Caprikat, Foxwhelp & Aurora: The Tip of Africa’s ‘Panama Papers’ Iceberg?

The X, Y and Zumas of the ‘Panama Papers’ leak

By AAT & AAF author, Michael-James Currie.

During the week of 04 April 2016, headlines around the world reported on what may turn out to be one of the most significant developments in the fight to combat the use of offshore accounts for purposes of hiding proceeds derived from various forms of white-collar crime, including fraud, corruption, and tax evasion among others.

The leaked documents — from about 214,000 offshore entities, covering almost 40 years from 1977 up until the spring of 2016 — were obtained from an anonymous source by the respected German daily Süddeutsche Zeitung (“SZ”) and made public through the Washington-based International Consortium of Investigative Journalists (“ICIJ”).

The Panama Papers leak is the second major scandal in recent history, relating to leaked information on individuals’ private bank accounts, following the HSBC Switzerland scandal in 2015. In the HSBC scandal, a number of high-ranking African individuals were identified as having utilised private bank accounts by HSBC’s Switzerland branch. This information came about as a result of a whistleblower HSBC employee (at the time) who leaked confidential information relating to various individuals who allegedly utilised these Swiss accounts for purposes of money laundering and tax evasion.

Inter alia, the following African individuals were identified as a result of the HSBC information leak:

  • Rachid Mohamed Rachid, Egypt
  • Fana Hlongwane, South Africa
  • Jean-Yves Ollivier, South Africa
  • Gad Elmaleh, Morocco
  • Johnson Nduya Muthama, Kenya
  • Belhassen Trabelsi, Tunisia
  • Roger Boka, Zimbabwe
  • Patrick Bédié, Côte d’Ivoire
  • Aziza Kulsum Gulamali, Burundi
  • Abdul-Karim Dan Azoumi, CAR
  • Saïd Ali Coubèche, Djibouti

Kh ZumaThe Panama Papers have now shown, perhaps unsurprisingly, that the Zuma family is also embroiled in this scandal. This time it is President Zuma’s nephew, Khulubuse Zuma, who is identified as being authorised to represent Caprikat Ltd.  Andreas Stargard, a partner at Pr1merio Africa advisors, notes that “Caprikat is no stranger to the white-collar crime news.  Four years ago, the Financial Times ran an investigative report on this offshore entity and its connections to Dan Gertler, an entrepreneur with ties to the Congolese president.  It and other reports detailed how Caprikat (which had been incorporated only months before in 2012 in the BVI) was able to obtain oil blocks 1 & 2 of the ‘Albertine Graben’ in the Western Rift Valley bordering Uganda.”  Stargard notes that Mr. Zuma was also revealed to have ownership stakes in two other offshore companies, Foxwhelp Ltd. and Aurora Empowerment Systems Ltd:

“Taken together, Mr. Zuma’s three companies’ financial interests comprise not only the estimated 2 billion barrels of oil reserves in Lake Albert, but also several gold mines in the South African republic itself, potentially implicating direct political favours from the leadership there, as well as suspicion of any potential influence exerted by President Zuma on Congolese President Joseph Kabila to grant the oil blocks to his nephew’s company in 2012.”

The following passage in relation to Mr. Zuma was posted on The Centre For Public Integrity’s webpage:

“In late summer 2010, as published reports raised questions about the acquisition, British Virgin Islands authorities ordered Mossack Fonseca to provide background information on Zuma, which the law firm had not previously obtained. That same year, Mossack Fonseca decided to end its relationship with the companies.  Zuma and representatives of the companies have rejected allegations of wrongdoing and claimed the oil deals are ‘quite attractive’ to the DRC government.”

Mr. Zuma is, however, just one of a number of hundreds of individuals identified in the Panama Papers, which include individuals from all over the globe. While the papers will no doubt form part of broader investigations, the public outcry has already resulted in Iceland’s Prime Minister, Sigmundur Davíð Gunnlaugsson resigning on Tuesday, 05 April 2016.  John Oxenham, also with Pr1merio, observes that the Panama Papers “truly show the global scale of anti-corruption efforts: this is no longer a question of domestic or even regional enforcement, but one of worldwide dimensions.  The dealings of Mr. Zuma’s companies may simply be the tip of the iceberg.  Associates of Presidents Vladimir Putin (Russia), Nawaz Sharif (Pakistan), Mauricio Macri (Argentina), Petro Porochenko (Ukraine) and others are likewise reportedly implicated by the Papers.”  Time will tell whether there will be more casualties, as politicians around the world, including UK Prime Minister David Cameron, are called on to explain their financial links to Panama.KHZUMA2

The Panama Papers represent no doubt an important breakthrough in the global war on corruption. As David Lewis, Chairperson of Corruption Watch in South Africa said:

Well hopefully it means a number of good things because this is a big revelation and law enforcement authorities will be hard pressed to do so given the scale of the leaks or follow up I guess … looking at critically exposed persons who have been hiding large amounts of assets that vastly exceed the salaries that they earn. So it will aid law enforcement and exposure of people who use these structures to hide illicitly sourced gains. It’s a big deal.”[4]

AfricanAntifraud will keep you posted on all major developments in relation to this story.



“Just a math issue”: Anti-Corruption Efforts in Kenya take Center-Stage for Obama

File Jul 25, 11 51 17 AM

Anti-Corruption Efforts will Require some “Visible Prosecutions”

President Obama opined that it was “absolutely the right thing to do for President Kenyatta [to] emphasize” the Kenyan government’s stepped-up anti-corruption efforts.  He called public corruption potentially “the biggest impediment to Kenya growing even faster.”

“Just a math issue”

Business efforts being “constantly sapped” was a real risk to foreign direct investment, as Obama pointed out: “International businesses are concerned if the price of investing in Kenya is 5-10% going to some place that doesn’t have anything to do with the project.  It’s just a math issue.”

Acknowledging that corruption is not only an African problem (noting that even the U.S. and his hometown of Chicago had faced significant public fraud & bribery problems), the President highlighted what AAF has often stated: anti-corruption efforts imply serious cultural changes and necessary at both the top as well as the grassroots levels.  They will “require some change in habits,” and most notably “require some visible prosecutions,” according to Obama.

It is not hard to predict that President Kenyatta’s cabinet will see more shake-ups as a result of the promised stepped-up anti-corruption efforts.

The Ethics and Anti-Corruption Commission offices in Nairobi

As we noted in “Increased anti-corruption enforcement across Africa?“:

“You will read about record-breaking fines imposed; and you will hear about ever-longer jail sentences for violators.  African nations are no different in this regard than the U.S., where the DOJ has an annual tradition, almost invariably touting record-setting numbers resulting from its various enforcement divisions.  Even a quarter billion dollars of cumulative fines in South Africa are insufficient evidence of true deterrence, however — what is needed going forward is a culture of anti-corruption compliance, which goes deeper and spreads its roots more widely throughout the business & governmental community than any single record fine or jail sentence can ever accomplish,” says Andreas Stargard, an attorney with Primerio, an Africa-focused law firm and boutique business consultancy, advising on anti-corruption and competition & regulatory matters across the continent.

Increased anti-corruption enforcement across Africa?


Chimera or Reality — Is Africa stepping up its anti-graft game?

If one is to believe the media attention that has been bestowed upon anti-corruption enforcement by various African jurisdictions, there has been an uptick in successful anti-graft campaigns across the continent.  Or is there…?  Has Africa truly embraced the prosecution of well-to-do businessmen and government officials?  As one practitioner observes, mere penalty statistics (albeit impressive in terms of pure figures) are far from enough:

“You will read about record-breaking fines imposed; and you will hear about ever-longer jail sentences for violators.  African nations are no different in this regard than the U.S., where the DOJ has an annual tradition, almost invariably touting record-setting numbers resulting from its various enforcement divisions.  Even a quarter billion dollars of cumulative fines in South Africa are insufficient evidence of true deterrence, however — what is needed going forward is a culture of anti-corruption compliance, which goes deeper and spreads its roots more widely throughout the business & governmental community than any single record fine or jail sentence can ever accomplish,” says Andreas Stargard, an attorney with Primerio, an Africa-focused law firm and boutique business consultancy, advising on anti-corruption and competition & regulatory matters across the continent.

Over the next weeks, AAF will be investigating this “trend” of enhanced enforcement — and analyse whether it is real or only perceived.  Today, we begin with two case examples, one from the East and one from the South, both of which have recently been featured in the media with seemingly impressive news to report…

The Ethics and Anti-Corruption Commission offices in Nairobi

The Ethics and Anti-Corruption Commission offices in Nairobi

Example ‘A’: Kenya

George Wachira, a director of Petroleum Focus Consultants, writes in the Business Daily that, “over the past six months a series of events have given Kenyans some hope that this time around we may be on the right path in shaking the roots of corruption.”  He cautions, however, that the ongoing fight against corruption will yield results only “if sufficiently supported by all,” echoing Andreas Stargard’s observation of the importance of a universal “culture of compliance”:

The fight against corruption cannot survive merely on the push of top leadership. There must be in place support from effective and sustainable systems and institutions that can routinely function without prompting or interference. And recently some of these institutions have been undergoing a real-life test. … With clear and strong messages and actions from the top leadership it becomes easier to address corruption. This is an essential and critical starting point.

Second in line in the crusade against corruption is certainly the media which has been consistent in its anti-corruption messages and analysis.

The other key anti-corruption voices have included the Opposition, civil society, and a number of foreign offices with well intentioned interests in Kenya.

… I judge that the D-Day on the fight against corruption occurred when the list of shame was published with names of senior public servants suspected to have engaged in corruption. … If this process succeeds and achieves these standards, then Kenya will have moved a major step ahead in the war against corruption. If the process is derailed by whatever causes, then I am afraid we shall have lost momentum on the war on corruption. … [Another] recently launched system with similar detective capacity is the e-procurement system that can document the audit trails of all public procurement.

It is evident from recent events that Kenya can and should keep on the path towards a country with reduced corruption. We need to appreciate the efforts of all the players in this anti-corruption crusade.

As a general matter, AAF concurs with Mr. Wachira’s comments and the tenor of this article: it takes  more than just one element to create an effective anti-corruption system that both prevents as well as detects and punishes violations swiftly.

As he points out, this system may well start “from the top,” as is the case with the Kenyan presidents recent pronouncements on his unwillingness to tolerate corrupt government dealings.  The question is, however, what happens if society cannot rely on its top officials to provide such guidance, nor rely on even lip-service paid to the anti-graft movement.  An example is South Africa, our next case study, where the recent worldwide FIFA corruption scandal resonated with particular momentum, given the country’s past hosting of the FIFA soccer World Cup.  As several news outlets have reported, the South African government (at its highest levels, including the Ministry of Sports and Recreation), has tried to keep details of the FIFA bribery allegations from the country’s public, specifically by instructing ex-Cup local organising committee (LOC) members not to give interviews and to hand over any evidence to the Ministry only.  Other corporate fraud scandals (ex.: Nedbank) continue to embroil the country, whose economy (and currency) appear on a perpetually and dangerously downward-sloping curve.

Example ‘B’: South Africa

In our FIFA article, we pointed out with significant concern that “the South African Government’s, particularly under the auspices of President Zuma, dismantling of key enforcement agencies, especially the National Prosecution Services … has effectively prevented proactive enforcement of corrupt activities.”

Nonetheless, in the South African daily Times, Babalo Ndenze recently summarised the “most successful year yet” for the country’s Asset Forfeiture Unit — some of the few corruption-busters that have remained intact since a sweeping and politically-driven “overhaul” of the anti-graft investigative units in Africa’s southernmost Republic has caused the effective number, quality and fervour of public fraud prosecutors to dwindle to dangerous lows.  As we observed in a prior article on the perception of corruption in the country causing less foreign direct investment, “a new report released by the Centre for Corporate Governance in Africa at the University of Stellenbosch Business School, concludes that corruption remains one of the major obstacles to Africa’s economic rise: among the Southern African Development Community (SADC), South Africa suffers particularly from the perception of a high prevalence of bribery and corruption in the granting of South African government contracts and procurement tenders …”

Nonetheless, the Times chimes in with healthy enforcement statistics, and we will conclude today’s instalment with a recitation of those numbers:

The crime-fighting unit recover R2.8-billion [that’s almost $250 million] during the 2014-2015 financial year. Its biggest haul involved freezing contracts worth R1.8-billion issued by the Gauteng health department.

The unit also froze orders worth R4.2-million against a company that was awarded a tender to transport mourners to Nelson Mandela commemoration events in the Eastern Cape. The tender process was rigged.

A number of Buffalo City Municipality officials, including former mayor Zukiswa Ncitha, were implicated in the case.

The unit also recovered a farm worth R1.5-million in the Free State that had been illicitly obtained by an SA Police Service detective.

The unit froze and recovered R59-million in various bank accounts of people who defrauded the Social Housing Regulatory Authority in East London . The unit also recovered some of the authority’s R4.8-million that had disappeared for “personal purposes”.

It was assisted by the National Treasury to recover more thanR61-million that was swindled from the authority’s coffers.

A list of the unit’s major recoveries appears in the National Prosecuting Authority’s latest annual report, which has been tabled in parliament.

According to legislation, the seized money goes into the central revenue fund.

“The unit achieved its best-ever performance, obtaining freezing orders to the value of R2.8-billion, significantly exceeding the annual target of R755-million by 265% and last year’s performance by 293%,” the report read.

The unit’s head, Willie Hofmeyr, said this success can be attributed to working closely with other crime-fighting institutions such as the Hawks, the police and the Special Investigating Unit.

“We’ve had a few good years in the past but this was probably our best,” he said.

“It’s true that working together has made a difference

“Tender-preneurs” holding back tech investment in Africa

Will technological tender process end the reign of “tender-preneurs”?

Biztech Africa‘s Tom Jackson reports from Connected East Africa conference in Diani, Kenya, that former Kenyan permanent ministry secretary Dr Bitange Ndemo has given a speech on how corruption is holding back technological investment in the country.

Image: By BiztechAfrica

The paper reports that development as a tech hub in East Africa is “being held back by corruption and “tender-preneurs” who take advantage of lax procurement regulation.”

The speaker was in the ministry until 2013 and has since returned to the University of Nairobi.  Referring to new government initiatives to digitise the procurement process (in order to prevent and/or limit corrupt tenders), he said that “I hope, and I pray, that this anti-corruption process at the moment reveals the true ‘tender-preneurs’.”

“Because the problem is in the procurement law and the PPP law. We have super wheeler dealers behind and then you are the one that gets in trouble. But if they were to decide to work for the people then Kenya would be developed in one year. Because they can execute.”

Perceived Corruption Hampers Asian Investment in Kenya


Chinese Investors See East African Corruption As Hurdle to further Investments

Welcome to 2015, AAF readers.  Our editors and staff are looking forward to a great New Year of providing you with news and insights into anti-corruption and fraud-prevention on the African continent.

Our first story of the year hails from East Africa, when CNBCafrica‘s Elayne Wangalwa reports on the dampening effect of Asian investment into the Kenyan economy due to the high degree of perceived corruption in the state.

In her article, Wangalwa writes that the primary alleged culprits are the Nairobi City Council and the Kenya Revenue Authority.  These figures are based on statistics resulting from a Business Perceptions Index (BPI) survey requested by the Sino-Africa Centre of Excellence Foundation.  The study surveyed approximately 400 Chinese state and privately-owned firms active in East Africa (75 in Kenya).

Interestingly, the foreign investors were partially at fault when the bribery-allegation triggers occurred: “Most of [the Asian companies] were asked for bribery when the officials found misconduct in their business practices, like the absence of some business certificate display,” according to the survey, resulting in the BPI suggestion that “Chinese companies learn more about Kenyan laws and regulations.”

According to CNBCafrica, the Chinese presence has been augmented significantly since the last visit of Chinese Premier Li Keqiang to the country in 2014, with the number of Chinese expatriates in Kenya more than doubling.

FCPA investigation hits FedEx in Kenya


Kenya and FedEx: Possible breach of FCPA anti-bribery provision

According to Wall Street Journal and Law360 reports, two powerhouses (one country, one company) are involved in a recent self-reported FCPA violation: FedEx Corporation has reported possible infractions of the foreign anti-bribery law in Kenya to the United States Department of Justice.

According to the articles, “FedEx says it told the authorities at the DOJ and the SEC that it had received an email in December outlining allegations of potential bribery in the Republic of Kenya and possible violations of the FCPA. The shipping giant has been investigating the matter since 2013 but has been unable to substantiate the reported claims, the company said.”

“FedEx informed the DOJ and SEC of these allegations shortly after their receipt and have been engaged in a cooperative dialogue with both agencies since that time,” a FedEx spokesperson told Law360 late Tuesday night. “To date, FedEx has not found anything to substantiate the allegations, but the investigation is ongoing.”

The company was allegedly tipped off anonymously late last year, involving claims made in an e-mail (which the sender also threatened to send to the DOJ and Securities and Exchange Commission) that its on-the-ground agent, Pan Africa Express, was implicated in bribing Kenyan government officials in return for favorable conduct, such as “customs officials to clear shipments without inspection, as well as to government vehicle inspectors and others, the person alleged,” according to the WSJ article.

East Africa: “Rampant corruption” hinders economic development

Tanzania Private Sector Foundation (TPSF) Chairman warns of injury to economic development, emphasises importance of single standard

Dr Reginald Mengi, Tanzania Private Sector Foundation (TPSF) Chairman (source: IPP Media)

In a report by Charles Ngereza, the head of the 231-member strong TPSF was quoted as highlighting the importance of ensuring that a single standard must govern corrupt conduct by both domestic and foreign entities and individuals.  Speaking on the occasion of “European Union Week” at the East African Community Headquarters, he said:

“We hear Africans are corrupt but the question remains, what about international companies which give bribes so as to be favoured in investment projects on the continent? They too should be punished.  Double standards mustn’t be allowed to dominate this matter.”

The Chairman of the 190-member strong East African Business Council (EABC), Felix Mosha, was quoted as optimistically highlighting the EAC’s overall growth-rate increase from 14% to 23% year-over-year, thanks in part to easier border crossings and business infrastructure improvements.

Along the lines of our sister site,‘s post from today (“Investment in Africa: Changing landscape, new hurdles”), the article emphasises the potential long-term detrimental effect on economic growth of allowing corrupt business practices to continue.  Anti-corruption measures must be instituted and implemented at an international level “through imposition of sanctions on all international companies found guilty of the practice and manipulation of African leaders in their companies’ interests.”