A court battle between two Chinese companies has exposed the political influence of a company believed to be a major source of funds for Mozambique’s ruling party

A joint investigation by Zitamar News and Expresso, Portugal’s leading investigative newspaper

Frelimo’s holding company, SPI, and its Chinese partner in the Dugongo cement plant in southern Mozambique, have been accused of conspiracy in a Hong Kong court case which has shed new light on SPI’s relationship to Mozambique’s ruling party.

The case was brought in 2020 by China International Fund (CIF) Limited, a Hong Kong-based company formerly headed by controversial businessman, Sam Pa, and famous for questionable dealings across Africa — and in particular in Angola, for its joint venture with the state oil company, China Sonangol.

In 2009, CIF took an 80% stake in a joint venture with SPI to build a cement plant in Bela Vista, Maputo province. But 10 years on, and frustrated with a lack of progress building the plant, SPI replaced CIF with another Chinese company, West China Cement Limited (WCC).

The Hong Kong case was brought by CIF against WCC and West International Holding Limited, a subsidiary of WCC. CIF’s lawyers told the court how WCC conspired with SPI to take control of the cement plant, even though the Mozambican company had no legal standing to remove the plant’s majority shareholder.

According to the court ruling in Hong Kong, this is what happened: in November 2017, SPI convened a general meeting of CIF-MOZ, the consortium that owns the cement plant, and had a capital increase approved in which CIF’s 80% shareholding was diluted to just 1%. Although CIF contested this at the time, in February 2019 SPI obtained a favourable ruling from a court in Mozambique, confirming that the local company now owned 99% of the cement plant consortium. In September of that year, SPI and WCC signed an agreement in China in which this new Chinese investor took 60% of the consortium.

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Furthermore, CIF alleges that the company’s removal from the project was accompanied by the expulsion of its workers from Mozambique, in an illegal process in which the business arm of Frelimo apparently used state means to intimidate CIF workers and forcibly deport them to China.  

In an email presented to the court, one CIF staff member told how Mozambican police and migration agents went to the cement factory on 31 August 2019 and took Chinese workers linked to CIF to the airport, in an action organised and planned by SPI.

They said they did not receive any repatriation documents, and were given oral instructions to leave by Interior Ministry agents, who threw them into vehicles and took them to the airport.

SPI’s new partner, WCC, tried to halt the court case against it in Hong Kong, claiming that the proper jurisdiction to settle the dispute was Maputo, but CIF claimed that the dispute must be settled in China and not in Mozambique to avoid the risk of political influence on the judgement.

CIF’s lawyers argued that Mozambican courts would never be impartial in judging the case because of the profile of the local partner company. “SPI is the financial and investment arm of Frelimo, which has been the ruling party in Mozambique since 1975,” the ruling read. “Given the strategic importance of the project, there is a real risk that Frelimo will put pressure on the Mozambican courts to reject any claim that CIF may make in Mozambique, and there is evidence that the Mozambican courts are susceptible to Frelimo’s political influence.”

SPI ‘involved in Frelimo election campaign’

CIF provided the Hong Kong court with evidence to back up its claims that SPI is linked to Frelimo, and that it could not expect a fair trial in Maputo.

One is an email sent to CIF on July 2, 2018 by Safura da Conceição, an SPI director and former Frelimo MP, in which she describes the company as “the holding company of the Mozambican party.”

In another email to CIF dated 9 August 2019, Tomás Timbane, described as SPI’s lawyer, explains that company director Victor Timóteo was unable to attend a meeting in Lisbon because “the Frelimo election campaign is approaching and SPI is involved in its preparation”.

There is also, among the correspondence cited, an email of 19 July 2019 in which Timóteo says the cement plant project is politically sensitive and not having it completed in time would “give a negative signal to the country and may penalise the Frelimo party in an election year”.

Tomás Timbane told Zitamar News he is not and never has been SPI’s lawyer. Victor Timoteo, contacted by Expresso, did not comment on SPI’s links to Frelimo but said the company is a commercial entity “duly authorised to operate in the market,” and that its board is free to make “the investments it deems pertinent.” He added that “licensing processes in Mozambique are conducted by serious, competent people, whose party affiliation is not known”.

Nevertheless, the evidence was considered sufficient to convince the judge. Although there have already been references to SPI as a source of funding for Frelimo in the media, this is the first time that the link appears in a court case, and the first time evidence has emerged of the link being formally acknowledged.

Serious investors

“I wouldn’t be surprised if Frelimo had done something like this,” said Edson Cortez, head of transparency NGO the Centro de Integridade Publica (CIP) in Maputo. “There have been similar cases in the past, where basically foreign investors came in with capital, and figures linked to the ruling party participated with their power to influence processes.”

Some partnerships, Cortez said have failed due to a change in government, as people gain and lose power; in other cases, he said, Frelimo does a kind of “auction” for the best investor. “Frelimo can be cooperating with a certain investor, but then for some reason it believes it’s better to drop the one who made the first investment — and it appears that’s what happened in the case of Dugongo,” he said.

“It’s very bad for the reputation of the country. It just shows that in Mozambique the likelihood of serious investors coming is very low.”

But SPI has attracted other foreign investment partners. One example is Viettel, a Vietnamese telecoms company owned by that country’s military, which is a co-investor with SPI in the telecoms company Movitel.

Another SPI joint venture is with Portuguese energy company Galp, in fuel terminals in Beira and Matola. Galp bought into the existing Matola project in 2013, acquiring a 45% position from a Kuwaiti company, IPG (Independent Petroleum Group), which retains 45%. SPI has 10%. The same consortium went on to build a terminal in Beira, too.

The Matola terminal was inaugurated by President Nyusi in December 2020 and, according to press releases at the time, represented an investment of US$100 million by Galp and IPG. The Beira terminal is still being built.

Expresso asked Galp what investment SPI has made in the two fuel terminals, and what work the company had done on the project — and if Galp considered that there is a conflict of interest in SPI being its partner in projects that depend on the approval of the Frelimo government. The company did not reply specifically to these questions, but said it “is governed by the highest ethical standards, complies with the law in all markets in which it operates and repudiates any suggestion that it may at any time have benefited from any form of illegitimate treatment by the authorities, whether in Mozambique or in any other country.”

Galp’s code of ethical conduct, published on its official website, says that the company “does not make contributions to political entities, in direct or indirect form, nor donations in lieu of these payments, for any purposes other than those strictly permitted in the applicable legislation.”

But the company has been in murky waters before regarding its connections with politically-connected people and companies. “We do not know the details of the compliance systems of Galp and other Portuguese companies with operations in Mozambique, but judging by what happened with the Angolan Isabel dos Santos [former shareholder of Galp], received as a successful businesswoman and desired investor, I would not be surprised if reinforced measures of identification and diligence before Politically Exposed Persons (PEP), or entities with obvious political connections, were relatively absent from these systems,” says Karina Carvalho, executive director of Transparency International in Portugal.

“There remains, unfortunately, the idea that in some places, business can only be done outside the law, or at least by flexing its interpretation according to the context,” Carvalho said.

There are very few accusations and convictions of international corruption in Portugal, despite there being “close relations of large Portuguese companies in especially vulnerable markets,” she added.

In the court ruling in Hong Kong, the judge cited Transparency International’s 2019 Corruption Perceptions Index when deciding whether the case could be heard in Mozambique. Out of 180 countries, Mozambique was ranked 146th. In the latest ranking, it now sits in 147th place.

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