Mozambique Contracts Fulfilled But Not Implemented

By Gregory Tosi

The contrast between opportunity and challenge has always been stark for Mozambique. Since its independence in 1975, the former Portuguese colony has made tremendous strides in reducing once-crippling poverty. Only two years on and Mozambique would suffer a brutal civil war which would last 15 years until the collapse of Soviet and South African support for the ruling Marxist, FRELIMO, and insurgent forces, RENAMO, respectively. I guess one can say that when the AK-47 rifles left, the warring parties finally agreed to a peace talk, a little too late though because much of the country’s critical rural infrastructure had already been damaged. This condition put so much pressure on the Mozambican economy.

But, to its economic disadvantage, the country has failed to secure its coastal waters that contain vast natural resources including tuna and natural gas reserves.  

Its longtime, one-party government has elected to point blame at others rather than looking at itself in the mirror – much like someone who blames the credit card company for racking up too much debt. It has said to the world, in effect, “If only you would have stopped me.”

As a result, Jean Boustani, a Lebanese national and a salesman for Privinvest, a global shipbuilder, is on trial in Brooklyn, New York, in connection with transactions made by Mozambique and executed in Europe, Africa and the Middle East. Suffice to say, something is wrong with this picture.

According to federal prosecutors in New York, the Mozambican entities and European-based banks entered into a $2 billion loan arrangement. In turn, the “proceeds of the loans were intended to fund three maritime projects for which Privinvest was to provide the equipment and services,” including coastal surveillance, tuna fishing, and building and maintaining shipyards.

If these programs had been implemented after Privinvest had delivered, the fleet, associated equipment and services stood to have enabled Mozambican fishermen to safely harvest the abundant schools of tuna off the country’s shores. It also would have protected the country’s sovereign waters from poachers and pirates.

Instead, Boustani stands accused on conspiracy charges and the vessels sit in dry dock idling away. Among other things, prosecutors allege that Boustani lured the Mozambicans into entering into inflated contracts, a charge Privinvest and Boustani stoutly deny.

A 2012 World Bank report noted Mozambique’s “Plano de Acção de Redução de Pobreza (PARP)” endeavored to increase “production and productivity for the agricultural and fisheries sectors.” Consistent with that approach, Mozambique contracted for – and Privinvest delivered – a fleet of fishing and patrol boats to the country, which is located on Africa’s southeast coast.

At Boustani’s trial, Stanley Bryant, a retired U.S. rear admiral, testified as an expert witness, and explained that Mozambique had not overpaid at all. In other words, it had not been defrauded.

Bryant explained that the Mozambican contract with Privinvest was a comprehensive, “turnkey” contract, a staple of the defense industry, in which the buyer receives an array of services together with the individually purchased items.

Bryant stated: “There’s a whole litany of things that could be included so that you don’t just throw the keys at the person to whom you are selling the car and tell them to have a nice day. You give them the maintenance or the opportunity to have it maintained for a certain period of time at least, tell them how to maintain it, tell them how to drive it, employ it, everything.”

As for the potential impact on cost, Bryant observed that a turnkey contract could double the cost to a buyer, but would also provide a comprehensive suite of services.

Bryant framed the contract this way: “You can imagine, again, buying an automobile, then having maintenance for life, and a warranty for life, and a technical expert to come out to your house anytime you needed him because you have a little issue with it. Spare parts were included … it would all increase the price of the asset.”

Substitute “boats” for “cars” and you have the story of the Privinvest deliveries. So much for Mozambique being defrauded by Boustani or Privinvest.

Said differently, what ails Mozambique is not a boat contract. Rather, as the International Monetary Fund recently indicated, it is an array of civic and economic problems ranging from lack of transparency to inadequate natural resource wealth management. And there are also regular and devastatingly immense natural disasters.

Earlier this year, more than 1,000 people in Mozambique, Zimbabwe and Malawi died as the result of cyclone Idai. The storm devastated agriculture and disrupted transportation. Growth too was a casualty. All of this is unfortunate, but none of it is Jean Boustani’s fault.