State companies at the heart of Mozambique’s debt scandal failed to account for at least a quarter of more than $2bn in contentious loans, according to an auditor’s report.
Kroll, the New York-based investigator, found that the three companies — all owned by Mozambique’s intelligence agency — also paid $713m more for fishing boats, naval vessels, radar and other maritime security equipment than an expert evaluation said they were worth.
The loans were taken out in 2013 when the impoverished southern African nation said it wanted to set up a state-backed tuna fishing company. But they were hidden from the IMF and donors, and their discovery plunged what had been one of Africa’s star economic performers into a financial crisis.
Donors, which provided about a quarter of the government’s budget, suspended aid and the government defaulted on the state-backed loans just as it was hoping to develop vast offshore gasfields and attract greater foreign investment.
Maputo, the nation’s capital, agreed to the audit last year in an attempt to unfreeze the donor funding.
In an audit summary released by Mozambique’s attorney-general on Saturday, Kroll said it could not find $500m that Ematum, the state fishing company, allegedly spent after securing $850m in loans arranged by Credit Suisse, the Swiss bank and Russia’s VTB Capital.
Until “inconsistencies” were resolved about whether the money entered Mozambique’s government budget, “at least $500m of expenditure of a potentially sensitive nature remains unexplained”, Kroll said.
After the government was forced to restructure the $850m tuna loan last year, it emerged that two other companies had taken loans of $1.2bn for maritime security equipment that had not been disclosed to donors.
Credit Suisse and VTB earned nearly $200m in fees on arranging the loans. The companies agreed to pay the fees and the money came from the loan issues themselves.
While welcoming the summary’s release, the IMF on Saturday said that important “information gaps” remained on how the loan proceeds were spent.
Given the scale of the missing funds, the release of the audit will increase pressure on President Filipe Nyusi to punish government officials involved in the hidden loans.
Kroll’s findings will also increase scrutiny of the role of Credit Suisse and VTB, which it said passed $140m of the fees they received on the debt to syndicate lenders and investors in order to boost the loans’ yield.
Investors with experience of emerging-market debt investing told the Financial Times that taking 10 per cent of a loan in fees was unusual despite the risk of lending to a first-time issuer, such as Mozambique.
Credit Suisse said its fees “totalled $23m — roughly 2.3 per cent of the total financings and in line with comparable emerging market financing transactions”, after taking into account the fees transferred to investors in the debt.
VTB could not be reached for comment.
Kroll said it was given limited information from the three companies and individuals tied to the intelligence agency, which it said had told officials issuing government guarantees that the projects were “a matter of national security”, leading to “less scrutiny” of the loans.