(Bloomberg) -- Almost $1 billion supplied to South Sudan through a credit line from Qatar National Bank and Kenya’s Stanbic Holdings Plc to help the country buy food, fuel and medicine went missing, according to an investigation by The Sentry.
The money, supplied between 2012 and 2015, was diverted to businesses with links to prominent South Sudanese officials, including members of President Salva Kiir’s family, the then-governor of the central bank and military officials, the US-based nonprofit that investigates allegations of corruption said in a report published on Wednesday.
The goods mostly weren’t delivered and after failing to repay the borrowed money, the South Sudanese government entered international arbitration talks with QNB before later reaching a debt-restructuring agreement with the lender, The Sentry said.
“Almost $1 billion effectively walked out of the country, and the human cost remains to be calculated,” it said. “At the peak of the letter-of-credit program, when hundreds of millions of dollars in goods should have arrived in markets, more than two million people went without food, hospitals and clinics had to treat patients without medicine, and fuel shortages resulted in black-market price gouging.”
South Sudan, which gained independence from Sudan in 2011 after decades of civil war, is one of the world’s poorest nations, ranking 185th out of 189 countries in a United Nations Development Programme index that assesses a range of factors including wealth, health and education. Since independence, the country has been plagued by conflict and allegations of corruption.
QNB and the Qatari government didn’t immediately respond to requests for comment. Stanbic is a unit of South Africa’s Standard Bank Group Ltd.
Stanbic’s line of credit “was in line with the objectives of the government of South Sudan to support local businesses’ participation in the importation of certain essential goods,” Standard Bank said in a response to queries. The transactions complied with its rules and processes and Stanbic has no “credit exposure against the Bank of South Sudan,” it said.
South Sudanese Information Minister Michael Makuei Lueth said he was busy and unable to speak when contacted. Chol Ajongo, South Sudan’s ambassador to Kenya, declined to comment.
The funds were meant to help local traders pay for imports at a time when they were struggling to do so because of a shortage of foreign exchange in the country and the weakness of South Sudan’s currency. Instead, the letters of credit were awarded to companies “that only existed on paper,” The Sentry said.
“The banks didn’t require physical verification that the promised goods were delivered,” Denisse Rudich, a senior adviser at The Sentry, said in a statement accompanying the report. “The letters of credit were often paid out based on false or misleading documents presented by companies selected by the government of South Sudan.”
While a 2015 report on the matter by Stephen Wondu, South Sudan’s auditor general, was presented to parliament, it was never made public, the group said.
In total, the letters-of-credit program amounted to $993 million, with $793 million of that coming from QNB and the rest from Stanbic, The Sentry said. Hundreds of millions of dollars were transferred into accounts in Kenya and Uganda linked to the same individuals who were allocated the letters of credit, or to their close associates, often with no proof of delivery, it said.
(Updates with Standard Bank comment in seventh paragraph)
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