The deal with a Dubai company is worth $12bn — almost twice the size of the country’s GDP
29 April 2024 - 14:47
byMichelle Nichols, Aaron Ross and Andrew Mills
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Nairobi — A Dubai-based firm has agreed to lend South Sudan’s government $12bn in exchange for repayment in oil, according to a copy of the deal’s term sheet and an unpublished UN report, potentially piling pressure on squeezed public finances.
The deal would be the largest oil-backed loan South Sudan has ever taken out, according to the report written by a UN panel of investigators for Security Council members. The country’s GDP is about $7bn. The UN report is due to be published soon.
The agreement was signed on December 28 by South Sudan’s former finance minister, Bak Barnaba, and Hamad Bin Khalifa Al Nahyan, chair of the Hamad Bin Khalifa Department of Projects (HBKDOP), according to the term sheet seen by Reuters.
It is not clear if the first tranche of the loan, worth $5.24bn, has been delivered yet. Bloomberg News first reported the findings of the UN report.
South Sudan’s minister of information, Michael Makuei, denied such a deal had been signed, asking: “How can one minister sign such a document alone on behalf of the government?” He declined to comment further when Reuters shared with him a copy of the signed term sheet.
Reuters was unable to locate contact information for HBKDOP. Its chair, Al Nahyan, did not immediately respond to a request for comment sent to his LinkedIn account. Reuters was unable to reach Barnaba, the former finance minister, who was replaced in March without explanation. A finance ministry spokesperson said he could not comment because he was out of the country.
South Sudan will receive the cash in dollars or euros, in exchange for crude delivered at discounted rates of $10 a barrel less than international benchmark prices, the term sheet says. The country produces about 150,000 barrels per day.
Infrastructure projects will receive 70% of the funds, while 30% will go towards the country’s working capital.
The UN report said servicing the loan was likely to tie up most of South Sudan’s oil revenues, which account for more than 90% of public revenues, for many years.
Resource-backed loans are popular among many mineral- and oil-rich African countries that struggle to access financing, but international organisations say they are opaque and risky.
Akinwumi Adesina, president of the African Development Bank, said earlier this month that such deals were complicating attempts to reduce debt levels across the continent.
South Sudan, which has been racked by conflict since gaining independence from Sudan in 2011, has turned repeatedly to oil-backed borrowing. It is locked in a dispute with the Qatar National Bank after it failed to supply crude oil to service a 2012 loan that had grown to more than $600m, the UN panel said.
Oil revenues have been a source of significant corruption, South Sudan’s government has acknowledged. President Salva Kiir said in 2012 that officials had stolen an estimated $4bn of public money.
The UN investigators said corruption remained rife. “Non-transparent off-budget government procurement continues to divert significant public funds away from salaries and services,” the UN said.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
South Sudan takes huge oil-backed loan
The deal with a Dubai company is worth $12bn — almost twice the size of the country’s GDP
Nairobi — A Dubai-based firm has agreed to lend South Sudan’s government $12bn in exchange for repayment in oil, according to a copy of the deal’s term sheet and an unpublished UN report, potentially piling pressure on squeezed public finances.
The deal would be the largest oil-backed loan South Sudan has ever taken out, according to the report written by a UN panel of investigators for Security Council members. The country’s GDP is about $7bn. The UN report is due to be published soon.
The agreement was signed on December 28 by South Sudan’s former finance minister, Bak Barnaba, and Hamad Bin Khalifa Al Nahyan, chair of the Hamad Bin Khalifa Department of Projects (HBKDOP), according to the term sheet seen by Reuters.
It is not clear if the first tranche of the loan, worth $5.24bn, has been delivered yet. Bloomberg News first reported the findings of the UN report.
South Sudan’s minister of information, Michael Makuei, denied such a deal had been signed, asking: “How can one minister sign such a document alone on behalf of the government?” He declined to comment further when Reuters shared with him a copy of the signed term sheet.
Reuters was unable to locate contact information for HBKDOP. Its chair, Al Nahyan, did not immediately respond to a request for comment sent to his LinkedIn account. Reuters was unable to reach Barnaba, the former finance minister, who was replaced in March without explanation. A finance ministry spokesperson said he could not comment because he was out of the country.
South Sudan will receive the cash in dollars or euros, in exchange for crude delivered at discounted rates of $10 a barrel less than international benchmark prices, the term sheet says. The country produces about 150,000 barrels per day.
Infrastructure projects will receive 70% of the funds, while 30% will go towards the country’s working capital.
The UN report said servicing the loan was likely to tie up most of South Sudan’s oil revenues, which account for more than 90% of public revenues, for many years.
Resource-backed loans are popular among many mineral- and oil-rich African countries that struggle to access financing, but international organisations say they are opaque and risky.
Akinwumi Adesina, president of the African Development Bank, said earlier this month that such deals were complicating attempts to reduce debt levels across the continent.
South Sudan, which has been racked by conflict since gaining independence from Sudan in 2011, has turned repeatedly to oil-backed borrowing. It is locked in a dispute with the Qatar National Bank after it failed to supply crude oil to service a 2012 loan that had grown to more than $600m, the UN panel said.
Oil revenues have been a source of significant corruption, South Sudan’s government has acknowledged. President Salva Kiir said in 2012 that officials had stolen an estimated $4bn of public money.
The UN investigators said corruption remained rife. “Non-transparent off-budget government procurement continues to divert significant public funds away from salaries and services,” the UN said.
Reuters
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