Mozambique’s former finance minister pleaded not guilty in a US federal court in New York in July in connection with a $2 billion corruption and money laundering scandal that prosecutors said defrauded American investors and threatened to further destabilise the economy of one of the world’s poorest countries. This crime is referred to as the Tuna Scandal.
Chang is accused of receiving bribes of up to $18 million during a scheme that secured loans for Mozambican state-owned companies from foreign banks and financiers for maritime projects. The money was looted through kickbacks and other corrupt dealings, according to US prosecutors.
Chang was the central figure in what came to be known as the Tuna Scandal, whereby, in 2013 and 2014, three companies borrowed about R38 billion in public debt without the approval of Parliament. However, the government was used as a guarantor in a scandal that would potentially cripple the country’s economy.
The scandal centres on loans totalling $2 billion that were supposed to go towards purchasing fishing vessels and naval patrol boats to bolster Mozambique’s fishing industry. But prosecutors say the investments never happened.
The funds were allegedly used to fund other transactions involving businesses in which the state had a significant stake, as well as the acquisition of a sizable tuna plant and a maritime surveillance fleet.
In 2016, Mozambique unveiled hefty state-backed borrowing it had previously failed to disclose to Parliament or donors like the International Monetary Fund (IMF), Credit Suisse, Russian bank VTB, and American funders.
The Mozambican government stood as guarantor of the loans, meaning the state would repay the money if things went wrong. More than a quarter of the borrowed money was not accounted for when auditors started investigating. The country’s currency subsequently lost a third of its value, inflation surged, and foreign donors pulled out. Auditors also reportedly discovered that $500m of the money was missing.
The scandal prompted the IMF and other donors to cut off support to Mozambique, triggering a currency collapse and debt default.
American authorities indicted Chang, who has been implicated in the looting of developmental funds, because it said many US investors, who had provided these funds, had been defrauded.
Until his extradition to the United States on Wednesday, Chang had been held in South Africa after being arrested in Johannesburg in 2018 on a US warrant. Civil society in Mozambique had lobbied for his extradition to the US because they felt that back home, he would not face justice. These groups opposed his return to his own country because of concerns that he would likely be treated leniently. The scandal caused a financial crisis in Mozambique when the International Monetary Fund withdrew its support for the country after the so-called ‘hidden debts’ were revealed in 2016.
He had fought his extradition to the US, and the Mozambican government’s own attempts to have Chang face trial in Mozambique had been dismissed by several South African courts. Gauteng High Court in Johannesburg Judge Margaret Victor overturned South African Justice Minister Ronald Lamola’s decision to extradite Chang back to Mozambique.
Zara Jamal, partner at LEX Africa member JLA Advogados in Mozambique, advised, “The SADC protocol on extradition (signed between southern African countries, including Mozambique and South Africa) only allow for the extradition of someone who is effectively charged by the court of the Requesting Country, and Chang was not charged in Mozambique for these crimes. A person only becomes charged based on an indictment by the court, which did not happen with Chang. As such, the extradition of Chang to Mozambique would be contrary to the SADC protocol.”
“The extradition and trial of Mr Chang is a victory for governance, accountability and the rule of law.” Says LEX Africa chairperson Pieter Steyn.
Credit Suisse’s Involvement and Others Who Implicated
In 2021, Swiss bank Credit Suisse agreed to pay at least $475 million to British and American authorities to settle bribery and kickback allegations stemming from their involvement with the corrupt loans. Three former Credit Suisse bankers pleaded guilty to US charges of money laundering over the case. In late 2021, UK authorities fined the investment bank $178m over the scandal.
Over and above this, at least 10 people have already been convicted and sentenced to prison by a Mozambican court over the scandal, including Ndambi Guebuza, the son of the former Mozambican president. Armando Guebuza, former president of Mozambique, was also sentenced to 12 years in prison for receiving up to $33 million from the corrupt deal.
The Tuna Scandal has had a significant impact on the Mozambican economy and its investment potential, especially with the IMF and other donors cutting off support to Mozambique, which triggered a currency collapse and debt default. It is positive to see measures being taken to ensure that those responsible are being charged.
Explore our news articles, specialist publications and browse through our webinars and gallery
