Looted its foreign reserves
In email correspondence, a spokesperson for QNB insisted that the bank “exercised full due diligence applicable or required for such dealings — including customary checking of documents”. CfC Stanbic declined to comment before the M&G’s deadline.
To date, it remains unknown how much of the nearly one billion dollars disbursed through the LC scheme was embezzled. In South Sudan, archiving systems are practically nonexistent, and a visit to the customs headquarters quickly reveals the futility of trying to gather reliable data: at the time of reporting, the office had no electricity on most days, let alone a proper database of imports.
Yet a peek into the better-kept records of South Sudan’s neighbours, who were party to the crossborder transactions under the LCs, offers some insights. Data obtained from the Ugandan Bureau of Statistics, corroborated with the United Nations’ Comtrade Database, suggests that the bulk of LCs weren’t used to import goods.
What, for example, happened to the $10-million allocated to the five Eritrean companies to import cooking oil? According to trade data, at best one-third was delivered.
‘It’s a kind of blackmail’
One billion dollars could have gone a long way for South Sudan’s population of about 12-million, a third of whom faced severe food insecurity at the height of the scandal.
But while government officials and their business associates used the country’s dwindling foreign reserves to enrich themselves, citizens literally paid the price.
“The pharmaceuticals situation is in a mess,” said John Charles Ladu, the owner of St Joseph’s Pharmacy, one of the oldest and busiest drug retailers in Juba. “We don’t have a source where you can get the medicine.”
With a turnover of less than $500 000 a year, St Joseph’s should have been inundated with affordable drugs from wholesalers who benefited from the $38-million in LCs allocated to the nascent pharmaceutical sector, which industry insiders estimate is only worth between $5-million and $10-million a year. But it was forced to rely mostly on black-market drugs instead.
The misuse of funds intended for vital food and medicines increased the burden on donors to fill the gaps.
“It’s a kind of blackmail,” said one Western diplomat. “If you draw your red line and you say: ‘We will only spend this much,’ [the government] will just say: ‘Okay, don’t fund it then.’ If we don’t do it, people will die.”
Although there is little hope that the government will reform and crack down on corruption in its own right, pro-transparency activists say that the international community must increase the pressure by introducing more aid conditions.
“Donors need to give their foreign support with benchmarks, among them the commitment to really fight corruption,” said Edmund Yakani, who leads civil society group the Community Empowerment for Progress Organisation and lobbied South Sudan’s Parliament to request an audit of the LCs. “Everything else is a waste of time.”
Lost loot: Since South Sudan’s independence in 2011 (above), most of the country’s foreign reserves have been squandered. The administration of President Salva Kiir, pictured (below left) receiving a report from the auditor general, has failed to stamp out corruption. Civil society activists like Edmund Yakani (below right) are calling for an investigation into the letters of credit scheme, which has made it difficult for pharmacists like John Charles Ladu (below middle) to stock drugs.