No prosecutions for Banco Astral plunder

By Joseph Hanlon

No Mozambicans will be prosecuted for plundering and bankrupting Banco Austral a decade ago, the Public Prosecutor’s Office (PGR) announced on 1 April. This follows a decision last year that no one would be prosecuted for the 2001 assassination of Antonio Siba-Siba Macuacua, the Bank of Mozambique’s head of banking supervision who took over as head of the bank after it collapsed.

It ends a nine year struggle between Frelimo, which refused to hold accountable anyone from the party elite, and donors and civil society which fought to keep the issue alive. Donors forced a forensic audit of Banco Austral and made the bank collapse and murder symbolic governance issues, raising them each year in negotiations with the government -- in the end, to no avail.

As a condition of IMF support, the then People’s Development Bank (BPD) was privatised in 1997 to the Southern Bank Berhad (SBB) of Malaysia (30.4%) and Invester (29.6%), a Mozambican company headed by Octavio Muthemba, former Industry Minister and chair of SPI - Gestão e Investimentos, the Frelimo party holding company. The state kept 40% of the renamed Banco Austral. Through a mix of direct theft and bad loans to themselves and others in the Frelimo elite, the bank was drained of at least $150 million and then handed back to the state in 2001. Siba-Siba was named head, and tried to collect on some of the loans and prepare the bank for reprivatisation to ABSA of South Africa, now Barclays. In an unsuccessful attempt to stop the sale, Siba-Siba was murdered at the bank’s offices on 11 August 2001.

The Public Prosecutor’s Office (PGR) on 1 April said it would not prosecute Muthemba, who was chair of the Banco Austral board of directors, Jamu Hassan and Omaia Salimo, who were members of the board, and Alvaro Massinga, who sat on the bank’s supervisory board, on the grounds that they did not take part in the direct day-to-day management of the bank.

Although the four received loans for themselves and their companies, knowing this was in violation of both the law (Lei 28/91) and the bank’s Credit Policy Manual, both of which banned loans to managers and directors, the PGR does not feel this warrants prosecution. Muthemba, Hassan, and Massinga each had personal and company loans in excess of $2 mn from Banco Austral, and these were not being repaid. The acts of the four men are “to be condemned on moral and ethical grounds”, the PGR states, but any response must come from the Bank of Mozambique, not the PGR. And it is for Barclays or the Mozambique government to try to collect on the outstanding loans.

The PGR does suggest that three Malaysian managers of Banco Austral should be prosecuted, but there is little chance of getting them back to Maputo for trial.

In a series of article written in 2001, I quote a senior Mozambican banker saying "it was impossible for the Banco Austral board of directors not to know that frauds were occurring.” The original series of articles, which gives detailed background to the bank scandals, is titled “Killing the goose that laid the golden eggs “ and is on  www.open.ac.uk/technology/mozambique/pics/d53732.doc 

An attached file has AIM and Savana articles on the PGR decision.

Obs: read the series of articles "Killing the goose that laid the golden eggs"  in Portuguese here (Matando a galinha dos ovos de ouro).