Less than two decades after it was granted debt relief, the Government of Mozambique again finds itself unable to honour obligations to international creditors. Pending the publication of an audit of US$2 billion of borrowing by Mozambican companies afforded questionable sovereign guarantees, Africa Research Institute and Zitamar News convened a webinar with four expert panellists: Roberto Tibana, principal consultant at Analitica-RJT; Anne Frühauf, senior vice president with Teneo Intelligence; Tariq Hamoodi, partner at Bybrook Capital; and Dr Joseph Hanlon, visiting senior fellow at the London School of Economics.

This Briefing Note sets out the known details of the controversial loans to Mozambican companies and their ramifications for the government, the banking sector and international financial institutions. It then summarises panellists’ perspectives on the debt, and how Mozambique and its creditors might extricate themselves from the crisis.  

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• Fishy business
• Loan sharks
• Mayday! Mayday! Mayday!
• Navigating choppy waters
• Getting off the hook?

Fishy business

Between February 2013 and May 2014, three Mozambican companies contracted Middle Eastern shipbuilding group Privinvest and other suppliers to provide a tuna fishing fleet and maritime security. The project eventually involved borrowing US$2 billion, roughly equivalent to a third of the national budget. This sum exceeded the total amount of external debt raised directly by the government between 2010 and 2012, and breached commitments made to the International Monetary Fund (IMF) in July 2013.[i]

At the time, President Armando Guebuza was preparing to depart from office and intent on ensuring that his chosen successor secured a victory for Frente de Libertação de Moçambique (Frelimo) in the October 2014 general elections. The Guebuza family is said to have initiated the discussions with Privinvest through connections to the holding company’s co-founder and director, Iskandar Safa.[ii] The national security services, Serviço de Informação e Segurança do Estado (SISE), which report directly to the president, were tasked with establishing three companies: Empresa Moçambicana de Atum (Ematum), ProIndicus and Mozambique Asset Management (MAM). A SISE officer, António Carlos do Rosário, was appointed CEO of all three corporations.[iii]
[quote]Fishing boats were not the only item on an undisclosed shopping list; Rosário later admitted that the tuna concept had been a pretext for defence expenditure[/quote]
During September 2013, the London offices of investment banks Credit Suisse and VTB Capital arranged US$850 million in “loan participation notes”, akin to an unlisted bond, for Ematum.[iv] According to a three-page prospectus, this was intended to fund a tuna fishing fleet capable of landing 20,000 tonnes of tuna per annum.[v] Only a year earlier, a South African company, Oceanfresh, had been granted exclusive rights to fish tuna off the Mozambican coast, with a quota of 12,000 tonnes per annum.[vi] Fishing boats were not the only item on an undisclosed shopping list; Rosário later admitted that the tuna concept had been a pretext for defence expenditure.[vii]

Despite having not built a fishing vessel since the 1980s, Privinvest shipbuilder Constructions Mécaniques de Normandie (CMN) was contracted to supply 24 trawlers, in addition to three patrollers and three interceptors (each designed to be armed with a 20mm cannon and 12.7mm machine gun).[viii] The company had unveiled designs for a new 23.5-metre trawler, alongside plans for a new 43-metre trimaran patroller, only six months earlier. Mock-ups of the 32-metre high-speed interceptors were disclosed on the day the deal was announced.[ix] Guebuza and Safa visited the CMN shipyard on 30 September 2013. Within a month, Ematum had transferred US$836.3 million directly to Abu Dhabi Mar, CMN’s holding company, which is part-owned by Privinvest. The balance of the money raised by Credit Suisse and VTB – US$13.7 million – was spent on banking and transaction fees. Ematum itself was left with no working capital for its operating costs or funds for future debt repayments.[x]

Loan sharks
[quote]The lending package was signed in June 2013, but not disclosed to investors who purchased the Ematum debt just months later. Credit Suisse reportedly purchased insurance against the risk of Mozambique defaulting at Lloyd’s of London[/quote]
Concurrently, Credit Suisse and VTB Capital arranged further loans totalling US$1.16 billion for ProIndicus and MAM, apparently disregarding the considerable implications for investors in the Ematum debt. Credit Suisse raised US$622 million for ProIndicus, a corporation established to provide security for firms involved in offshore gas exploration and shipping in Mozambican waters, despite an absence of demand for these services.[xi] This followed a feasibility study undertaken by the bank in February 2013, initially assuming a US$372 million loan.[xii] The lending package was signed in June 2013, but not disclosed to investors who purchased the Ematum debt just months later. Credit Suisse reportedly purchased insurance against the risk of Mozambique defaulting at Lloyd’s of London.[xiii]

Within months of the loans to Ematum and ProIndicus, VTB Capital privately arranged US$535 million of borrowing for MAM.[xiv] This entity was hastily incorporated in April 2014, ostensibly to provide services to ProIndicus and others.[xv] In May 2014, MAM contracted Privinvest to build two shipyards (in Maputo and Pemba), where it would could construct, under license, Privinvest security vessels. The deal included the provision of spare parts and maintenance for the fleet, and the establishment of a naval training school.[xvi] VTB Capital charged an up-front arrangement fee of US$35 million, equivalent to 7% of the amount raised.[xvii] The co-arranger of the deal was Palomar Capital Advisors, a subsidiary of Privinvest led by Andrew Pearse, who had worked on the fundraising for ProIndicus while at Credit Suisse.[xviii]

In each instance, Manuel Chang, Mozambique’s then finance minister, signed paperwork confirming that the government would guarantee the debts. A parliamentary inquiry later found Chang acted in contravention of Article 179 of the Mozambique Constitution, which requires that the legislature be consulted on sovereign guarantees.[xix] The sums borrowed also exceeded the limit set by the legislature for that year, thus violating the budget laws.[xx] A further irregularity was that the contracts exist only in English, while Mozambican law requires such documentation to be translated into Portuguese and authenticated.[xxi]
[quote]The Office of the Attorney General subsequently characterised the granting of unauthorised sovereign guarantees as a “criminal offence” in the form of “abuse of office”[/quote]
The Office of the Attorney General subsequently characterised the granting of unauthorised sovereign guarantees as a “criminal offence” in the form of “abuse of office”.[xxii] Irregularities surrounding the guarantees may explain why neither the Government of Mozambique, nor the banks arranging the loans, took steps to inform the IMF and World Bank, despite a clause in the loan agreements which stipulated that the guarantor would comply with its obligations to those bodies.[xxiii]

President Nyusi, who took office in January 2015, sought to rectify remaining irregularities. The Government of Mozambique formally assumed responsibility for US$500 million of the US$850 million Ematum debt, including it in the defence budget for that year, and obtaining retrospective parliamentary endorsement for the borrowing. Mozambique honoured the first scheduled repayment, despite a budget shortfall amid declining commodity prices, substantial currency depreciation and delays to the development of liquid natural gas (LNG) reserves. Officially, at this juncture, Mozambique’s external debt stood at some US$6 billion, exceeding the sum at which the country had been granted debt relief under the Heavily Indebted Poor Countries Programme in 2001.

Mayday! Mayday! Mayday!

In March 2016, struggling to meet its obligations, the government was forced to restructure the balance of the Ematum debt. Mozambique asked international investors to exchange US$697 million in Ematum notes for new sovereign bonds with a later repayment date.[xxiv] To assuage its creditors, the government offered a higher interest rate and other incentives, thus increasing its total obligation to US$726.5 million.[xxv] Credit Suisse and VTB Capital arranged the restructuring; however, negotiations with bondholders were rushed. Charles Blitzer, a former IMF assistant director advising investors, asserts that the process failed to comply with recognised principles for fair debt restructuring.[xxvi]
[quote]Only after investors had accepted the restructuring terms did details emerge of the US$622 million loan raised for ProIndicus[/quote]
Only after investors had accepted the restructuring terms did details emerge of the US$622 million loan raised for ProIndicus.[xxvii] The UK Financial Conduct Authority has initiated an inquiry into whether Credit Suisse violated regulations by failing to disclose the existence of the ProIndicus debt to Ematum creditors during the restructuring.[xxviii] The bank’s hand was forced when, on 15 March 2016, Standard and Poor’s downgraded Mozambique’s credit rating, which entitled investors in ProIndicus to exercise their right to immediate repayment.[xxix] This situation prompted Credit Suisse to reveal the US$622 million in additional borrowing.[xxx] The Government of Mozambique then disclosed that a further US$535 million had been borrowed by MAM.

Alarmed by the fiscal mismanagement and fearing a vast corruption scandal, the IMF halted its programme in Mozambique, including payment of the second instalment of a US$283 million loan from its Standby Credit Facility.[xxxi] The World Bank also suspended disbursements, while bilateral donors terminated general budget support. The metical, the national currency, depreciated sharply, losing 40% of its value in two months.[xxxii]

Despite the sovereign guarantee, MAM missed its first payment of US$178 million due on 23 May 2016. In October 2016, the government conceded that it did not have sufficient capital to service any of the three loans, including the restructured Ematum debt. On 18 January 2017, Mozambique missed the first US$60 million coupon payment on its sovereign bond.[xxxiii]

Navigating choppy waters

The government and its creditors are at an reached an impasse. Mozambique wishes to restructure the three debts; however, holders of the sovereign bond have refused to negotiate until an independent audit has been completed, and the IMF resumes its programme.[xxxiv] Webinar panellists acknowledged the challenges faced by Kroll, the firm appointed to audit the accounts of Ematum, ProIndicus and MAM, especially as substantial sums appear to have been transferred directly to Privinvest and associated entities.[xxxv] It is unlikely that Mozambicans will ever know precisely how the money borrowed was spent, or what assets remain unaccounted for, given the veil of secrecy surrounding the transactions.
[quote]It is unlikely that Mozambicans will ever know precisely how the money borrowed was spent, or what assets remain unaccounted for, given the veil of secrecy surrounding the transactions[/quote]
ProIndicus is due to make a capital repayment of US$119 million on 21 March 2017, but is not expected to pay. As the loan was reportedly syndicated by Credit Suisse to numerous Mozambican banks, the country’s financial sector could be severely tested if the government defaults on its obligations as guarantor.[xxxvi] Local bondholders include Millennium BIM and Moza Banco (which is already in administration).[xxxvii] A related risk is that the capital raised by ProIndicus was used as collateral for commercial loans, or for down-payments on contracts for military equipment, thus increasing the risk of yet more undisclosed debt.[xxxviii] When addressing the parliamentary inquiry in late 2016, do Rosário spoke of an entire maritime protection system (Sistema Integrado de Monitoria e de Protecção) supported by 16 radars, 6 patrol aircraft, drones and satellite imagery.[xxxix]

Anne Frühauf, senior vice president at Teneo Intelligence, who advises investors in Mozambique, anticipates a “significant restructuring deal” during 2017. She questions how such a negotiation cannot result in a “haircut” for creditors, despite some having already participated in one restructuring. With the government’s repayment capacity practically non-existent, Frühauf anticipates discussion regarding the possibility of postponing debt repayments until the 2020s – the point at which revenue from vast offshore gasfields should become available, assuming final investment decisions on LNG extraction are taken soon. A major challenge is that holders of the original Ematum debt, which has since been repackaged as a sovereign bond, will resent being treated identically to holders of ProIndicus and MAM debt: in 2016, Ematum bondholders agreed to a longer amortisation period in return for a higher coupon rate. Having been restructured into a bullet payment, the annual interest burden related to the sovereign bond is already much lower than the debt-servicing costs associated with ProIndicus and MAM.
[quote]Frelimo, is reluctant to acknowledge that the guarantees were issued illegally. The Nyusi government would rather assume the liabilities inherited from the Guebuza administration than risk the political fall-out[/quote]
Tariq Hamoodi, a partner at Bybrook Capital in London, anticipates Mozambique honouring its obligations – eventually. Panellists noted that the ruling party, Frelimo, is reluctant to acknowledge that the guarantees were issued illegally. The Nyusi government would rather assume the liabilities inherited from the Guebuza administration than risk the political fall-out. Hamoodi points to the recent restructuring of the Ematum bond as having precluded any admission of wrongdoing. He views all three debts as equally binding and regards any calls for differential treatment as unrealistic. Hamoodi anticipates the three being bundled into a single loan, despite sovereign bondholders holding out for a better deal. One way to alleviate the haircut on international investors might involve Mozambique issuing gas warrants, granting creditors a certain share of future revenues from Empresa Nacional de Hidrocarbonetos (ENH), the state oil and gas company.

Getting off the hook?

Dr Joseph Hanlon, visiting senior fellow at the London School of Economics, pointed out there is an argument against bundling the three loans. ProIndicus and MAM debts were issued by Credit Suisse and VTB Capital as syndicated loans, thus establishing a fiduciary duty on behalf of the banks. By contrast, the Ematum debt is now packaged as a sovereign bond. All three debts were issued in London under contracts governed by English law. Hanlon believes that a legal process in the UK could prove advantageous for Mozambique. He notes that, historically, governments that default on their debts do better than those which attempt to pay from a position of debt distress.
[quote]Hanlon believes that Credit Suisse and VTB misled investors by claiming that the debts were repayable when this manifestly was not the case[/quote]
Hanlon contends that Credit Suisse and VTB face widespread criticism for their failure to either undertake sufficient investigations, or to report their findings to investors. Competent due diligence should have brought to light three facts. First, that in the absence of parliamentary approval, the sovereign guarantees were unconstitutional and illegal. Second, that the Credit Suisse feasibility study was “totally ridiculous”, and founded on assumptions that Mozambique could sell its tuna for three times as much as the Seychelles. Third, that collectively the three loans would make Mozambique’s debt burden unsustainable. Hanlon believes that Credit Suisse and VTB misled investors by claiming that the debts were repayable when this manifestly was not the case.

Hanlon argues that Mozambique should repudiate the “secret” and “illegal” debts issued to ProIndicus and MAM. It would then fall to a bondholder or one of the banks to appeal to the UK courts. The banks might prefer to proceed to arbitration, since the process is private. Hanlon believes that “Credit Suisse do not want to go into open court”, where they would be asked to present due diligence reports. While details of any settlement reached through arbitration would be public, documentation would not need to be disclosed.
[quote]Hanlon believes that a government refusal to honour its sovereign guarantees would be accepted, and possibly even welcomed, by the international financial institutions and donors[/quote]
As for Ematum, Hanlon concedes that the repackaging of the debt as a sovereign bond complicates further negotiations with creditors. In practice, the government has accepted, however reluctantly, its obligation as a guarantor. That distinction aside, he believes that “the original notes were sold on the same false prospectus”, which – unwittingly or intentionally – misled investors. Even if an agreement cannot be reached immediately with holders of the Ematum bond, renouncing the sovereign guarantee on the ProIndicus and MAM loans would bring Mozambique closer to debt sustainability. Such a scenario could enable the IMF to re-engage with the government, providing it with room for manoeuvre. Although bilateral donors will not want to run the risk of aid money being, in effect, used to service the debt, all parties want Mozambique to return to debt sustainability. Hanlon believes that a government refusal to honour its sovereign guarantees would be accepted, and possibly even welcomed, by the international financial institutions and donors.

Frühauf challenges this scenario on the grounds that the government has displayed no political will to repudiate the debts. Investigations have been limited, and politicians have displayed no sign of wanting to issue a declaration of “odious debt” or “illegitimate debt”, which might provoke further scrutiny. Frühauf argues that Mozambique will remain saddled with a heavy debt burden primarily because of political dynamics within Frelimo. The political cost of implicating allies of former President Guebuza or the security services could divide the party and jeopardise the leadership transition. Nyusi’s recent appointment of a new SISE director could, however, indicate willingness to subject the security services to greater scrutiny.[xl] Frühauf posited that internal opposition to Nyusi and his handling of the debt crisis might grow ahead of the crucial party congress in September 2017, and pressure to renounce part of the debt could gain traction.
[quote]Tibana predicted a tricky year ahead for President Nyusi and Frelimo grandees. In September, the party will have to decide whether the incumbent will remain its candidate for the next elections, or if Frelimo needs to replace Nyusi to turn the page on the debt scandal[/quote]
Roberto Tibana, principal consultant at Analitica-RJT, noted that any legal process brought against former finance minister Manuel Chang would inevitably open a can of worms. It remains unclear whether Frelimo elites are ready to “sacrifice” Chang, or indeed to countenance any course of action that might lead to court cases – and revelations. Tibana stressed that government ministers, past and present, would be implicated in any findings. Nyusi was the minister of defence when the debts were issued, making it “difficult to shrug off responsibility”. Tibana believes that all of Mozambique’s creditors will need to take a haircut. He questioned whether Credit Suisse and VTB Capital failed to conduct adequate due diligence or if the loans were issued with their full connivance. Tibana predicted a tricky year ahead for President Nyusi and Frelimo grandees. In September, the party will have to decide whether the incumbent will remain its candidate for the next elections, or if Frelimo needs to replace Nyusi to turn the page on the debt scandal.

External actors could yet intervene to Mozambique’s advantage. The US Securities and Exchange Commission (SEC) has requested copies of the documents provided to purchasers of the Ematum bond. Swiss regulators are also known to be taking a keen interest. If further financial transgressions are disclosed, a declaration of “odious debt” or “illegitimate debt” might become more expedient.  Not all outsiders sympathise with Mozambique’s plight, however.

The government will struggle to extricate itself from its current predicament without presenting the country, and the region, as a far riskier investment destination than had previously been projected. Trust with the international financial institutions and bilateral donors will also need to be restored if Mozambique is to diversify its sources of concessional borrowing, and this is unlikely to be a smooth process. Perhaps most importantly, as Tibana pointed out, the crisis has come as “a big shock” to hard-pressed Mozambicans, a fact that Frelimo elites have been slow to acknowledge, let alone react to. The party’s 2014 campaign song, Moçambique confia em Filipe Nyusi, stressed the trust placed in the presidential aspirant. With Frelimo’s egregious fiscal indiscipline now common knowledge, such confidence will be hard to recover.

For a two-week free trial of Zitamar News, please email subscriptions@zitamar.comreferencing ARI in the subject line.

An edited recording of the webinar is available here

Notes

[i] “Alarm over new debts”, Africa Confidential, 15 November 2013

[ii] “How far to push Guebuza”, Africa Confidential, 12 June 2015

[iii] Gestão de Investimentos, Participações e Serviços (GIPS), the social security arm of SISE, owns 98% of MAM, 50% of ProIndicus and 33% of Ematum. The other shareholders of Ematum are the national fishing company, Empresa Moçambicana de Pesca (Emopesca), and the parastatal fund manager, Instituto de Gestão das Participações do Estado (IGPE). ProIndicus is 50% owned by Monte Binga, which is managed by the Ministry of Defence but owned by IGPE. Ematum and ProIndicus each hold 1% of shares MAM. See “Secret debts devastate economy”, Africa Confidential, 13 May 2016

[iv] A fundraising by Credit Suisse for US$500 million was oversubscribed, leading VTB Capital to issue a further US$350 million. See “Secret security debts devastate economy”, Africa Confidential, 13 May 2016

[v] “MDM calls for measures against those responsible for ‘hidden debts’ – Mozambique”, AIM/Club of Mozambique, 12 December 2016

[vi] “Oceanfresh awarded tuna quota in Mozambique”, Undercurrent News, 16 September 2012

[vii] “Mozambique tuna company was front for security spending, CEO admits”, Zitamar News, 9 December 2016

[viii] Contrary to the CMN announcement, a spokesman for Credit Suisse insisted that “there are no weapons or combat systems of any kind on any of the vessels being built under the EMATUM contract.” See: Boris Korby, Paul Burkhardt and Lyubov Pronina, “Mozambique Tuna Bonds Fund Anti-Pirate Fleet in Surprise”, Bloomberg, 13 November 2013

[ix] “CMN décroche une commande historique de 30 navires”, Mer et Marine, 6 September 2013

[x] “Revealed: Ex-Credit Suisse banker in business with EMATUM ship-builder”, Zitamar News, 11 May 2016

[xi] For ProIndicus, the principal sum borrowed was US$622 million, with a final maturity date of 21 March 2021. The first repayment of US$24.88 million was due on 21 March 2016, with subsequent repayments of US$119.424 million in March 2017, 2018, 2019, 2020 and 2021. Interest Rate: LIBOR + 3.20% until 21 March 2014 and then 3.75% thereafter (payable annually). According to Quinn Emanuel Urquhart & Sullivan LLP, Credit Suisse raised US$522 million, with VTB arranging and underwriting the balance. This assertion is not reflected in the “Summary of Key Terms of Certain Commercial External Indebtedness” issued by the Ministry of Finance in November 2016

[xii] “Leaked Credit Suisse doc puts complete Mozambique coastal security contract at only $372m”, Zitamar News, 21 June 2016

[xiii] Matt Wirz, Julie Wernau and Matina Stevis, “Behind Credit Suisse’s Soured Mozambique Deals”, The Wall Street Journal, 11 August 2016

[xiv] For MAM, the principal sum borrowed was US$535 million, with a final maturity date of 23 May 2019. Four repayments of US$133.75 million agreed for May 2016, 2017, 2018 and 2019. Interest Rate: LIBOR + 7% (payable annually). Arranged by Palomar Capital Advisors and VTB Capital

[xv] “Mozambique: Prosecutors Investigating Ematum, Proindicus and MAM”, Agencia de Informacao de Moçambique, 1 May 2016

[xvi] “Mozambique’s defaulting MAM denied access to Maputo shipyard site”, Zitamar News, 14 June 2016

[xvii] Ed Cropley, “Exclusive: Mozambique paid $35 million for VTB shipyard loan – documents”, Reuters, 11 June 2016

[xviii] “Palomar named as joint arranger on $535m Mozambique shipyards loan”, Zitamar News, 25 November 2016

[xix] The inquiry was held during November 2016, with a confidential report delivered to MPs during December 2016. Article 179(2)(p) of Mozambique’s constitution grants the Assembly of the Republic “exclusive power” over the authorisation of government borrowing for a period of a year or more, and defines parliament’s role in determining the upper limits for any state guarantees

[xx] For 2013, the limit had stood at 183.5 million MZN (approximately US$5 million). In December 2013, parliament amended the budget law and increased the ceiling on government guarantees to 15.8 billion MZN, enabling Frelimo to accommodate US$350 million of Ematum’s “non-commercial activities” in the Ministry of Defence budget for 2014

[xxi] “Relatório e Parecer sobre a Conta Geral do Estado, Capítulo X – Dívida Pública”, Tribunal Administrativo de Moçambique, (February 2015) pp.X-20-21

[xxii] Procuradora-Geral da República spokesman Taibo Mucobora quoted by Voice of America: William Mapote, “Procuradoria de Moçambique admite indiciar membros do Governo Guebuza”, VOA Portgues, 14 July 2016

[xxiii] “Former Finance Minister signed loan guarantees”, A Verdade, 11 October 2016

[xxiv] Elaine Moore and Andrew England, “Mozambique proposes ‘tuna’ bond restructuring”, The Financial Times, 10 March 2016

[xxv] Once restructured, Ematum notes were issued for US$726.524 million on 6 April 2016. These have a maturity date of 18 January 2023 with a single repayment due then. Interest Rate: 10.5% per annum (payable semi-annually) with repayments due on 18 January and 18 July of each year until maturity (commencing on 18 January 2017)

[xxvi] Specifically, Principles for Stable Capital Flows and Fair Debt Restructuring issued by the Institute of International Finance. See Joseph Cotterill, “So long, and thanks for all the tuna bonds”, The Financial Times Alphaville, 11 March 2016

[xxvii] Matt Wirz and Julie Wernau, “Tuna and Gunships: How $850 Million in Bonds Went Bad in Mozambique”, The Wall Street Journal, 3 April 2016

[xxviii] Matina Stevis, “U.K. Regulator Scrutinizes Credit Suisse, VTB Over Mozambique Debt”, The Wall Street Journal, 3 June 2016

[xxix] “IMF cut-off follows secret debt shock”, Africa Confidential, 15 April 2016

[xxx] “Secret security debts devastate economy”, Africa Confidential, 13 May 2016

[xxxi] “Key Facts on Fund’s Engagement with Mozambique”, International Monetary Fund, 27 May 2016

[xxxii] The Mozambican metical had remained steady at 30 meticais to the USD during 2013 and much of 2014. Short on hard currency, the government was no longer able to support the currency during 2015, causing it depreciate to 50 meticais to the USD by March 2016. The value plummeted to 78 meticais to the USD in September/October 2016. During February 2017, the exchange rate has stabilised at approximately 70 meticais to the USD

[xxxiii] “Mozambique bondholders condemn ‘strategic’ default”, Zitamar News, 23 January 2017

[xxxiv] “Mozambique says it will default on debut sovereign bond”, Zitamar News, 16 January 2017

[xxxv] “Sovereign default looms”, Africa Confidential, 23 May 2016

[xxxvi] “Mozambique must restructure debt by March deadline to avoid banking ‘chaos’”, Zitamar News, 20 January 2017

[xxxvii] “Frelimo’s ostrich plan”, Africa Confidential, 8 July 2016

[xxxviii] “The burden of war and debt”, Africa Confidential, 18 November 2016

[xxxix] Joseph Hanlon, “Mozambique News Reports & Clippings”, The Open University, 13 February 2017

[xl] “Nyusi names new head of Mozambique’s security services”, Zitamar News, 30 January 2017

The post Mozambique’s debt crisis: Trawling for answers appeared first on Africa Research Institute.

Edward Paice is Director of Africa Research Institute and the author of Tip & Run: The Untold Tragedy of the Great War in Africa (Weidenfeld & Nicolson, 2007).

• Cat and mouse
• Imperial rivalries
• Tipperary mbali sana sana
• The butcher’s bill
• “There came a darkness”
• A forgotten conflict
• Notes

Mahiwa-Nyangao is certainly not listed among the better-known battles of World War I. Even people living close by these settlements on the B5 road, which runs inland from the southern Tanzanian port of Lindi to Masasi, are unaware of the fighting between British and German colonial troops that raged in their neighbourhood almost a century ago. Yet here, in dense bush, one of the most ferocious actions of the entire East Africa campaign of the Great War took place over four days in October 1917.

Casualties among the 5,000-strong British force – including three battalions from the Nigerian Brigade, three from the King’s African Rifles, and the Bharatpur Infantry and 30th Punjabis from India – were estimated at between one third and a half. The 16 companies of German Schutztruppen opposing them – about 2,000 men – sustained 25% casualties. Equally importantly at this stage of the campaign, when all hopes of resupply from Germany had evaporated, the German units expended nearly a million rounds of precious ammunition during the battle.

The combined casualties at Mahiwa-Nyangao were comparable to those of the bloodiest battle in the Anglo-South African, or “Boer”, War of 1899-1902. In addition to being recognised in contemporary military histories as “one of the greatest battles ever fought in Africa”,¹ Mahiwa-Nyangao also prompted the universal acknowledgement that “the courage displayed on both sides by the African soldier, be he Nigerian, King’s African Rifles, or German askari was remarkable”.²

Almost a year after Mahiwa-Nyangao, as the war entered its final phase, German and British forces clashed at Lioma and Pere Hills, to the east of Lake Nyasa in what is today Mozambique. For displays of outstanding courage 28 Distinguished Conduct Medals were awarded to askari of the King’s African Rifles. This was one sixth of the total number awarded to the regiment during the Great War in East Africa – for a single battle. The citations make hair-raising reading. Three British officers were also awarded the Distinguished Service Order. One of them remarked of the askari: “they do not know what fear means; they have won the war for us in East Africa”.³

Although the losses at Mahiwa-Nyangao, the costliest battle of the Great War in East Africa, do not compare with those of the battles at Verdun or the Somme, the campaign was neither minor nor insignificant. The death toll among combatants and civilians was colossal. The privation suffered by the populations of a theatre of war encompassing an area of 750,000 square miles – three times the size of the German Reich – was far worse than in all but a handful of areas of Europe traversed repeatedly by fighting. The financial cost to the Allies was comparable to that of the Anglo-South African War.

1st King’s African Rifles occupying Longido in German East Africa early in 1916

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Cat and mouse

The first shot fired by a British unit anywhere in the Great War was from the rifle of an African soldier – Regimental Sergeant-Major Alhaji Grunshi of the Gold Coast Regiment – as an Anglo-French force invaded the German colony of Togoland (today’s Togo) on 7 August 1914. The last German troops to surrender did so in Northern Rhodesia (today’s Zambia) on 25 November 1918, fully two weeks after the Armistice in Europe.

Togoland fell to an Anglo-French force after a fortnight, German South-West Africa was taken by South African troops in mid-1915 and German resistance to British, French and Belgian colonial troops in Cameroon finally ended in March 1916. But the Allies’ attempt to overcome German East Africa from the six neighbouring British, Belgian and Portuguese colonies – and German resistance – was of an altogether different magnitude.

About 150,000 Allied combatant troops were deployed against an enemy whose strength never exceeded 25,000

At the outbreak of war in Europe the prospect of small colonial defence forces of a few thousand African troops in each colony waging war against each other was as remote as the likelihood of the “main show” lasting beyond Christmas 1914. But over the next four years more than 125,000 British imperial and South African troops served in the East Africa campaign, Portugal sent 20,000 men in a number of expeditionary forces to Portuguese East Africa (today’s Mozambique) and Belgium threw 15,000 men of the Congolese Force Publique into the fray.

In all, about 150,000 Allied combatant troops were deployed against an enemy whose strength never exceeded 25,000. The total ration strength of British imperial forces – combatant and non-combatant – in the final phase of the war was still over 110,000 men, despite the fact that the headcount of the enemy they were by then pursuing through Portuguese East Africa, back into German East Africa and then into Northern Rhodesia had dwindled to a few thousand.

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Imperial rivalries

Improbable as it seemed to civilians and colonial authorities alike in Africa in August 1914, an imperial war on the continent – a final, bloody phase of the “Scramble for Africa” – had been considered a very real possibility by European leaders from the mid-1890s. In May 1896, Joseph Chamberlain, the British Secretary of State for the Colonies, warned the House of Commons that such a conflict would be “one of the most serious wars that could possibly be waged…It would be a long war, a bitter war and a costly war…It would leave behind it the embers of a strife which I believe generations would hardly be long enough to extinguish.”

Three years after Chamberlain’s warning war did break out in Africa. Although it pitted Britain against the Boer republics of South Africa rather than a rival European power it was unmistakably imperialist in character and intent. Far from being the rapid and immediately profitable pushover envisaged by British hawks, the Anglo-South African war lasted two and a half years, involved the mobilisation of more than 400,000 British and colonial troops and left much of South Africa in ruins.

“In money and lives”, wrote the historian Thomas Pakenham, comparing the cost of the conflict to the Napoleonic Wars, “no British war since 1815 had been so prodigal.”⁴ The bill to the British Treasury was over £200m, £12bn in today’s money and ten times the value of the coveted output of the Transvaal gold mines in 1899. British casualties exceeded even those of the Crimean War half a century earlier; and the toll wrought on Afrikaner and African alike was immense.

None of Britain’s European rivals intervened in South Africa. But Germany, France and Russia roundly criticised the aggression, and incidents elsewhere in Africa exacerbated imperial tensions. In 1898, war between Britain and France over an incursion by the latter into the upper reaches of the Nile was only averted by the narrowest of margins. Belgium and Portugal were intensely suspicious – with good reason – that Britain, France and Germany meant to dispossess them of their vast African empires.

Many prominent and well-informed individuals even
believed that Africa was a prime cause of the whole conflict

Despite a period of Anglo-German entente in Africa immediately before the outbreak of war and a widespread belief in Africa that the palaver in Europe would not touch the continent, by the end of August 1914 the British government was planning military action against German ports and wireless stations in Africa and the creation of Mittelafrika, a “second Fatherland” straddling all of central Africa, had become a fundamental war aim of the German government.

The backdrop of three decades of imperial rivalry in Africa is crucial to understanding how the Great War came to be fought there as well as in Europe. Many prominent and well-informed individuals even believed that Africa was a prime cause of the whole conflict. At the Pan-African Conference in 1919, William DuBois, the African-American activist and founder of the National Association for the Advancement of Colored People, declared that “in a very real sense Africa is a prime cause of this terrible overturning of civilization which we have lived to see [because] in the Dark Continent are hidden the roots not simply of war today but of the menace of wars tomorrow”.⁵ In similar vein, Sir Harry Johnston, the African explorer and administrator, was convinced that “the Great War was more occasioned by conflicting colonial ambitions in Africa than by German and Austrian schemes in the Balkans and Asia Minor”.⁶

Although the importance of Africa to imperial rivals meant that the war may have shared the same roots as the conflict in Europe, the conduct of the campaign in East Africa could not have been more different. For the most part it was as mobile as trench warfare was static, but equally attritional.

 

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Tipperary mbali sana sana*

When 50,000 British, Indian, South African and Belgian troops advanced into German East Africa from the north and east in early 1916 they did so on a front 1,500 miles long – nearly three times the distance from Calais to Nice. In 1918, when the fighting had moved to Portuguese East Africa, the area of operations for just 12,000 British and German combatants was two-thirds the size of France. That year a column of two King’s African Rifles battalions marched 1,600 miles in seven months, forded 29 large rivers and fought 32 engagements. In July alone it covered 330 miles virtually without rations, subsisting on what could be foraged. When the officers and men were inspected at the end of their stint in the field they were described as resembling the victims of famine. Their experience of the hardships of war in East Africa was typical, not exceptional.

In the north-west Belgian troops commanded by Colonel Tombeur advance towards Tabora, capturing the town in September 1916

The war in East Africa, in the words of the quartermaster of the Cape Corps, a unit raised from South Africa’s “coloured” population, “involved having to fight nature in a mood that very few have experienced and will scarcely believe”.⁷ The accounts of many a British – and German – combatant in East Africa attest to the fact that “there is no form of warfare that requires so much inherent pluck in the individual as bush fighting”; and to the terrible loneliness which “tested the nerves of the bravest”.⁸ In 1917 an officer in the 40th Pathans who had fought on the Western Front wrote: “what wouldn’t one give for the food alone in France, for the clothing and equipment. For the climate, wet or fine”.⁹

Disease was a bigger killer of British troops than combat, exacerbated by the poor supply of inadequate rations and a scandalously deficient medical establishment. The troop return of the Gold Coast Regiment is instructive. By the time it returned to West Africa at the end of its service the regiment had sustained 50% casualties in a force 3,800-strong. Those killed in action numbered 215 whereas 270 had died from disease. The wounded totalled 725, those invalided by disease 567.

Keeping troops supplied with adequate food and within reach of rudimentary medical attention was virtually impossible. The supply line for General Northey’s troops in Northern Rhodesia extended back to Durban, via Portuguese East Africa – the longest supply line of any British force in the Great War. As the availability of livestock for transport proved incapable by mid-1916 of matching the depredations of disease, the onus fell on the only alternative – human porterage. The mathematics are sobering. For example, the distance from the railhead to Northey’s front was 450 miles. This meant that 16,500 carriers were required to transport a single ton of supplies – enough to feed 1,000 askari and their camp-followers for one day – for the simple reason that 14,000 of them were needed to carry food for the column while 2,500 carried the food for the troops.

In the first two years of the war service as a military carrier was voluntary, short-term and remunerated nearly as well as service as an askari in the King’s African Rifles. But as the theatre of war and number of troops expanded, carriers’ pay was cut to a pittance and recruitment became in effect by force. The seeds of one of the greatest tragedies of the Great War were sown.

*“It’s a long way to Tipperary”: King’s African Rifles marching song

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The butcher’s bill

The official death toll among British imperial troops who fought in East Africa was 11,189 – a mortality rate of 9%. Total casualties, including the wounded and missing, were a little over 22,000. But the troops required more than a million carriers to keep them in the field. No fewer than 95,000 carriers died, bringing the total official death toll of the British war effort to more than 105,000. Among African soldiers and military carriers recruited from British East Africa alone, today’s Kenya, more than 45,000 men lost their lives. This equated to about one in eight of the country’s total adult male population.

The true figures were undoubtedly much higher. As many a British official admitted, “the full tale of mortality among native carriers will never be told”.¹⁰ Even 105,000 deaths is a sobering figure. It equals the number of British soldiers killed in the carnage on the Somme between July and November 1916. It is more than 50% higher than the number of Australian or Canadian or Indian troops who gave their lives in the Great War – and whose sacrifice is much more widely recognised. Indeed the death toll alone in East Africa is comparable to the combined casualties – the dead and wounded – sustained by Indian troops in the Great War.

The troops required more than a million carriers to keep them in the field

The scale of the catastrophe which befell the men employed or impressed as carriers did not attract immediate attention in Europe or Africa, not least because the compilation of statistics was delayed by the many problems of demobilisation. Even when the details began to emerge in the summer of 1919 the Chief of the Colonial Division of the American delegation at the Paris Peace Conference speculated that “the number of native victims…may be too long to give to the world and Africa”.¹¹

There were many British combatants in East Africa who paid tribute to the carriers on whom they were utterly dependent for survival. General Northey declared that he “would award the palm of merit to the [carriers]”.¹² Colonial officials warned the military establishment in 1917 of the consequences of seeking to mobilise virtually every adult male in the entire theatre of war. But when the mortality rate became common knowledge in Whitehall it was deemed a “bloody tale” best ignored, or even suppressed, as Britain sought colonial prizes in Africa at the Paris Peace Conference. As one colonial official put it, in particularly arresting terms: the conduct of the campaign “only stopped short of a scandal because the people who suffered the most were the carriers – and after all, who cares about native carriers?”¹³

The logistical challenges – and the solution – were no different for German commanders. No fewer than 350,000 men, women and children undertook carrier “duty” and it is inconceivable that the death rate among them was lower than one in seven. In contrast to the practice in British colonies, no records were kept for the carriers and, with the exception of those permanently attached to German units, they were not paid.

To exclude dead carriers from the death toll of the Great War in East Africa, as has been the case for a century, is unacceptable. At best it fails to recognise that the campaign could not have been fought without them; at worst, it is tantamount to depicting them as somehow not human.

As for the financial cost, when the contributions of India, South Africa and Britain’s African colonies were included the bill, in the words of one senior colonial official, “approached, if it did not actually exceed that of the Boer War”.¹⁴

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“There came a darkness”

The brunt borne by East Africans during the conflict was not limited to carrier service. In German East Africa newly harvested crops were routinely requisitioned by German colonial troops without payment. In 1916, in central Ugogo district, the effects were exacerbated by poor rainfall and the following year brought a famine during which one fifth of the population died. All told, an estimated 300,000 civilians perished in German East Africa, Ruanda and Urundi as a direct consequence of the authorities’ conduct of the war, excluding those conscripted for carrier service. This was an even higher death toll than that inflicted by German colonial troops during the suppression of the Maji-Maji rebellion a decade earlier.

Although the peacetime administration was less dislocated in the British colonies and protectorates, sowing and harvesting were disrupted almost everywhere – by the weather if not by the absence of men on carrier service or fighting. Food price inflation, tax rises and increasingly repressive land and labour laws compounded the hardships. “People in South Africa tell me they are sick of hearing about the German East Africa campaign; I’m sure that these poor natives in East Africa are pretty sick of it too”,¹⁵ wrote an officer in the 5th South African Infantry in late 1917.

The worst calamity of all was saved for last. For the surviving troops and carriers on both sides, and for the civilian populations prostrated by four years of fighting, October 1918 – “Black October” – brought something worse than total war. The Spanish influenza epidemic spread far more rapidly along the wartime lines of supply and communication than it would otherwise have done. This new curse was so virulent that a man could simply drop dead while on a short walk.

The official influenza death toll for British East Africa was 160,000. But it is unlikely that fewer than 200,000 died – a far greater loss of life than that caused by the war itself and nearly a tenth of the total population of the country. By the time the epidemic was over 1.5-2 million had died in sub-Saharan Africa in a matter of months. It was the final, diabolical confirmation that the Great War in East Africa was above all a war against nature and a humanitarian disaster without parallel in the colonial era. One phrase was common to many oral histories of the time: “there came a darkness”.

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A forgotten conflict

A post-war booklet declared that “if there had been no war in Europe the campaigns in the German colonies [in Africa] would have compelled the interest of the whole world”.¹⁶ The point is a good one. Using any yardstick but the war in Europe, the scale and scope of the Great War in East Africa, in particular, was gargantuan. It produced cameos of extraordinary courage and preposterous improvisation on land, on sea and in the air to rival anything witnessed in the “main shows”. Comparison with the Anglo-South African War is arguably more appropriate than comparison with the “main show” of the Great War, the Western Front.

The fighting in East Africa – and its consequences – also put the highfalutin’ talk of the European powers of their so-called “civilising mission” in Africa, and imperialism itself, on trial. In so doing it exposed unremitting colonial ambitions to adegree of scrutiny unsurpassed since the beginning of the Scramble for Africa. As William DuBois lamented at the Pan-African Conference, “twenty centuries after Christ, black Africa, prostrate, raped and shamed, lies at the feet of the conquering Philistines of Europe”.

If there had been no war in Europe the campaigns in the German colonies [in Africa] would have compelled the interest of the whole world

In East Africa, the memorials and graveyards of the fallen attract little attention. Elsewhere Africa’s involvement in the Great War is all but forgotten. There is no askari or carrier monument in London. The best-known accounts of the war are fictional – C.S. Forester’s The African Queen, Wilbur Smith’s Shout at the Devil and William Boyd’s Booker Prize-nominated An Ice Cream War. If an episode is recalled at the mention of the conflict, it is usually of the thrilling adventure variety: Germany’s attempt to resupply the troops in East Africa by Zeppelin in 1917; the extraordinary British naval expedition to capture Lake Tanganyika; the thrills of the British operation to sink the German cruiser Königsberg in the Rufiji Delta in 1915; the determination and ingenious guerrilla tactics of the German commander, von Lettow-Vorbeck. Perhaps the disastrous British expeditionary force landing at Tanga in the first months of the war, a precursor of the disaster at the Dardanelles in 1915, might be vaguely familiar.

These episodes have their place. But they are corners of a much larger canvas. They should not be allowed to obfuscatethe reality of war to the detriment of the memory of those who fought and the suffering of the civilian population. The voices and memorials of the Great War in East Africa are predominantly European. But African combatants and carriers called upon to march twenty miles a day for months on end, in searing heat and torrential rain, subsisting on minimal rations and out of reach of medical resources, would have concurred with the sentiment expressed by one young British officer. In 1914 Lt Lewis had witnessed the slaughter of every single man in his half-battalion on the Western Front and had experienced the horrors of trench warfare. Sixteen months later, in a letter to his mother from the East African front, Lewis wrote: “I would rather be in France than here”.¹⁷

Left: Askari of 2/4 King’s African Rifles in Portuguese East Africa.
Right: M’Ithiria Mukaria, the oldest surviving veteran of the King’s African Rifles, in Isiolo (photographed by the author, February 2002)

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NOTES

1 Downes, W.D., With the Nigerians in German East Africa (Methuen, 1919), p.226

2 Haywood, A., and Clarke, F., The History of the Royal West African Frontier Force (Gale & Polden, 1964), p.235

3 Matson papers 5/14, p.159, Bodleian Library of Commonwealth and African Studies at Rhodes House

4 Pakenham, T., The Boer War (Abacus, 1992), p.572

5 DuBois, W.E.B., The African Roots of War, Mary Dunlop Maclean Memorial Fund Publication No.3 (1915), p.714

6 African World Annual, 1919, p.29

7 Difford, I., The Story of the First Battalion Cape Corps (privately published, Cape Town, 1920), p.93

8 Sheppard, S.H., “Some Notes on Tactics in the East African Campaign”, Journal of the Royal United Services Institution, February 1942, pp. 138-9

9 Thornton papers, Imperial War Museum

10 Duff, H., “White Men’s Wars in Black Men’s Countries”, National Review, Vol. 84 (1925), p.909

11 See Steer, G.L., Judgement on German Africa (Hodder & Stoughton, 1939), p.262

12 Northey papers, Imperial War Museum

13 CO/820/17, The National Archives

14 Duff, op. cit.

15 Lt Rice in The Nongqai, November 1918, p.508

16 See Foreword, Through Swamp and Forest: The British Campaigns in Africa, (privately printed, undated)

17 Lewis papers, letter dated 15 April 1916, Imperial War Museum

Other resources

Edward Paice interviewed by James Naughtie on BBC Radio 4 ‘Today’ programme on 7 August 2014

Edward Paice guest speaker at King’s African Rifles dinner marking the centenary of the outbreak of World War I

The post How The Great War Razed East Africa – Edward Paice appeared first on Africa Research Institute.