Journalicious Dots from Switzerland

NOFORN
SIPDIS

E.O. 12958: DECL: 01/28/2020
TAGS: PREL PGOV KDEM KMCA MCC SNAR EINV MZ
SUBJECT: XXXXXXXXXXXX TALKS OF CORRUPTION AT THE
HIGHEST LEVELS OF GOVERNMENT

REF: A. MAPUTO 80
¶B. 07 MAPUTO 1395

MAPUTO 00000086 001.2 OF 003

Classified By: Charge d’Affaires Todd Chapman for reasons 1.4 (b+d)

¶1. (S/NF) SUMMARY: The Charge recently met with XXXXXXXXXXXX–(“the source”) who described his frustrations with FRELIMO, PresidentGuebuza, and Mohamed Bashir Suleiman (MBS). He complained thatthey exercise complete control over the licit and illicit economy of Mozambique. The source, who has excellent connections within the Government of Mozambique (GRM), including the private numberof the President, as well as a personal relationship with MBS,said “I do not want to do business anymore in Mozambique“ because of this triumverate of control. He is liquidating hisassets and leaving Mozambique, and says that he now seesthe “malaise” in Mozambique as if “he had cataractsbut now see it all.”

¶2. (S/NF) The source describes President Guebuza, who he has known and befriended for the past twenty years as a “vicious scorpion who will sting you,” and has an even more grav assessment of MBS. He cautions that FRELIMO is not interested in bettering the life of Mozambique’s citizens, but rather its self-enrichment. In the licit economy, the ruling party, FRELIMO, and MBS work in tandem to control the legal and illegal economies and restrict the space for private sector growth by demanding a cut of all significant business transactions. In the illicit economy, MBS dominates money laundering and drug transshipment, providing kickbacks to FRELIMO. Other key players involved in pressuring the business community for bribes or percentage stakes, according to the source, are Domingos Tivane, head of Customs, and former Prime Minister Luisa Diogo. END SUMMARY.

———————————– MOHAMED BASHIR SULEIMAN AND GUEBUZA ———————————–

¶3. (S/NF) The source XXXXXXXXXXXX. He speculated that over the next term Guebuza would use his business proxiesto amass a still larger personal fortune. Guebuza manages his business interests through several front companies, including Celso Ismael Correia’s Insitec and Salimo Abdullah’s Intelec Holdings. The source said that MBS meets directly with President Guebuza, who has direct knowledge of MBS’ funding to both the FRELIMO party (underwriting the recent election campaign) and Guebuza’s front companies. The source, who described Correia as a “30 year-old pipsqueak,” stated that Correia has no business experience or university degree, but shows great loyalty to Guebuza.

¶4. (C) Guebuza’s business interests in Mozambique are legion. They include stakes in Mocambique Gestores (MG), Maputo Port Development Company (MPDC) which runs Maputo Port, Focus 21, Navique, Vodacom, and SASOL. Guebuza also has a share in Maputo Corridor Logistics Initiative (MCLI) which controls the toll road from Maputo to South Africa, according to the source. Guebuza has shares in a significant number of banks, including BCI Fomento (where Correia is Chairman), Mocambique Capitais, Moza Banco, and Geocapital. Through family members, Guebuza also controls Intelec Business Advisory and Consulting, Beira Grain Terminal, MBT Construction Ltd, Englob Consultants Ltd, Mozambique Power Industries, Macequece Ltd, and Mozambique Natural Resources Corp.

¶5. (S/NF) One new area that Guebuza appears to be interested in is the gaming industry. The source says that Guebuza forced the Constitutional Council (CC) to review and declare a recent law liberalizing the gaming industry as “constitutional” even though it calls for all casino assets to revert to the state after a defined period of time, in direct contravention of private property laws enshrined in the Constitution. The judges of the CC, who also ruled in favor of decisions during the elections to invalidate large numbers of opposition candidates in the legislative and presidential races, complained of the unconstitutionality of the new law, but were told to give it a favorable ruling, which they did.

¶6. (S/NF) The source elaborated on the depth of Guebuza’s business interests, which range across the economy. He said that Guebuza is in on almost all of the “mega-project” multi-million dollar deals via contractual stipulations to work with the Mozambican private sector. One example is Guebuza’s involvement in the 2007 purchase of Cahora Bassa Hydroelectric Dam (HCB) from the Portuguese Government for $950 million. $700 million of this was paid by a private consortium of banks, which was arranged by a Guebuza proxy, for which Guebuza received, while he was a sitting president, an estimated commission of between $35 and $50 million. The Portuguese bank which arranged the financing turned over its shares in BCI Fomento, one of the largest Mozambican commercial banks, to a Guebuza-controlled company.

————— MBS AND FRELIMO —————

¶7. (S/NF) The source, says that FRELIMO brazenly squeezes the business community for kickbacks. As an example, the source said that he has personally seen Manuel Tome, former FRELIMO Secretary General, senior member of the National Assembly, and relative of President Chissano, in MBS’ office receiving pay-offs quite openly. Head of Customs Domingos Tivane openly demands and receives payoffs from importers, including MBS. The source stated that one business contact remarked to him that when visiting Tivane’s expansive home to deliver a bribe he noticed that the bureaucrat had solid gold fixtures in his bathroom. The source also stated that former Prime Minister Luisa Diogo, until she was removed from the Cabinet (septel), was heavily involved in taking bribes for FRELIMO, of which she kept a percentage. Similar allegations were raised in the 21 January issue of Zambeze, regarding soft loans paid to Diogo’s husband Albano Silva, purchases of houses and buildings for a fraction of their value, as well as Diogo’s close ties to officials such as Diodino Cambaza, whose corruption trial is ongoing.

¶8. (S/NF) At the ports, the source commented that FRELIMO has its own clearing agent that handles FRELIMO and MBS business. The clearing agent chronically under-invoices items, avoids the 17% VAT, and also has an arrangement with Tivane’s Customs authorities to bypass the ports’ mandatory scanning. The source has documentary proof of the under-invoicing by MBS, and poloff has seen MBS’ trucks drive through the port without being scanned. Nonetheless, the source said that Government of Mozambique (GRM) officials routinely describe MBS as an “untouchable” due to his connections to Tivane and Guebuza, a situation which is reported to irk a cash-strapped Tax Authority (AT) President Rosario Fernandes.

————————- MBS AND OTHER BUSINESSMEN ————————-

¶9. (S/NF) Regarding MBS’ retail operation, the source states that MBS does not tolerate competition. The source’s milk processing facility was threatened by MBS who used VAT-avoidance and under-invoicing to dump vast quantities of imported condensed milk on the market in order to put the source out of business. Only after the source made an agreement with MBS for exclusive distribution of his milk products, with a 10% kickback on all sales to MBS, did MBS stop his dumping practices. Other businessmen have complained about similar practices in other commodities to include edible oil. The source complained that “even those who bribe” MBS or FRELIMO cannot make a profit under such conditions.

—————————— NARCOTICS AND MONEY LAUNDERING ——————————

¶10. (S/NF) The source says he only has second hand knowledge of drug trafficking and money laundering in Mozambique. He said that “MBS and the ‘Nacala dealers’ all have offices in Dubai” to facilitate money laundering operations in Mozambique. It is through these operations that after 15 years in business in Mozambique, MBS was able to pay $30 million in cash to establish his shopping plaza downtown, Maputo Shopping, which opened in 2007. The source said that he asked prominent Ismaili/Aga Khan businessman Mustaque Ali how MBS became so rich so fast, and Ali’s wry answer was “Johnson’s baby powder,” a euphemism for drugs. The source noted that the sometimes erratic changes in Mozambique’s foreign exchange position are due to sudden multi-million dollar transfers of cash overseas tied to money laundering. The source commented that in the past few years there have been several embarrassing situations in which shiploads of drugs, primarily hashish and heroin have washed ashore; however, the media is usually afraid to report on such incidents because no one wants to become another Carlos Cardoso, the courageous Mozambican journalist who was murdered in 2000 while investigating a massive bank fraud tied to then-President Chissano’s family.

——————————————— COMMENT: CANDID COMMENTS FROM A CONNECTED MAN ———————————————

¶11. (S/NF) The source, XXXXXXXXXXXX While he has an axe to grind because he is frustrated with the scope and depth of corruption in Mozambique, his statements corroborate what we have learned from other sources (Ref A). Ties with MBS and other known money launders and narcotraffickers by senior GRM officials are disturbing and demonstrate a short-sighted focus on self-enrichment. The source cautions against building long term relationships with FRELIMO, and fears that, having allowed the illicit economy to prosper, and having advertised Mozambique as a money laundering destination and drug transshipment hotspot, the ruling party will no longer be able to control the nefarious activities within its borders. Rumors and stories of corruption abound in Mozambique, but rarely will a successful well-connected XXXXXXXXXXXX be willing to share specific practices based on first-hand knowledge and participation in these practices.

CHAPMAN

XTAGS: XTAGPREL, XTAGPGOV, XTAGKDEM, XTAGKMCA, XTAGMCC, XTAGSNAR, XTAGEINV, XTAGMZ 10MAPUTO86