10 Jan 2019

Detention of former Mozambique finance minister in $3b loan scandal legal - judge

2:47 pm on 10 January 2019

A South African judge has ruled that the detention of Mozambique's former finance minister Manuel Chang over $US2 billion of fraudulent loans was legal.

Manuel Chang, former finance minister of Mozambique, appears at the Kempton Park Magistrates court to fight extradition to the United States.

Manuel Chang, former finance minister of Mozambique, appears in court in South Africa to fight extradition to the United States. Photo: AFP

Mr Chang is among 18 Mozambique citizens indicted over the loan scandal, which New Zealand investment banker Andrew Pearse is alleged to be involved in.

Lawyers for Chang, who was arrested in South Africa on 29 December and denies wrongdoing, argued in court on Tuesday that his detention on US charges was illegal because a request for extradition had not yet been received.

Chang was in charge of Mozambique's finances when it failed to disclose government guarantees for $US2b ($NZ3b) in international borrowing by state-owned firms.

Judge Sagra Subrayen said in a Johannesburg court on Wednesday (local time) that Chang's detention had followed the procedure set out in the extradition treaty between South Africa and the US, and that she was not persuaded by the defence's argument.

"The application is therefore dismissed," she said.

If Chang is extradited to the US, analysts say the case against him could unearth details about Mozambique's debt scandal, with potential implications for senior members of the ruling party ahead of elections in October.

Mozambique's acknowledgement in 2016 of the undisclosed borrowing prompted the International Monetary Fund and foreign donors to cut off support, triggering a currency collapse and a debt crisis that Mozambique is still struggling to recover from.

The US is also seeking the extradition of three former Credit Suisse bankers and the lead salesman of Abu Dhabi-based holding company Privinvest, who it says are implicated in the fraud.

Mr Pearse is one of those three ex-Credit Suisse bankers, who are alleged to have conspired to borrow vast sums of money guaranteed by the Mozambique government, ostensibly to fund maritime projects in the poor African nation.

It's alleged Mr Pearse received over $US45m in bribe and kickback payments through the scheme.

- Reuters

Get the RNZ app

for ad-free news and current affairs