Dott, Odrek firm to get S. Sudan debt billions

The Ministry of Finance is planning to pay billions of shillings to three local companies on behalf of the Government of the Republic of South Sudan (GoRSS) as part of a long-running compensation saga that has previously been mired by allegations of inflated costs and influence-peddling.

The three companies have been catapulted to the front of the compensation queue in an agreement signed by Finance Minister Matia Kasaija and his South Sudan counterpart, Dr Bak Barnaba Chol on September 12.

The three companies are Dott Services Limited, Tomosi’s Farm Bwesharire Limited, and Ranway Petroleum Company Limited.

READ: Minister named in South Sudan compensation wrangles

Dott Services, a civil contractor in the roads sector, enjoys a reputation for being highly connected at the top echelons of the government. Some of the individuals listed as agents for the company on different projects include Mr Prasad Reddy, Mr P. Rajani Kanth and Mr K. Satya Yella Prasad.

Tomosi’s farm is owned by businessman Odrek Rwabwogo and his wife Patience Museveni. Ranway’s subscribers at the company registry are listed as Abdirashid Abdulkair, Abdirizaq Abshir, Ali Abdulaah Mohamed and Natumanya Emmanuel.

In the agreement signed two weeks ago, GoRSS revealed that it issued a sovereign guarantee dated September 30, 2021, in favour of the three companies to the value of $190,378,068 (about Ush713 billion). The sovereign guarantee has not been made public before now and this is the first time this newspaper has learnt of its existence.

In keeping with his long-standing decision, now going back several years, not to speak to Daily Monitor, Finance Minister Matia Kasaija declined to comment when contacted by this newspaper on Monday.

“I have no news [for Daily Monitor],” he said as soon as the reporter identified themselves, before hanging up the telephone.

HERE: Finance officials on the spot over South Sudan traders’ pay

Finance Ministry spokesperson Jim Mugunga said he was out of the country and had not responded to written inquiries sent to him by press time on Monday night.

Long-running

The compensation claims go back to 2010 when local firms through the Uganda Grain Traders Association petitioned the government to help recover money they claimed was owed to them by GoRSS for grain supplied to the country.

Negotiations between the two governments led to the signing of a Memorandum of Understanding in November that year, in which South Sudan acknowledged owing the traders $56.4 million. It paid $14.8m in December 2010, leaving a balance of $41 million. However, South Sudan failed to meet a payment schedule agreed as part of the MoU between the two countries.

In addition, a civil war that broke out in South Sudan in December 2013 made it difficult to collect the money. The matter later became controversial with questions about the veracity of some of the compensation claims. 

In 2015, a new group of claimants approached the Government of Uganda for assistance, adding to the older companies whose claims had only been partially settled. The new claimants had primarily supplied GoRSS after 2011, and included Ugandan firms, small scale traders and individuals who claimed losses caused by the civil war.

The lobbying efforts of the grain traders under the 2010 MoU, who were demanding for their balance of $41m, and the new claims, led to the negotiation of a bilateral agreement between GoU and GoRSS which was signed on December 22, 2016.

The agreement yielded a new compromise: GoU would pay the $41m owed to the grain traders as a loan to the Government of South Sudan, for which the neighbouring country would provide a sovereign guarantee. It was also agreed that a joint verification team consisting of officials from the two countries would be formed to verify all other claims for subsequent settlement.

When the bilateral agreement was presented to Parliament for approval in 2018, MPs asked to include 23 additional Ugandan companies whose claims for payment were at the approval stage at the South Sudan Ministry of Finance. The Attorney General, however, advised that the 23 fresh claimants had to be verified by both governments and a sovereign guarantee issued by South Sudan in their favour before Uganda paid them any money. The list of 23 later increased to 24 firms. (See table – Editor).

In April 2018, Parliament appropriated Shs40 billion towards paying part of the $41m claim that South Sudan had consented to. After GoRSS provided a sovereign guarantee in January 2019, the Shs40 billion was paid out to the first set of grain companies (See table on Page 5) in early 2019.

It was after this payment was made that other traders complained about discrimination and lack of fairness, which resulted in Parliament establishing a select committee to investigate the matter. In its final report, the committee highlighted the different categories of claimants.

The first category, mainly grain traders, was agreed upon by the two governments, covered by the sovereign guarantee, and would be paid by GoU as funds allowed. Parliament urged the government to borrow domestically, if necessary, to settle these claims and save the companies from further financial strife. 

Category two was of claimants with supporting documents, which Parliament approved for compensation subject to verification.

Parliament also introduced a schedule of 23 (later 24) companies whose payments were in the approval pipeline at the South Sudan Ministry of Finance. (See table below). However, the Attorney General advised that any companies not covered by the original agreement and subsequent sovereign guarantee had to be jointly verified by the two governments before being paid. We were unable to confirm from the Finance Ministry whether a final verification of claimants has now been agreed upon.

Jumping the queue

The addendum signed earlier this month appears to put the three companies at the front of the compensation queue, not just of the 24 companies added by Parliament, but also of the original 10 as well as other smaller companies that claimed to have made supplies earlier. It has also raised eyebrows within the Ministry of Finance.

“It is not clear what criteria was used to select these three companies out of the dozens of companies that are claiming compensation,” an official in the Ministry of Finance told this newspaper. He asked not to be named because they are not authorised to speak on behalf of the ministry.

“And if they are going to ask the South Sudanese for a sovereign guarantee the fair thing would have been to ask on behalf of all claimants rather than a select few,” the official added.

A second query, the official added, was the amounts lined up for compensation to the three companies. According to the parliamentary select report, the claims by Dott Services Limited amounted to $12.8m while that of Tomosi’s Farm was $10m. These claims had not yet been independently verified when the parliamentary report was tabled and we could not immediately establish how the claims rose to $190m, as indicated in the addendum signed this month. 

The third company set to benefit from the compensation, Ranway Petroleum Co. Limited does not appear on any of the lists of companies claiming compensation from the Government of South Sudan. However, it was captured by the parliamentary select committee as having failed to repatriate its money equivalent to South Sudanese Pounds 320,000,000 from its bank accounts in Juba.

A search at the company registry in Kampala indicated that a company named Ranway Petroleum was incorporated on October 30, 2015, almost two years after the civil war broke out. It was not immediately clear how the money claimed by the company had been earned, over what time, and why Ranway Petroleum was unable to withdraw it while other companies doing business in the country have continued to operate their accounts after some stability returned to South Sudan. At today’s exchange rate the money claimed by the company is equivalent to $532,105.

Before the outbreak of the civil war, the South Sudan Pound was pegged to the US dollar at an official rate of 2.96 pounds to the dollar. This would have translated to $108m although the unofficial exchange rate on the parallel market, of 18.50 SSP to the dollar, would have reduced the amount to $17.3m.

Given that the GoRSS floated the South Sudan Pound in December 2015 – a few months after a company with a similar name was incorporated – it is not clear how the claim by Ranway arose, how much it is worth, and why it is a candidate for what is, effectively, a bailout by the Ugandan taxpayer.

Calculations by this newspaper show that even if the highest threshold is used, the combined total claim from the three companies as captured in the parliamentary report, would still be less than half of the amount provided in the just-signed addendum.

“It isn’t clear why the government would seek to go out of its way to help one company in particular deal with its exchange rate risk yet this is a risk all companies that do business in foreign countries deal with,” a banking expert interviewed for this report, and whose identity is being withheld at her request, said.

The claims by the three companies, according to the parliamentary select committee report, would amount to under $23m. It is not clear how the two governments arrived at a figure of $190m.

The figure is significantly higher than the $124m that all the 24 companies that Parliament said were awaiting payment at the Finance Ministry in Juba. The claim by Ranway Petroleum is also almost ten times the total claim of 14 companies which were owed money in South Sudanese Pounds, and which are awaiting a determination of which exchange rate to apply against their claims once verified.

The Government of South Sudan is yet to refund the money lent to it by Kampala. In November 2022 Minister Kasaija told Parliament that Uganda had written to GoRSS seeking reimbursement of funds paid to Ugandan traders and companies on its behalf.

“We have already submitted letters of claim and when I met the South Sudan Minister, he answered positively that they have received the letter and they are making preparations to pay,” Kasaija told MPs on the Trade, Tourism and Industries committee on November 3, 2022. He made no reference to a new sovereign guarantee that the addendum he signed two weeks ago says was drawn up a year before that parliamentary appearance.

Lucrative tenders

While little is known about Ranway Petroleum, Dott Services is one of the biggest civil engineering companies in the country. It enjoys a charmed corporate life, winning lucrative government tenders and benefiting from soft landings when things have gone wrong.

In May 2015, with two months to the end of a project to rebuild the 120-kilometre Nakalama – Tirinyi – Mbale Road and only 19 percent of the work completed, Uganda National Roads Authority terminated Dott Services’ contract. UNRA was, however, forced to rescind its decision and reinstate the company’s contract after President Museveni appealed on its behalf. (Another company, Chinese Rail No. 18, benefited from a similar presidential reprieve around the same time).

In 2021 the company was handpicked to build roads in the Democratic Republic of Congo in a contract worth $330 million.

Tomosi’s Farm Bwesharire has largely operated out in the pasture as a 500-acre farm and it is not clear what supplies the company made to South Sudan. Its principal, Mr Rwabwogo, has in recent months taken an increasingly higher profile in his role as an advisor to his father-in-law, and as a promoter of the country’s exports, especially coffee. 

Background

“The Government of the Republic of South Sudan and the Government of the Republic of Uganda entered into a bilateral agreement dated December 22, 2016, concerning the payment of monies owed to Uganda South Sudan Traders by GoRSS for the goods supplied between the period 2008 to 2015.

"The GoRSS at the time of the agreement acknowledged that it owed Uganda Traders only $41.6m and having already partly paid $15m to the companies named in the first schedule. That the GoRSS has agreed and cleared to pay three other companies namely Tomosi’s Farm Bwesharire Limited, Dott Services Limited and Ranway Petroleum Co. Limited in addition to the companies named in the first schedule to the original executed bilateral agreement dated December 22, 2016.  A second schedule is hereby created with three other companies namely Tomosi’s Farm Bwesharire Limited, Dott Services Limited and Ranway Petroleum Co. Limited and these are entitled to $190.4 million.”

Extract from addendum