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A US$30mn revolving trade finance facility awarded by the African Export-Import Bank (Afreximbank) to South Sudanese company Trinity Energy has drawn scrutiny after its implementation raised a host of red flags for trade-based money laundering (TBML) and bribery.

Following a three-year investigation into the deal, corruption-tracking organisation The Sentry says that the facility, first agreed in 2018, enabled “the creation of a parallel revenue source and avenues for off-book spending that avoid public scrutiny and are vulnerable to capture by self-interested individuals and elites”.

Afreximbank agreed a series of loans of US$30mn to Trinity Energy, guaranteed by the Bank of South Sudan, for the import of diesel and gasoline. The energy company drew letters of credit (LCs) under the facility to buy fuel from a Kenyan firm, which it sold to the South Sudan market.

The deal also saw the government of South Sudan award more than 40% of the crude oil cargoes it contracted from June 2018 to May 2019 to Trinity Energy. These were then sold on to Glencore Singapore.

The arrangement was intended to address South Sudan’s lack of refining capacity and pump US dollars into the country’s depleted reserves of hard currency.

But in a report titled Crude Dealings, published on February 21, The Sentry voices concerns over indications of illegal activity stemming from the way the deal was implemented and calls on Afreximbank, along with the other parties involved, to investigate its dealings with Trinity Energy and the South Sudanese government.

Signs of potential TBML include Trinity Energy’s alleged concealment of the “illicit exchange of hundreds of thousands of US dollars” by paying fake invoices from a Ugandan company for goods that were never delivered. The Sentry believes that Trinity Energy may have used these transactions to illegally change US dollars for South Sudanese pounds on the black market via a third party, a travel agent based in Juba.

In a similar example, Trinity Energy is accused of making a “questionable” currency transfer by paying an inflated price of US$200,000 for almost 6,000 bags of sugar from a Ugandan firm, despite being an energy company with no history of sugar trading.

The Sentry suggests that this too raises questions over whether the trade took place and, if not, whether the payment was a way of disguising foreign exchange transactions.

Another aspect of the deal under scrutiny is a series of payments totalling US$6.5mn that Trinity Energy spent to secure the deal itself, and to arrange the first two LCs, together worth US$60mn.

The sums involved – US$2.5mn on fees linked to the Afreximbank facility, US$2.5mn on visits, meetings and travel, and US$1.5mn on “lobbyist fees and facilitation fees” – raised suspicions of bribery, with facilitation payments a particular red flag, The Sentry says.

Trinity Energy’s former finance director-turned-whistleblower, Biswick Kaswaswa, also alleges that envelopes of cash were given to government officials, while several employees collected earnings far higher than their stated salaries, which Kaswaswa suggests was to create cash funds for business facilitation.

HR and procurement manager Lual Kur Wiir received US$96,054 from Trinity Energy between May and October 2018, despite earning a monthly salary of just US$40. Trinity Energy’s executive director at the time of the deal, Ann Kathure Rutere, told The Sentry the inflated salaries were paid to wipe out a build-up of arrears. In the case of Kur Wiir, the watchdog calculated that the sum he received would have paid his salary for 200 years.

The Sentry also claims that the deal was uncompetitive in that it allowed Glencore “privileged access to crude contracts” worth US$376mn, with the commodity trader the only one named in the deal as original offtaker.

In a statement provided to GTR, Glencore says that it “was not a party to the financing arrangements” and “is therefore unable to comment”.

“Our understanding is that Afreximbank provided various financing facilities to the Government of South Sudan and Glencore was not party to those arrangements in its capacity as a contractual purchaser of crude oil from Trinity Energy,” the commodity trader says, adding that it “has not lifted any crude oil from South Sudan since 2020”.

 

Elite connections

The Sentry also traces multiple links to members of the South Sudanese government and argues that the trade finance facility was a way of allowing the government to move “a substantial portion” of its spending off the books.

The deal saw fuel supplied to the South Sudanese army at a significantly marked-up price, while Trinity Energy benefitted from exemptions on its fuel imports, suggesting that the government “went out of its way to facilitate the trade finance deal between Trinity Energy and Afreximbank”.

In return, the government “enjoyed unwritten benefits from its relationship with Trinity Energy, at one time using it for ad hoc fuel supplies to the army and at other times calling on it for injections of emergency cash”.

Trinity Energy said in response to The Sentry that there were “credibility issues” with Kaswaswa and disputed paying US$1.5mn on lobbyist and facilitation fees. It claims it “has acted in a transparent and bona fide commercial manner in its dealings in the oil market”.

Afreximbank and Trinity Energy did not respond to GTR’s requests for comment.

Harry Verhoeven, senior research scholar at the School of International and Public Affairs of Columbia University, tells GTR that the investigation emphasises how the South Sudanese government has treated the energy sector as “a platform to expand and consolidate political and commercial relations rather than as a key base of the economy to sustain a real developmental agenda”.

The report shows that energy imports and exports are viewed not as ways to help South Sudan’s citizens and strengthen its economy, Verhoeven says, but “as tools that can be monetised in elite-level competition over resources and political influence”.

He adds that the report lays bare how the South Sudanese government has “external enablers, including global oil traders…but also regional neighbours such as Kenya and Uganda, where key political, commercial and military actors have long benefited from South Sudanese land, oil, financial deposits, without facing any legal or political accountability”.

South Sudan has suffered a series of catastrophes since gaining its independence in 2011. Civil war broke out in 2013, resulting in the deaths of an estimated 382,900 people, according to the London School of Hygiene and Tropical Medicine.

Last year, The Sentry claimed that South Sudanese leaders had allegedly abused a US$993mn LC scheme that deprived the country of food, fuel and medicine, awarding LCs to companies that did not deliver the goods.