Economics of Shame: 1,908 South Sudanese companies misappropriated $1billion in Letters of Credit between 2012-2015, Auditor General’s Report reveals
As a political response to the 2012 Panthou (Heglig) war between Juba and Khartoum, Juba closed the production of oil- the only revenue stream for Juba, as well as a source of revenue for Khartoum in an attempt to put a chokehold on Sudan.
The Government embarked on negotiating dollar supply facilities from the Qatar National Bank and Stanbic CfC Bank to ensure the supply of strategic imports including pharmaceuticals, fuel, food, building materials, and industrial inputs. There was a secondary (political) objective of empowering South Sudanese citizens in the private sector through affirmative action to promote and bolster this policy.
This was the origin of the infamous ‘letter of credit’ trade, where ghost companies were allocated bloated contracts without meeting the minimal requirements to supply ‘essential goods’ to the country.
In an independent investigation report conducted and presented to Parliamentarians by the National Audit Chamber in 2015, the officials found that close to 1 billion United States dollars were wasted in the project by companies that either supplied wrong goods or supplied nothing at all.
Just like the dura saga, the project was a total failure and riddled with fraud. It did not yield the intended results. Instead, it benefited a few officials and fake ‘traders’ who turned the noble banking facility of lines of credit (LCs) into mere means for personal benefits at the expense of the people in South Sudan.
The performance and management of the Letters of Credit cost the country, not only huge financial losses but also international shame and indignity in the eyes of the region and the world.
The report found that 1,908 local companies were responsible for the misappropriation of the funds that were needed for the development of the country.
According to the Auditor General report, concerned institutions such as the Central Bank, Joint Technical Committee, South Sudan Customs Services all evaded their duties with regards to verifying the authenticity of the companies.
The investigation was conducted in the 10 states and 2 Administrative Areas of Abyei and Greater Pibor and some other government ministries such as Health, Agriculture and Housing. The findings were consistent with reckless and coordinated corruption.
The report exposes the level of impunity exhibited by some states and companies by choosing not to supply the goods, or made dismal supply at levels incompatible with the terms of the supply agreement.
The report unearthed situations where companies that had ‘won’ the contracts were later rejected and contracts were given to other new companies underground.
Two big cases were in Unity and the Lakes States where Qatar National Bank indicated that ‘Unity State government subsequently replaced these six companies with one (1) company, namely, ”Well Done International Co. Ltd” without justification or explanation.’
In Lakes, Ninety-five per cent (USD. 5, 700,000) of the allocations were given to only three companies. These companies are Jolly General Trading Ltd, Noor General Trading and Mariek Trading Co. Ltd.
Information received from the state Ministry of Finances shows that Jolly General Trading Co. Ltd and Mariek Trading Co. Ltd delivered some food items to the state. Noor General failed to deliver any goods to the state.
Family Tekle Trading Co. Ltd and Lakes Investment and Trading Co. Ltd were allocated USD.100,000 each. Neither delivered any goods to the state.
Several officials such as the Undersecretary in the Ministry of Commerce and Trade awarded contracts to companies without consulting with the Joint Technical Committee- the body responsible for the award of contracts.
The ministry of Health alone saw losses amounting to $3,400,000 evaded as 15 companies failed to deliver goods- most of them lacking premises.
“Information received from the Drugs and Food Control Authority Secretariat of the Ministry of Health revealed that fifteen (15) companies allocated Letters of Credit amounting to USD. 3,400,000 for import of pharmaceuticals failed to supply the drugs as required by the terms of the Letters of Credit. From these fifteen (15) companies four (4) have no identifiable business locations”.
Many originally approved allocations to companies were cancelled by the former Undersecretary and replaced with other companies without vetting and selection by the Joint Technical Committee. The justifications of cancellation of these companies were their failure to meet the one month allowed period for processing the letters of credit.
According to the 16 paged Report, Auditor General Steven Wondu recommends the investigation and arrest of the shareholders of those companies that cheated the country with huge amounts of wealth.
In his report, Wondu said that the allocation of the money was corrupted by powerful Government officials. Awards of the contracts involved threats and intimidation and were therefore given under duress.
“The Performance and Management of ‘Letters of Credit’ program from 2012 to 2015 was unsatisfactory. Internal controls, governance and risk management processes were very week at best and non-existent at worst. Actions by government officials had a negative effect on the achievement of the intended government objectives”, read an excerpt.
The project was implemented and managed by the various bodies including the Joint Technical Committee of the Ministry of Trade, Industry and Investment, Bank of South Sudan, National Qatar Bank, Stanbic CfC Bank, some national ministries, state governments, and Administrative Areas.
The audit investigation was conducted pursuant to Article 186 (7) of the Transitional Constitution of the Republic of South Sudan and Section 12(4) of the Auditor General Chamber Act, 2011, read together with the National Legislative Assembly Resolution No. 25/2015 (3) dated 9th June 2015