Never far from the headlines, the EMATUM scandal has shot back to prominence over the past fortnight.
In the process of restructuring the remaining US$700 million of 2013’s controversial fishing-and-gunboats US$850 million Euro-bond, Mozambique was forced to admit the existence of a further US$787 million debt which took bondholders by surprise.
The Wall Street Journal reported on Sunday 3 April that that debt was owed by another quasi-state owned company called ProIndicus, which – like EMATUM – had obtained a sovereign guarantee to borrow something between US$600m and US$900m for naval defence equipment.
The name ProIndicus had been doing the rounds in Maputo since 2013 but the general understanding was that it had either been replaced or subsumed by EMATUM. That was the line that the government had fed to the International Monetary Fund (IMF) – among others.
EMATUM was the biggest scandal in Mozambique in recent times – and almost ruined relationships with the IMF and the donor community who many argue showed excessive forbearance in continuing to give the country money.
Now it transpires that the scandal is twice as big as was previously believed.
The fall-out of the ProIndicus revelation is likely to affect donor relations
We are still some way from understanding what the full fall-out from these revelations will be.
The day after the government admitted to the IMF the truth about ProIndicus, the resident representative flew to Washington DC as scheduled to take part in the IMF’s annual Spring Meetings.
The donor community in Maputo is, at the time of writing, still waiting to hear the IMF’s official line on the situation and as such is itself hesitant to make a statement.
Meanwhile, Finance Minister Adriano Maleiane and central bank governor Ernesto Gove are due to head to the US later this week for the Spring Meetings. This means that the IMF’s official response may even wait until after Maleiane sits down with IMF managing director Christine Lagarde.
Lagarde led the 2014 IMF conference in Mozambique called ‘Africa Rising’, using Mozambique as an exemplar for Africa’s economic potential. At that conference, Lagarde reportedly had a private meeting with the then-finance minister Manuel Chang, to get the scoop on EMATUM. Chang reportedly told Lagarde that the EMATUM borrowing had been approved by parliament – which was a lie. Now she and her organisation have been lied to again.
It is not only the IMF that will be furious at having been made a fool of again. According to sources in Maputo, all major donors are now considering their position. They are caught in a dilemma where they feel their trust has been betrayed, but know the poorest will be hit hardest by any cuts in aid provision.
Mozambique’s Economy: ProIndicus changes everything
More analysis of the impact of the revelation on the Economy is available in our publication: Mozambique Politics & Security.
Given Mozambique’s level of dependency on donor aid, the ProIndicus scandal could wreck the country’s budget for this year and those to come.
A significant portion of donor budget support has yet to be disbursed, and more than half of the US$283 million loan the IMF agreed to hand over at the end of last year may also still be pending. If so, it is unlikely now to materialise.
The IMF report that justified that loan classed Mozambique’s public debt as ‘sustainable’, with the deficit coming in at just under 40% of GDP. However, the Pro-Indicus revelations have tipped it over the edge to the ‘high risk’ category, Mozambique Politics & Security understands.
This month was also the deadline that finance minister Maleiane and central bank governor Ernesto Gove had agreed to, to hand the IMF a new business plan for EMATUM to make the company financially sustainable. Always a tall order, that will probably now be forgotten about, as the ProIndicus scandal takes centre stage.
As we go to press, Mozambique Politics & Security is hearing that Maleiane may have resigned. If he learned about ProIndicus from the Wall Street Journal, as seems possible, then his resignation is perfectly understandable. But the move would plunge Mozambique’s economy, and particularly its currency, further into crisis.
The ministry does, at least, now have a deputy after Maria Isaltina Lucas, formerly first secretary at the ministry until she was moved to head up the National Statis-tics Institute last year, was recalled to fill the vacancy. She receives rave reviews from sensible economists in Maputo – but is highly inexperienced to be taking the tiller if Maleiane does step aside.
Ernesto Gove must be considering his position at the Bank of Mozambique, too. On 8 April, he told MediaFAX he knew nothing of ProIndicus – meaning he either lied or was lied to.
ProIndicus bullets will be harder for Nyusi to dodge
In all of the EMATUM outrage, President Filipe Nyusi, who was the defence minister at the time of the deal, has been given a remarkably easy ride.
The understanding has been that he either did not know about the deal, which was cooked up between senior defence staff, the presidency, and the finance ministry, or if he did know about the deal, he was too junior within the government to have been able to do anything about it.
With the ProIndicus revelations, however, it will be harder to make that argument. ProIndicus’ main shareholder is Monte Binga, an investment company owned by the ministry of defence. Setting aside how remarkable that arrangement is in itself, it makes it harder for Nyusi to deny involve-ment in the deal.
A separate issue is the very fact of an investment company owned by the defence ministry, investing in private security firms and, very possibly, arms for the armed forces alongside. The revelations will add an extra dimension to talk that continued insecurity in the country plays into the pri-vate interests of those in charge of the country’s defence.