Report cites Juba oil marketer in $30m loan scandal claims

South Sudanese oil marketing company Trinity Energy is embroiled in a scandal over the controversial procurement of a $30 million loan from the African Export-Import Bank backed by senior government officials, raising integrity questions about the firm (PHOTO | ANDREI PUNGOVSCHI | AFP)

South Sudanese oil marketing company Trinity Energy is embroiled in a scandal over the controversial procurement of a $30 million loan from the African Export-Import Bank (Afreximbank) backed by senior government officials, raising integrity questions about the firm that is seeking to expand its foothold in East Africa.

A new damning report by the investigative and policy organisation Sentry has flagged possible bribery, tax evasion and money laundering during the loan procurement. It has called for inquiry.

The loan, secured in April 2018, was backed by proceeds of crude oil and, as part of the deal, South Sudan’s Ministry of Petroleum committed to award contracts for oil cargo to Trinity Energy.

In April 2018, Trinity Energy – which is 99 percent-owned by Trinity Holdings while one percent is held by South Sudanese national Akol Emmanuel Ayii Madut –agreed to a trade finance facility with Afreximbank for a series of $30 million loans to buy diesel and petrol for the South Sudan market.

Privilege to access oil

According to the report titled “Crude Dealings: How Oil-Backed Loans Raise Red Flags for Illegal Activity in South Sudan”, the arrangement gave Trinity Energy – a company that has never before traded crude – the privilege to access South Sudan oil, the country’s most valuable resource and the source of its vast majority of national wealth.

The report alleges that Trinity Energy was awarded more than 40 percent of crude cargo contracted by the government from June 2018 to May 2019 and the loan negotiators ignored regulations on oversight, transparency and competition, and facilitated off-book government spending, including supplies of fuel to the South Sudan army.

According to Sentry, Trinity Energy spent millions of dollars on “facilitation” and “business acquisition” costs for the Afreximbank deal, including SSP18.7 million ($125,000) in payments to the government committee for approving the deal.

“During the implementation of the trade finance deal, Trinity Energy changed millions of US dollars on the black market, paid fake invoices overseas to disguise the black-market exchange of hundreds of thousands of dollars, and engaged in behaviours indictive of tax fraud,” says the report dated February 2023.

Zero oversight

The Sentry investigators note that the absence of checks to government operations opened the door to commercial dealings based on personal relationships and the exchange of benefits and favours.

“The result is that companies and the executive branch can conduct business in the absence of oversight or transparency and with scant regard to the rule of law, economic sustainability, and the wellbeing of the nation,” the report says.

Trinity Energy denied the allegations in the report, terming them defamatory.

“Trinity Energy would like to reassure the public and all our stakeholders that we remain committed to offering our customers world class energy solutions. We seek to do this as a responsible corporate citizen that is committed to complying with all laws and regulations in the countries in which we operate,” the firm said in a media statement dated February 22.

“We are committed to the future of South Sudan and are helping to build structures for the economic and social stability of our beloved country through an affordable supply of fuel.”

The Sentry report notes that during the loan procurement process, Trinity spent about $2.5 million on “visits, meetings and travel involving stakeholders” and a further $1.5 million on “lobbyist fees and facilitation fees” to set up the trade finance deal with Afreximbank and the first two $30 million letters of credit.

It also spent about $418,000 on “business acquisition fees” between signing the agreement in April 2018 and shipping the first crude cargo in July 2018, allegedly paid to members of the government technical committee tasked with approving the deal.

Money laundering

“Trinity Energy moved hundreds of thousands of dollars to companies in South Sudan and Kenya owned by its shareholders and directors. These related party transactions are red flags for trade-based money laundering, transfer pricing and possible breaches of the arm’s length principle,” the report notes.

The firm is also accused of using the Afreximbank trade finance facility to supply diesel and petrol worth millions of dollars to the South Sudanese army at a time when government forces were involved in civil conflict.

“The deal was not made public, thereby evading checks and balances on government spending,” says the report.

It recommends that Kenya and Uganda investigate illicit money flows. “Uganda particularly should investigate the trades identified in this report for which no physical trade was recorded, a classic red flag for trade-based money laundering.”

Sentry also asks Afreximbank to review of whether execution of the trade finance facility complied with the bank’s anti-bribery and anti-money laundering policies.

“State officials and business people operate in an environment of impunity that incentivises rather than deter negligence, rent-seeking and illegal activity.”

They further ask global and regional financial institutions to identify accounts held or beneficially owned by those with business dealings in South Sudan’s oil sector and senior officials “and determine measures needed to mitigate the risks involved in such accounts and customer relationships.”