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Alexandra Wrage
President and Founder, TRACE


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Nicola Bonucci 
International Lawyer and former
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Dave Lee
FCPA Compliance Consultant, TRACE
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Sunny McCall
Senior Director II, Compliance Training, TRACE
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Lee Nelson
Independent Compliance and
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Jessica Tillipman
Associate Dean for Government Procurement Law, The GW University Law School
  • Writer's pictureDave Lee

A Four-Part Series: Part 3 - Hook, Line and Sinker: Ematum

tuna fishing boat

Mozambique began to take out a second group of so-called tuna bond loans in September of 2013, to fund a newly created tuna-fishing enterprise called Ematum. This venture lay at the heart of the loans, as it would ostensibly generate hundreds of millions of dollars in revenue. Ematum borrowed $850 million, by far the biggest single investment in fishing seen on the continent.

But the assumptions behind Ematum’s business model should quickly have raised more eyebrows, even to suit-clad bankers who might not be able to tell a trawler from a purse seiner to a long-liner. It was, as Mozambique’s own lawyers would later describe it, “commercially absurd.”

This is readily apparent from a look at the July 2013 Mozambique Fishing Feasibility Study, which was used to justify the investment. The study:

  • Indicates that there is a proposal to buy 27 total vessels, but has no discussion of the terms of that purchase, including price;

  • Assumes no fluctuations and mentions no hedging strategy with regard to fuel costs, tuna prices, or exchange rate fluctuations;

  • Boasts of “state of the art” satellite data links but does not state their purpose, or their advantage over simple, cheap VHF radio equipment;

  • Makes no case for the purchase of expensive new vessels over vastly cheaper used vessels;

  • Has no discussion of onshore processing or logistics, and only a cursory discussion mention of training;

  • Uses revenue projections that assume, with no elaboration, that the 21 Mozambican vessels under Ematum would catch as much tuna as 129 (predominantly) foreign-owned vessels, or roughly six times more fish per boat;

  • Has no discussion of when or how those foreign vessels would be phased out of Mozambican waters and how that would affect catch;

  • Counts three trawlers (meant to catch bait for the tuna vessels to then use) as among those that would catch tuna;

  • Assumes that there is no learning curve to the enterprise despite the study itself indicating that there is virtually no local experience in the industry (there was only one locally-owned commercial tuna vessel in Mozambican waters, and the foreign-owned vessels did not employee any local crew);

  • Assumes a full year’s worth of catch in the first year of operation, even though the fishing vessels would not be delivered until the second half of the year; and

  • Contains typographical errors.

The study appears more flawed when viewed against other factors that are not mentioned in the study, but were known or available to Credit Suisse bankers at the time:

  • It includes the purchase of patrol vessels when these would have already been included in the ProIndicus venture;

  • According to Mozambique’s own data, the one commercial tuna vessel already in Mozambique’s fleet had been catching about 25 percent of what the study projected each additional boat would catch;

  • The projections also assume that the boats will haul in more tuna than they can apparently carry [DL1] ;

  • It estimates transportation costs to high-value markets (i.e., Europe, Japan) at $250 per ton, even though a study commissioned by the Pew Charitable Trusts estimates it (including insurance) at more than 20 times that amount; and

  • Comparing tuna pricing data in the Fishing Feasibility Study against pricing data in the Pew study, it appears that the former used retail prices for sushi-grade tuna in Japan, instead of wholesale or dock value (i.e., what is paid to fishermen).

Ematum ultimately paid $22.3 million for each tuna vessel. Similar (if not the same) vessels now appear available on the second-hand market for roughly $3 million.

As early as November of 2013, the Ematum offering was met with skepticism by some, who doubted both soundness of the commercial venture as well as the sums involved. But even with these warning signs, there was a reason not to care: “investors know there are huge gas reserves off the shores of Mozambique that will eventually bring in lots of foreign exchange, even if tuna does not.”

But in the end, many investors – including Credit Suisse and VTB – would find that this was not the case. We explore this further in our next post.

FCPA Compliance Consultant, TRACE



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