/ 5 February 2020

Mozambique’s government-industrial complex

Mozambique President Armando Guebuza
Mozambique President Armando Guebuza.

As Mozambique prepares for a natural-gas boom that could double its gross domestic product, the governing Frelimo party must get serious about cutting ties between senior officials and big business.

The country’s recent tuna bond scandal — which saw former president Armando Guebuza and former finance minister Manuel Chang collude with senior government officials, banks and companies to saddle the country with $2-billion of hidden loans — shone a light on the party’s intricate business network.

But before the scandal was exposed, a confidential European Union analysis from 2012 of Mozambique’s government, which was distributed to European legislators, raised deep concerns about the state of the ruling party. 

The EU report said Mozambicans had described Frelimo as “dangerous” and as “an armed party” that was “gatekeeping” access to housing, jobs and credit. The bloc’s report detailed a business network that it said allowed the party to secretly manage the vast wealth at its disposal.

Dozens of holding companies connected to current or former officials serve as “entry points for large-scale foreign direct investment,” the EU report said. These companies include:

  • Insitec and Focus 21, controlled by former president Armando Guebuza;
  • Tika, controlled by former president Joaquim Chissano;
  • Whatana Investment Group, controlled by the family of former president Samora Machel; and
  • PSI, controlled by the Frelimo party as a whole.

Another layer of the network consists of local partners, who land lucrative contracts under a broad mandate, according to the EU report. These companies identify business opportunities, obtain licenses, and wait for foreign partners to invest or target public tenders. They are mostly staffed by family connections and loyal friends. 

The party’s right to rule

Mozambique’s Frelimo government rode to power in 1975 after liberating the country from Portuguese colonial rule. A brutal civil war between Felimo and rebel group Renamo engulfed the country for the following two decades.

In the aftermath of the war, the Frelimo government became a donor darling for Western aid agencies by posting impressive progress in reaching development goals.

But like many governments born out of liberation struggles, Frelimo has become more concerned with retaining power and control over state resources than developing the country, according to the EU report.

Frelimo’s legacy as a liberator of the country from Portuguese rule was “still fundamental to justify its exclusive rule over Mozambique”, the document said. The party has been “suspended above society” and has failed dismally in its stated social and political goals.

The analysis, which was circulated after Mozambique announced the discovery of an enormous field of natural gas – estimated to be worth trillions of dollars – showed the EU was worried that Frelimo had little interest in using natural-gas reserves to spur economic development.

Instead, the party was mostly interested in dominating the state for “the expansion and reproduction of power and access to rents”, the EU’s analysis concluded.

Turning the page

Key players in the tuna bond scandal remain at the helm of the government. Frelimo has created a system of governance that protects the guilty, incurs massive public debt and barters natural reserves for repayment.

The public outrage following the tuna bond scandal has piled pressure on the government, presenting an opportunity for reform.

As Mozambique’s lucrative natural-gas industry nears production, which could begin as soon as 2023, bolstering public institutions that will hold senior party members to account is more important than ever.

Mozambique’s Parliament must begin investigating and making public all contracts involving politically exposed people with ties to the dominant party. These people must be banned from participating in deals with foreign companies. 

The government must also make public all contracts involving natural resources through every stage of the pipeline. Most importantly, the government must also put mechanisms in place to ensure any debt incurred is for the benefit of citizens, rather than private interests.

Otherwise Mozambique’s wealth will belong to the party, not the people.

Khadija Sharife and Mark Anderson are Africa editors at the Organized Crime and Corruption Reporting Project. The views of the authors do not necessarily represent those of the organisation.