Category Archives: Sudan investments

Financial Sanctions for South Sudan? Part II – The Profiteers

The Profiteers is a documentary by Africa Uncensored that was unveiled in Kenya this week. It was to air on television but was cancelled a few hours before airing on Kenya Television Network (KTN) a local TV channel. The producers confirmed the network’s abrupt decision to pull the broadcast, and then went ahead to release the feature on their own, on Youtube in three parts, and with links and commentary on Twitter.

The Profiteers production by Africa Uncensored follows other work by The Sentry Group and are featured in the latest Sentry report on the situation in South Sudan. Sentry continues to run a watch on events in South Sudan, corruption, the growing refugee population, and complicity of foreign organizations such as banks in Kenya and security forces in Uganda.

The Profiteers investigative team led by John-Allan Namu extensively document, both with straight and under-cover reporting, stories of South Sudan leaders luxuriating in other countries and cutting deals for weapons, logistics, security and valuable wood as they purchase luxury houses and real estate properties in Kenya, Uganda, Ethiopia and Australia, flashy cars and are flush with cash which is the basis of their profligate lives and which does not match their official modest salaries. They are able to freely travel and operate bank accounts and transact vast sums through them, even though some of them face international sanctions.

The Profiteers and The Sentry mention several institutions including banks like KCB, Stanbic and Equity bank, and money transfer services such as Dahabshil, and Amal. Some activities look questionable but are understandable such as the decision by the Bank of South Sudan to hold the bulk of its reserves outside the unstable country while soldier battle.

Sentry Recommendations
  • Kenya and Uganda should strengthen regulatory bodies to track money and enforce sanctions.. compliance departments in Kenyan and Ugandan banks should not wait for financial regulators to request information and should immediately find and flag high-value transactions, all real estate transactions, and the accounts of South Sudanese politically-exposed persons (PEPs)
  • Law Enforcement Should Investigate South Sudanese property without political interference
  • Trade Associations should improve standards for investments
  • Businesspeople should share investment information.
Also mentioned in the Sentry report is a wave of posts by Kenyan bloggers: In mid-2018, a group of Kenyan bloggers garnered significant attention when posting photos on Twitter of luxurious homes owned by South Sudanese elites or images of top officials’ family members living extravagant lifestyles in Kenya and Uganda. Referencing the impunity apparently enjoyed by these well-connected South Sudanese, the bloggers labelled their tweets with the hashtag #SouthSudanUntouchables. The same day that hashtag went viral, a high-level U.S. government official spent the day in Kenya, addressing government agencies, financial institutions, and civil society to deliver a related message: that South Sudanese officials should no longer enjoy impunity and that their ill-gotten gains should not be welcome in Kenya and Uganda.

Financial Sanctions for South Sudan?

Yesterday, the Sentry Group, whose mission is dismantling the financing of Africa’s deadliest conflicts, released a report on corruption in South Sudan. As the fighting in South Sudan has gotten worse, with the leaders unable or unwilling to pursue peace, it’s been an open secret that they have economic links, some of which are in Nairobi, especially in real estate and banking.

Excerpts

Findings & Recommendations

  • Even President Kiir and Vice President Machar themselves have acknowledged that corruption is at the core of the country’s current crisis. “An estimated $4 billion are unaccounted for or, simply put, stolen by former and current officials, as well as corrupt individuals with close ties to government officials,” President Kiir wrote in a June 2012 letter to government officials that was leaked to the press.
  • Most of the funds that these kleptocrats have amassed appear to come from the oil, mining, foreign exchange, and banking sectors as well as food procurement and defense supply contracts from the government.
  • South Sudanese leaders have paid lip service to the need for oversight, but public institutions have been transformed from entities that are supposed to safeguard the rule of law and provide social services into predatory entities that do quite the opposite.
  • Top South Sudanese officials and their immediate family members hold stakes in numerous commercial ventures are not actually available to the public…Immediate family members of South Sudanese politically exposed persons – (a.k.a. PEPs) should be required to declare their assets.
  • U.S. authorities, as well as their counterparts overseas—in places like Australia, the European Union, Kenya, and Uganda— should open investigations that could lead to the forfeiture of criminally derived assets and to the prosecution of those involved in profiting from corruption in South Sudan.
  • Governments should thoroughly examine whether or not banks involved in these transactions fulfilled their due diligence, reporting, and compliance requirements.
  • The facilitators and enablers of corruption and mass atrocities should be priority targets for sanctions designations. .. been facilitated—knowingly or not—by a wide range of lawyers, brokers, banks, and foreign companies.
  • The U.S. government and U.N. Security Council have already sanctioned a series of mid-level commanders from both sides of the conflict in South Sudan. The failure to follow on these actions with any meaningful scrutiny of higher level targets muted any message these actions may have had, resulting in a perception in South Sudan that the international community is not serious about imposing consequences.
  • Kenya and Uganda, in particular, have relatively solid anti-money laundering legal frameworks on paper that can provide a basis for action against corruption, as well as demonstrate that local laws are being violated by banks that process suspicious transactions on behalf of South Sudanese PEPs. These banks should already be conducting enhanced due diligence on South Sudanese PEPs, according to the FATF Recommendations, and taking other measures required to prevent suspicious transactions.
Pic by @mankangwafo

Sanctions on what? Pic by @mankangwafo

Kenya links

  • Kenya Commercial Bank processed large payments from multinational companies operating in South Sudan into the accounts of two senior South Sudanese politically exposed persons over a period of several years.
  • “Some of these ministers have bought apartments, have bought very beautiful houses, villas,” President Kiir continued. “They are hiding it in Kenya and they refuse to reveal it.” … A source within South Sudan’s government confirmed to The Sentry that the Kiir and Machar homes in Nairobi were close to one another in Lavington
  •  Violent takeover of KK Security”: One of Machar’s relatives became involved—albeit highly controversially—in KK Security, a Kenya-based company active throughout East and Central Africa.

For KCB, or any other Kenyan banks operating in South Sudan,  they are really without blame. The report does not highlight if the transaction with the leaders were in Kenya or in South Sudan where they have 18 branches.

South Sudan is relatively small for Kenya banks, accounting for just 13% of assets outside Kenya (Tanzania is 39%, Uganda is 30%). In the absence of rules from the (regulator) Bank of Southern Sudan, (unlikely) or Kenya’s CBK, or the Kenya government, to freeze doing business with people who probably are in charge of other South Sudan government accounts at the bank, is asking too much.

Guide to Khartoum

A guest post by @Wiselar   

Getting There: If flying from Nairobi, you have an option of either Kenya Airways (KQ) or Ethiopian Airlines. Kenya Airways operates both a late night (23:55) and a late morning (11:00) flight from Nairobi that costs about $600. For the Ethiopian flight, you will have to connect via Addis Ababa but it’s cheaper at about $450.
I went on the night flight from Nairobi’s JKIA. KQ operates an Embraer 175 on this route (though this changes a lot) and the flight time between Nairobi and Khartoum was about 2.5 hours. 
On Arrival: On arrival in Khartoum (same time zone as Nairobi) at about 3 a.m., there was little activity at the airport other than our arriving flight.
Immigration forms are readily available, and must be filled in duplicate. You must also watch out for the spacing on the form as they are arranged to cater for Arabic which goes from right to left. After filling the forms, processing at the immigration counters is pretty quick. This is followed by a security screening of carry-on luggage before being going to the baggage pickup area where with several baggage carousels around,  luggage was ready for pickup on time. Airport officials require you to have your baggage tag and they counter-check against the one on your checked-in baggage,  so keep it close.
Khartoum Airport road

Sudan requires all visitors of other nationalities to register as aliens on entry to the country and this costs $40. This should ideally be done before you leave the airport but you can also do it the next day if you don’t make it the first time. Most importantly, you will not be cleared to leave Sudan if you don’t register as an alien. This can cause inconvenience you, if you didn’t know about it or and didn’t spare enough time especially on the day of departure, when it can be even more difficult or confusing as most officials only speak Arabic.

Getting Around: I had arranged a pickup with the hotel but a taxi from the airport to my hotel (about 14 kilometers away) would have cost about $10. There was no traffic at this time of the day so these charges may vary. I noticed there were more private vehicles than public means around Khartoum. Still taxis are readily available and they are not too costly, but it’s always better to ask the hotel or a host to arrange the taxi for you and pre-negotiate the rates.
In Sudan, they drive on the right side of the world as does most of the Arab world. Also it can get very hot, and people drive around with the air-conditioner on.
Rickshaws are also a very popular mode of transport in Sudan, and some owner do some extra ‘pimping’ work on them, such as shiny rims, to make them stand out. 
Staying in Touch:  If you’re a Safaricom customer like I am, roaming in Khartoum is via Airtel Sudan, Khartoum. Making calls and texting worked fine as expected but it was still expensive, and data charges while roaming are exorbitant so ensure you have your data turned off to avoid accidental connection. If you have to use your phone a lot, consider buying a local SIM. There are several local providers – Sudani, Airtel, MTN – but the biggest is Sudani. I didn’t get to purchase a local SIM but I’m sure this should be easy. 
Out & About: Sudanese people are generally friendly. Being a Muslim country, the weekend is on Friday and Saturday with the first day of the work week being on Sunday. The locals are pretty easy going and not too concerned about security. This is unlike Nairobi where you always have to be on the look out. Since it is very hot outside, there are very few people walking the streets.
There’s also little or no police presence around town. This is unlike other African cities such as Abuja where there’s quite a heavy military and police presence
Arabic is the most widely spoken language in Khartoum. Hotel staff and officials from the meeting I went to were able to do basic communication in English. A lot of signage is in both Arabic and English so it is easy to get around. All the newspapers and other publications I came across were in Arabic.
Being an Arabic country, food is eaten communally, from a central serving with smaller side dishes to accompany. Bread and meats are common. Pork is not allowed due to religion, and mutton (goat and sheep) is the most common type of meat.
As with many other African countries, politics takes center stage in conversations and to sum it up, the Sudanese people don’t defend Al Bashir as much as Zimbabweans do Mugabe.
I had to change to the local currency of Sudanese Pounds (SDG) as most places outside hotels will not accept US Dollars. With a daily budget of $20 for a meals and $40 for taxis per trip, you can make it around the city.
Outside Khartoum’s Corinthia Hotel 
Where to Stay:  I stayed at one of the better hotels in Khartoum – Corinthia Hotel. A similar classed one would Al Salaam Rotana. A standard room at the Corinthia went for $210 for bed and breakfast before taxes.
Shopping & Sight-Seeing: There aren’t too many shopping spots around Khartoum. I also didn’t get time to go into their famous Afra Mall. You can however get places to buy curios (usually sold by South Sudanese nationals) but with very little variety.
Places for visitors to see include the meeting point of the Blue and White Nile rivers, which is a the sight. I was lucky to stay at a hotel that overlooked that view. My hosts mentioned there are tourist boat rides on the expansive Nile, and I would have loved to go on one, if I had more time.
Odd Points: Due to sanctions, US products have little presence here. My hosts told me they have to purchase computer software via third-parties in places like Dar es Salaam and Dubai. They also prefer to use open source software because of these restrictions which is also the reason credit cards are not accepted in Sudan.
Also, a peculiar habit I noticed was a lady alighting from the lift when a group of men got in and having to wait for the next one.

Guide to Juba

@mankangwafo visits the world’s newest country – South Sudan

Getting there: Traveling to the Republic of South Sudan is not a simple task as few airlines serve Juba, the Capital and largest city in the world’s newest Republic. If you are coming from Nairobi, Kenya Airways (KQ), Fly540, and Jetlink (until last week) are your direct flight options. KQ has several daily flights to Juba and tickets range from US$400-$600, a steep price for a 90-minute flight. Edit: Other flights to Juba are with Egypt Air (via Cairo), Ethiopian Airlines (via Addis Ababa), and Air Uganda (via Entebbe)
While most eager businessmen and doe-eyed development workers might shell out the cost of a ticket, the government’s new visa requirements could be a hurdle for some. Applicants are expected to have invitation letters and business documents explaining the purpose of their trip. A single journey visa (valid for a month) costs US$100 and a multiple entry visa costs even more. Also required are two photos, a valid yellow fever card and a travel permit (if you had visited South Sudan before independence).
Once in Juba, getting through immigration, baggage claim and customs is daunting as the arrival lounge is a large empty space with few signs and  no air conditioning. The heat is exacerbated by the large number of passengers struggling to claim their bags and get them checked by customs in no defined sequence – and unclear signage has some visitors claiming their bags before being checked by immigration instead of the other way round. There are no unexpected taxes at the airport and a cab ride into the heart of Juba town ranges from 30-45 South Sudanese Pounds (SSP) or (US$10–$15 at the official dollar rate). English is the national language, though  most people speak Arabic as well.
Accommodation: Finding a decent hotel at an affordable price is a challenge as there is no apparent standard for hotels and bed and breakfasts. On average, a simple hotel room (either prefab or cement) ranges from US$160 – $400 with breakfast included. Full board prices can range between US$180 to US$500. But, the higher prices  do not guarantee accommodation equal to a five star hotel.
Cow’s block traffic on main road in Juba town.

The most recent crisis between Sudan and South Sudan has gravely affected South Sudan’s economy and the cost of living has significantly increased, with inflation high and foreign reserves are low. The black market price of the SSP is almost 50%  higher than its official rate. This, (among otherreasons) coupled with the fact that, it is a landlocked country with limited agricultural productivity, has caused food prices to be significantly higher now than they were a year ago. One can easily spend about 60SSP (US$20) on meal of fish and chips. There are cheaper options, however, as you can find a delicious meal of ugali and Sukuma or foule in some restaurants.

Communications: Getting a local SIM card is pretty easy. Most people have two lines either Vivacell or Gemtel. For international calls, Gemtel is relatively cheaper than Vivacell. Unfortunately, neither Safaricom (Kenya) or T-Mobile (USA) SIM’s have network coverage in South Sudan. Other MTN subscribers are able to roam in most parts of the country, but getting data on mobile devices with Vivacell or Gemtel is difficult as it needs to be configured at headquarters.
South Sudan does not yet have a power grid. All electricity is supplied by generators further hampering the business environment and increasing the demand/importance of oil. Getting a steady Wi-Fi connection can be costly, and while most hotels have V-SAT’s and free Wi-Fi for guests, the bandwidth is usually really slow. The best time get a decent connection is usually after 9 p.m. The costs for internet access ranges from about 1 – 4 SSP per minute, and cybercafés have 30 minute and hour long bundles.
Social scene: There are several hotel restaurants, bars and barely a handful of clubs. That said, South Sudanese are very warm and welcoming. Most discussions there are about politics, football, nationalism and the future of the new republic. Unfortunately, I did not get to taste any typical South Sudanese food, but you can be sure to find a tasty dish of nyama choma, ugali and other East African delicacies. One unique thing to South Sudan is that it has its own beer labels, brewed locally. Try a Nile Special, White Bull or Club Pilsner—all local brewed by SABMiller.
Safety: Even though there have been more reports of crimes—particularly in the Jebel Hills—Juba is still relatively safe. There are police check points along the main roads after midnight, but as a general rule, it would be wise to travel with a group of people and be mindful of your surroundings. While some foreigners have reported being harassed, I haven’t experienced that.  As the country is still pretty new, there are few developed tourist sites. However, if you are into outdoor activity, a hike up Jebel hills is worth it.
Random fact: In South Sudan, there are SUVs—yes including Hummers and Porsches—everywhere. In fact, its not uncommon to see someone with a luxury SUV and no actual home. More recently, there are several matatustyle buses operating in Juba. I tried to take one but was advised against it because, they do not always have defined routes.

Other Travel Tips:      There are few ATMs in Juba, so be sure to have hard currency (preferably US$ or SSP). If carrying US$ make sure you have US$100 and US$50 notes—few places (if any) accept 1, 5, 10 or 20s. Also make sure your US$ notes were printed after 2006. 
– Do not forget to take malaria prophylactics at least two weeks before your trip to South Sudan and also try to get a typhoid vaccine.
– The quickest and cheapest way to get around the city is by Boda Boda. But, though efficient, Boda’s are a bit more dangerous in Juba than elsewhere in the region because of the rough terrain.
– Most hotels have potable water, but if traveling outside Juba be sure to carry a bottle or two of water.
–  If you are traveling out of Juba have a mosquito net & insect repellent handy. There are few hotels outside the main cities and you might have to stay in a tukul (hut).

Regional diversification

Taking regional investments a step further – how are various local listed companies doing on the regional front? January 2008 showed that having a focus on Kenya alone could be an Achilles heel despite it being considered one of the strongest economies in the region. Various listed companies are making pushes in East and Central Africa – however many of these countries are all dependent on Kenyan access, hence its not really true diversification of political risk. In that sense, Olympia Capital, an NSE laggard may be ahead of its peers with its tangled Botswana and South African corporate moves.

here’s a recap:

CMC says regional sales are on target in Uganda and Tanzania (from ½ year results this week)
Diamond Trust has set its sights on Burundi (adding to Uganda and Tanzania) while many other banks have targeted Rwanda
East Africa Cables attribute good performance to their subsidiaries in Uganda, Rwanda and Tanzania
KCB has subsidiaries in Uganda, Tanzania and S. Sudan (though it wrongly had the flag of Sudan on its’ annual report cover. These countries contribute less than 10% to their income and Ug had a loss of 49 million (setup costs) while Tz barely broke even with a profit of 0.2m in 2007. KCB opened in Kampala in November 07 and will open 6 more Ug branches in 2008, 4 new ones in S. Sudan in 08, and another 20 new branches in Tz over the next two years according to their annual report
Kenol who after acquiring Kobil could be the first 100 billion shilling turnover company, have subsidiaries in Uganda, Tanzania, Rwanda, Zambia and Ethiopia. 80% of their sales are from Kenya, while the other countries contribute about 20%.
TPS East Africa acquired 8% of Serena Rwanda which includes Kigali Serena and Lake Kivu Serena. Of Serena’s 2007 sales of Kshs. 3.7 billion (~60 million), Kenya accounted for 64% and Tanzania 36%.
Total Oil Kenya has sister companies in Uganda, Tanzania Congo Rwanda so essentially remain a Kenyan company with 97% of their sales being local. They however complain in their 2007 report that other countries who should be buying from Kenya are (because of our tax regulations) buying offshore and shipping through Kenya instead.
Sameer Africa are looking for transporters to Somalia, DRC, Ethiopia, Rwanda, Sudan, Burundi, Mozambique, Zambia, Malawi Uganda and Tanzania for their products.