A South African firm managed to defraud a major Ghanaian bank, Stanbic Bank, and misused development funds intended for crucial infrastructure projects, according to recent revelations. The incident, which has left stakeholders reeling, highlights the importance of sound governance in development financing.
This was contained in social media post made respected honorary Vice President of IMANI Africa Bright Simons.
According to Bright Simons, the story begins in 2019, when Investec, a prominent South African bank, aimed to finance development projects in Ghana through an innovative approach. They created a special purpose vehicle (SPV) named “Ghana Infrastructure Company,” intending to use it for financing infrastructure such as roads, clinics, and storm drains. This model was considered a breakthrough, as it did away with the need for a traditional sovereign guarantee. Instead, government payments made as projects progressed were to serve as security, allowing Investec to incrementally increase its investment into the SPV.
While the venture was touted as a breakthrough, Investec, in private, demanded additional guarantees from Stanbic Bank, a prominent local bank used by the South African promoters of the SPV. These guarantees, along with support from South Africa’s export credit agency, were meant to back the project, particularly for materials sourced from South Africa. Unfortunately, it has now come to light that these Stanbic Bank guarantees were fraudulent—fabricated using simple tools like Photoshop by the South African promoters of the SPV.
In addition to the fake guarantees, many of the promised projects were not delivered. The funds that were supposed to go toward constructing vital infrastructure, including storm drains and roads around Lamashegu, Tamale, were grossly misused. The storm drains turned out to be largely fictional, and the poorly constructed roads were soon destroyed by subsequent flooding. Instead of investing in infrastructure, a significant portion of the funds was squandered on luxury items, including a Porsche once used as a prop in the Hollywood movie “Bad Boys,” for which $1.4 million was spent.
Bright Simons, a well-known analyst and activist, emphasized in a recent Twitter post that this scandal underscores the necessity of involving civil society, local analysts, and independent monitors in the design and supervision of development projects. He argued that such oversight would have acted as a safeguard, potentially preventing the misappropriation of funds.
According to Simons, the absence of diverse local stakeholder involvement was a critical failure in this case. Investec relied heavily on legal and financial consultants, as well as government ministries, instead of engaging with individuals who had a deep understanding of the local context. If they had consulted knowledgeable local actors, warning signs might have been noticed before large sums were disbursed.
Simons further pointed out that while trust is essential in development finance, it must be paired with strong transparency measures to deter abuse. He stressed that the preference for opaque practices over transparency in private development finance is problematic and can result in situations like this—where funds meant for public benefit end up being spent on luxury items instead of essential infrastructure.
The incident serves as a stark reminder of the critical role that governance, transparency, and community involvement must play in ensuring the success and integrity of development finance projects, especially in countries like Ghana.
It is all well and good to push for more “innovation” in how development is financed in places like Ghana. But we should always make GOVERNANCE the foundation. Here is a story of how a group of South Africans duped a big bank in Ghana.
1. In 2019, Investec, a prominent South… pic.twitter.com/uLjJ3uTpJ7
— Bright Simons (@BBSimons) September 28, 2024
