Honorary Vice President of IMANI Africa, Bright Simons, has exposed a fraudulent scheme in which a group of South Africans swindled a Ghanaian bank, spending $1.4 million of development funds on a luxury Porsche.
Mr Simons detailed how a 2019 initiative by Investec, a prominent South African bank, went disastrously wrong in Ghana, revealing significant governance failures that allowed the fraud to occur.
In his analysis, Simons explained that Investec sought to get creative with development finance in Ghana by structuring an investment into a Special Purpose Vehicle (SPV) named “Ghana Infrastructure Company.” The SPV was designed to fund the construction of roads, clinics, climate-sensitive storm drains, and other infrastructure projects across the country.
“Investec hailed it as a breakthrough model that would do away with the need for a sovereign guarantee,” Simons explained, noting that the idea was to use payments from the government as the projects progressed as a form of security. As more projects were completed and paid for, Investec could then reinvest further into the SPV.
However, things soon went awry. Simons disclosed that Investec had quietly demanded secondary guarantees from Stanbic Bank, the local bank used by the South African promoters of the SPV. South Africa’s export credit agency also stepped in to cover materials sourced from South Africa. But behind the scenes, the scheme was unraveling.
“It has now been revealed that most of these projects were not delivered,” Simons stated. Worse still, the guarantees supposedly issued by Stanbic Bank were found to be fake. “The South African SPV promoters knocked them together using Photoshop,” he said, outlining the extent of the deception.
The misuse of funds was equally shocking. Simons revealed that instead of investing in the promised infrastructure, the SPV promoters squandered a large portion of the money on lavish expenses. One of the most egregious purchases was a $1.4 million Porsche, which had been featured as a prop in the Hollywood movie Bad Boys. “Yes, they spent $1.4 million of the money on a Porsche used by Will Smith in a movie,” Simons remarked.
As a result of the fraud, vital infrastructure projects such as storm drains in and around Lamashegu, Tamale, were left incomplete or poorly executed. The inadequate construction of roads and storm drains led to flooding that washed away the roads, highlighting the devastating consequences of the scam.
Simons emphasized the need for stronger governance and oversight in development finance projects, particularly in Africa. “There is no way such a situation could have happened if Civil Society and other local analysts and activists were deeply engaged in the design and monitoring of all development projects,” he argued. He called for independent monitoring of projects where the government has liability to ensure that funds are properly used.
Simons also pointed out that if Investec had involved more locally knowledgeable actors, rather than relying solely on legal and financial consultants and government ministries, “alarm bells would have sounded long before too much money got disbursed.”
He concluded by stressing the importance of transparency in development finance. “Trust is essential, true. But trust-based financing only works when transparency is a strong deterrence to trust-corroding actions,” Simons said, warning that the alternative is “scarce funds going into Porsches instead of storm drains.”