South Sudan’s banking regulator has threatened to suspend Stanbic Bank’s licence within 14 days in an escalation of a Sh722 million dispute pitting the lender and an airline.
In his letter to the lender, Bank of South Sudan (BOSS) Governor John Ohisa directed Stanbic Bank South Sudan to immediately cooperate with the country’s investigative bodies concerning the dispute between it and Air Afrik.
He also directed Stanbic to re-register its subsidiary as a stand-alone unit in compliance with the country’s laws and discussions.
The governor said BOSS would crack the whip if the lender did not heed the directives.
“As the regulator, we hereby direct Stanbic Bank South Sudan to immediately co-operate with the Financial Intelligence Unit (FIU), the Anti-Corruption Security Division, and all relevant investigative and legal authorities by ensuring full disclosure and documentation relating to the allegations and recording of statements by required personnel from your bank,” said Ohisa.
“Failure to comply with these directives will result in immediate and decisive action within two weeks of receipt of this letter, including the suspension of Stanbic Bank South Sudan’s banking licence.”
The lender in its reply said it is complying fully with the security agencies. However, the bank’s head of Brand and Marketing Lilian Onyach said the dispute between it and Air Afrik was a civil one and ought not to be criminalised.
“It is our view that the matter is civil and should be treated as such in any jurisdiction which calls for the requisite judicial process aligned to a civil dispute. Stanbic Bank is committed to complying with South Sudan laws, regulations and guidelines of BOSS and looks forward to the amicable conclusion of our discussions,” said Onyach.
On re-registering the subsidiary as a stand-alone entity, Onyach said they were in discussions with BOSS to resolve the issue. Nevertheless, she maintained that the bank is vouching for the maintenance of the current arrangement.
“Regarding the conversion of the branch into a subsidiary, we confirm we are engaging with the regulator with a view of eliciting an amicable resolution,” she noted.
While we have expressed our preference to maintain our current branch structure, we are committed to a mutually beneficial agreement on the matter. We have committed to provide a comprehensive update to the Bank of South Sudan by January 31, 2025.”
The dispute revolves around BOSS, Air Afrik and Stanbic. It has resulted in multiple cases, with the lender’s chief executive Joshua Oigara obtaining orders barring Kenyan authorities from either questioning or arresting him over the dispute.
High Court
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There is also a separate battle between Stanbic and Air Afrik at the Court of Appeal.
Stanbic moved to the Court of Appeal, arguing that a High Court ruling had made it impossible for it to tell its side of the story.
According to the lender’s lawyer Kamau Karori, the orders by Justice Nixon Sifuna meant that it had to get the approval of Air Afrik to file its witness statement. According to him, this was unheard of. Air Afrik argued that the bank intended to delay the case by filing an appeal. According to the firm, the High Court had already heard at least five witnesses. Air Afrik alleged that Stanbic had not adduced evidence to show that it would be prejudiced by the orders issued in the lower court.
In the case, Afrik said it offers airline carriage and chartered flight services in South Sudan and the East African region. Its main route is Nairobi Juba.
It claimed that in 2014, the South Sudan government inked a deal to lease several aircraft for a year but with a likelihood of being extended for five years. According to the firm, the total cost for the deal was around Sh2 billion.
The court heard that the agreement was renewed and the South Sudan government committed to pay a 35 per cent deposit for the same. That was at least Sh722 million.
The firm said it maintained its account with Stanbic Bank in Juba and the Salva Kiir government wired the money on February 8, 2016.
Afrik said the lender reversed the money on May 27, 2016, on a claim that the money had been paid in error.
The South Sudan firm stated that Stanbic first wired back Sh600 million and then debited close to Sh100 million from its account stating that he had mistakenly withdrawn the money.
Afrik in its case said it lost money plus the business. Meanwhile, Stanbic decried harassment by South Sudan authorities over the dispute. The bank said it had received a summons from the South Sudan prosecution attorney, which it claimed was a similar intimidatory tactic employed by the Kenyan counterparts.
The lawyer said the investigative body is probing a false complaint which had already been previously investigated and the bank cleared. He asserted that Air Afrik had filed a complaint with the Central Bank of Kenya over the same issue.
Still, he said, the regulator threw it out after finding that the bank had done nothing wrong by debiting amounts it had erroneously wired to the firm.
At the same time, he argued that Air Afrik filed a separate case before the commercial court and was handled by Prof Sifuna. Kamau said Oigara he wasn’t working with Stanbic at the time the transaction is alleged to have happened.
According to Stanbic’s legal officer Janet Wanjohi, the row stemmed from a transaction in 2016.
Wanjohi explained that Air Afrik was Stanbic’s customer and it operated a business account in Juba, South Sudan in its South Sudan branch.
She narrated that on February 5, 2016, Stanbic received a credit advice note from South Sudan’s banking regulator advising it that its clearing and settlement account had been credited with $7.2 million (Sh770 million) for Air Afrik.
The officer said that three days later, Stanbic credited the aviation company’s account with the money after deducting its commission.
Subsequently, Wanjohi said, Air Afrik withdrew at least Sh101 million from the account.
However, she explained that Stanbic realised that BOSS had not remitted the money it had instructed it to wire Air Afrik.
The court heard that the lender opted to freeze any further withdrawals and it notified the aviation company that the money in the account would be reversed.
