozambique, checked by the Mozambique Administrative Court and reported to the IMF. This would have meant far greater scrutiny of the loans, and it is likely they would never have been agreed. However, Credit Suisse dropped this requirement, allowing the loans to be agreed without scrutiny.
At the start of 2019, three former Credit Suisse bankers were arrested in London as part of a US investigation into the case, along with a former employee of the United Arab Emirates company which supplied the boats, Privinvest, and former Mozambique Finance Minister Manuel Chang, who was arrested in South Africa.
The three bankers subsequently pleaded guilty to various charges. Andrew Pearse, who led on agreeing the deals for Credit Suisse, pleaded guilty to taking millions of dollars in kickbacks.
Despite the fact the loans were arranged by banks based in London, it was the US which led investigations into the case. However, Jean Boustani, the former employee of Privinvest, was acquitted in the US, partly because what he was accused of did not take place in the US.
Manuel Chang is still under arrest in South Africa, appealing a decision to extradite him to face charges in the US.
Since 2016 we have been working in solidarity with campaigners in Mozambique to stop the Mozambique people having to pay these unjust debts, and to get the banks and politicians responsible for the crisis to be held to account.
In 2019, following our campaign the UK government finally agreed to ensuring an investigation of the loans took place. In Mozambique, a trial began in 2021, and is still ongoing, into 19 politicians and officials connected to the deals.
Then in October 2021 the UK Financial Conduct Authority and various US authorities collectively fined Credit Suisse $475 million - £147 million by the Financial Conduct Authority - and Credit Suisse agreed to cancel $200 million of the debt that is still owed to them. In announcing the fine the Financial Conduct Authority said the loans were “tainted by corruption” and caused “a debt crisis and economic harm for the people of Mozambique”. However, neither the US or UK have taken any action against VTB Capital.
Yet, the people of Mozambique have not received a penny from the fine, with it all currently going into the UK government’s bank account. Mozambique campaigners are calling on the Chancellor to spend the money through the UK government’s ongoing work in Mozambique through national organisations (and not through the Mozambique government).
The Mozambique case has been so scandalous that various laws and regulations were broken in Mozambique, the UK and even the US (which only had a tangential relationship to the case). But the practise of giving loans in secret is not illegal in the UK. In fact, it can be extremely difficult to find out what loans have been lent by who to governments, making it easier for scandals to happen.
One of the reasons the scandal happened was because there are no rules requiring the existence of loans to governments to be publicly disclosed. This lack of transparency makes it easier for loans to be misused, and prevents campaigners, journalists and parliamentarians from holding lenders and borrowers to account on how loans are used.
In 2019, the international organisation for multinational banks – the Institute of International Finance – agreed new voluntary guidelines on disclosing the existence and information on loans to lower income country governments. Over two years later, not one loan has been disclosed through this scheme.
The years following the Western world’s financial crisis in 2008 and 2009 were a boom time for lending to lower income country governments. The loans give to Mozambique in 2013 were part of a pattern where Western banks sought to lend at far higher interest rates in the global South, because interest rates in the West were so low.
That lending boom has now triggered debt crises across many countries. Jubilee Debt Campaign’s latest figures, released on 22 January, show that developing country debt payments have increased 120% between 2010 and 2021 and are higher than at any point since 2001. The latest analysis finds that 54 countries globally are in debt crisis, meaning that debt payments are undermining the ability of governments to protect the basic economic and social rights of their citizens.
Justice for the people of Mozambique
Now hit by Storm Ana, it is more important than ever that justice is served. Show your support and add your voice to the campaign.