Hope for South Sudan as fund offers President Kiir $105b budget support

Tuesday January 3 2017

South Sudanese traders sell vegetables in an empty stocked market in Akuem, outside Aweil, on October 12, 2016. PHOTO | AFP

South Sudanese traders sell vegetables in an empty stocked market in Akuem, outside Aweil, on October 12, 2016. PHOTO | AFP 

By JULIUS BARIGABA

South Sudan President Salva Kiir has received an offer of  €100 billion ($105 billion) for budget and project support from a Luxembourg-based investment fund, three years after donors turned off the aid taps following the outbreak of war in the world’s youngest nation.

According to documents seen by The EastAfrican, this funding package, which could change South Sudan, from a failed state to a healing, politically viable and economically promising unit, was arranged at a meeting in Kampala on October 10, 2016, “between well-wishers for the peace and stability of South Sudan” and the Uganda agent of Suiss Finance Luxembourg AG.  

The “well-wishers,” who also double as President Salva Kiir’s peace and security advisers, were Kalisa Mohammed and Twinomuhwezi Henry Williams, while the Suiss Finance representative was Moses M. Engadu.

According to the December 23 edition of the Indian Ocean Newsletter, Rene A Cortez, the Director of Suiss Finance Luxembourg AG wrote a letter on December 6, offering President Kiir’s government a “range of financial aid instruments.”

Documents on the funding deal reveal that the instruments included safekeeping receipts, foreign exchange and natural resources trading, as well as a line of credit, whose funds are to be deposited in South Sudan to be used as a direct support to the national budget.

Mr Cortez suggests that funds from his company could be used to finance projects through joint ventures in infrastructure, transportation, oil and energy.

It is understood that Mr Cortez, through Suiss Finance, is ready to provide the Juba administration with an initial $10.5 billion — but this figure could grow tenfold — through the fund’s trust account to be held by the Central Bank of South Sudan.

“Suiss Finance Luxembourg AG offers the Republic of South Sudan initially €10 billion, which can be increased up to €100 billion. After duly executing the agreements and supporting instruments (signed by your minister of finance and endorsed by the Central Bank Governor), and with your co-operation, the 10 billion euros can be created and transferred into a Suiss Finance Luxembourg AG trust account to be held in the Central Bank of South Sudan between 30 and 90 days,” Mr Cortez wrote.

To release funding

He then asked the president to invite Suiss Finance Luxembourg AG to present to him and the Government of South Sudan their proposal and conclude any relevant agreements to enable Suiss Finance to immediately initiate financial activities to release the funding.

Suiss Finance was created in 2009 with a capital of €31,000 ($32,726) by lawyers Wolfram Otto Voegele, Katrin Dukic and Kazimierz Walaszczyk.

President Kiir is reported to have jumped at the opportunity as it offers a lifeline for his broke government. The country became the biggest source of refugees fleeing and leaving behind horrific levels of violence, rape and kidnap.

On December 8, the South Sudan leader responded to Mr Cortez’s letter, by inviting the representatives of Suiss Finance Luxembourg AG for Africa and for Uganda, Patrick G Thimba and Moses M Engadu to Juba to meet his advisers, Mr Mohammed and Mr Williams.

If the deal goes through, it would signify a major breakthrough for the Juba government, and significantly thwart the efforts of the US, which in November 2016 pushed the UN Security Council to isolate South Sudan and consider a draft resolution on targeted sanctions against several leaders. Among those targeted is Sudan People’s Liberation Army Chief of Staff and President Kiir’s righthand man Gen Paul Malong Awan. 

The resolution, submitted by US ambassador to the UN Samantha Power, also targeted Information Minister Michael Makuei Lueth and former vice president and Sudan People’s Liberation Movement – In Opposition rebel leader Riek Machar for sanctions.

Although the US push for sanctions was vetoed by Russia, the Juba government remains in a precarious situation as it also faces an arms embargo. It is also starved of cash.

In addition, on December 12, the European Union foreign ministers issued a joint declaration warning that the EU could adopt new sanctions against South Sudan government officials for inciting racial hatred in the country and impeding implementation of the peace process.

The country has endured three years of ethnic conflict from December 2013, when violence erupted after forces loyal to Mr Machar clashed with pro-Kiir troops.  

But this is not the first time South Sudan is entering such a deal to mortgage its natural resources for cash. Sceptics are now warning that with the burden of old debt, the Suiss Finance forex for natural resources swap may prove difficult for Juba to navigate.

Juba already owes millions of dollars obtained in such arrangements. In May 2012, when South Sudan was caught up in a long standoff with Khartoum over its crude oil exports, it secured a $100 million line of credit from Qatar National Bank, and was to receive a further $500 million within a month, from an unidentified source at the time.

This $500 million loan did not come through at the time, but with funding gaps and especially forex continuing to plague the country, the South Sudan parliament in 2015 voted that the government borrow $500 million from Qatar National Bank, to be paid over seven years, which at the obtaining interest rate meant the Qatari bank would be owed $781 million.

Fortune hunters, fixers

The young and troubled country also faces another challenge as it tries to fix its politics, security and economy — fortune-hunters and fixers looking for a quick buck.

A source familiar with these deals told The EastAfrican that there are many international finance deal fixers who are aware of the funding crisis the government in Juba faces, and spend their time shuttling between Juba, Nairobi, Kampala and European cities, staking South Sudan’s natural resources, especially oil, to get the forex for the government.

Even as Juba fights to survive bankruptcy and a potential array of sanctions against its officials, it maintains that the latter are ill-advised and a creation of the US propaganda machinery, considering that the government is still committed to implementing the peace agreement, with a still functioning Transitional Government of National Unity in place. 

“The South Sudanese government is disappointed by the American proposal. These actions seriously undermine the sovereignty and internal processes to consolidate peace in South Sudan… the threat of sanctions against government officials are meant to derail the entire peace process and perpetuate a state of crisis in South Sudan to justify international action in the country,” Mayiik Ayii Deng, Minister in the Office of the President wrote on December 6, in protest at the US proposal to impose sanctions on Gen Malong, Lueth and Machar.

Looking at options

Uganda’s State Minister for Finance David Bahati, who has been involved in negotiations to secure guarantees from Juba to pay Ugandan suppliers, says he is not aware of the deal between Juba and Suiss Finance.

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He, however, added that he knows that the South Sudan government has been “looking at different options for funding.”  

Mr Bahati is familiar with Juba’s negotiations to raise cash in order to settle its debt obligations, some of which include millions of dollars’ worth of goods supplied by Ugandan businessmen before the war erupted in 2013, over which Kampala has been in discussions with Juba.