Mozambican firms query two findings of Kroll probe that questioned their actions

THREE state-owned Mozambican companies whose government-guaranteed debts led the gas-rich nation to default have criticised an audit by Kroll that has questioned their actions in the scandal.

The companies have queried two key findings by Kroll, including that more than $500 million (R6.89 billion) of debt has remained unexplained, and said that the entire maritime security project that the loans had funded “was public from day one,” according to a letter from their lawyers.

Verified

The letter was verified by the law firm. Mozambique’s government last year admitted to the International Monetary Fund that it had agreed to about $1.4bn of loans it previously had not disclosed, prompting the Washington-based lender to halt financing to the country.

A group of 14 donors followed suit.

Mozambique is in default after missing at least two payments on its $727m worth of Eurobonds this year.

As a condition to resume funding, the IMF said that Mozambique should appoint an international company to carry out an audit of the loans taken by the three companies.

Tuna-fishing company Empresa Mocambicana de Atum, or Ematum, borrowed $850m, which was converted into a Eurobond, while security company ProIndicus received $622m, and Mozambique Asset Management got $535 m.

The $1.4bnn of previously hidden debt excludes the Ematum loan.

They said the entire maritime security project that the loans funded ‘was public from day one’

Kroll undertook the probe and the attorney-general in June published a summary of the findings, which showed that the companies had yet to account for a portion of the debt and also suggested that the country may have been overcharged for parts of the projects the loans had funded.

Kroll has declined to comment on the letter.

The $500m that Kroll said was unexplained was officially moved to the defence budget and approved by parliament, raising questions about why Kroll believed there was a discrepancy, the companies have said last month.

Kroll hired a specialist to value the fishing boats, patrol vessels and aircraft the loans funded, who found that they may have been overpriced by about $700m.

Equipment

Privinvest, the contractor that had supplied the equipment, said it charged similar amounts to other clients.

It is “strange that the specialist has evaluated sophisticated systems in so short a time,” the companies said.

“Likewise, Kroll only presents an assessment that does not include intangible assets, such as the transfer of technology and intellectual property.”

Other points made in the letter include:

Banks and lawyers did due diligence and the three loans would not have happened if the projects were not economically viable.

The three companies blamed the government for the project delays.

The companies disputed Kroll’s assertion that they “provided limited financial data,” and listed a series of documents they provided regarding ProIndicus.

The IMF has yet to resume funding to Mozambique and said last month that the government should publish the full report and “fill the information gaps to strengthen transparency and ensure accountability” before it does.

Earlier this year, Antonio do Rosario, the head of the three state-owned companies, accused Kroll auditors of personally attacking him in its report and said that he chased representatives of the company away from his office after they sought details. – Bloomberg