Mozambique’s Banking Crisis: A Web of Corruption and Cronyism

A new report has revealed the extent of corruption and cronyism that plagued Mozambique’s banking sector in the 1990s, leaving a trail of devastation in its wake.

The Crisis at Banco Comercial de Mocambique (BCM)

According to documents obtained by our newspaper, BCM, one of the country’s largest banks, was heavily indebted due to reckless lending practices. In an effort to keep the bank afloat, officials granted substantial loans from BCM to other companies, including those with close ties to high-ranking government officials.

• One such loan was given to Simões, a company owned by António Simões, who had a reputation for using his connections to get ahead in business.
• The loan was used to import goods, but instead of repaying the debt in cash, Simões repaid it with lorries, which were then handed over to CSM, another company linked to Simões.

The Consequences of Corruption

The bank’s troubles continued to mount, and by 1998, BCM was facing large-scale fraud and deficits. Mozambican officials began to pressure Vasco de Mello, the bank’s president at the time, to take a more active role in addressing the crisis.

• In a surprise move, Simões sold his shares in Impar to Banco Mello for $20 million in early 1998, a year before the government and BdM finally agreed to sell the company.
• A new president, Manuel Ortigão Ramos, was nominated by Banco Mello and took over the bank in April 1999.

The consequences of Simões’ involvement with BCM were devastating:

• The metalworking industry was left in ruins
• The bank was on the brink of collapse
• Mozambique was saddled with massive debts

Profiting from Corruption

Some individuals appear to have profited from Simões’ dealings:

• António Simões himself made a fortune
• Others, including government officials and business leaders, also benefited from their connections to the bank

Related Story: Banco Popular de Desenvolvimento (BPD)

Banco Popular de Desenvolvimento (BPD) was another bank that suffered from poor management and corruption.

• Despite warnings from auditors about its high levels of bad debt, BPD was privatized in 1997 to Invester, a Mozambican group led by Octávio Muthemba.
• Muthemba’s connections to the government were strong, and he had previously served as Industry Minister.

The story of BPD is another example of how corruption and cronyism have damaged Mozambique’s economy and reputation. Our investigation will continue to uncover more examples of these practices and their impact on the country.