Congo Election Body Said to Pay Millions to Kabila-Tied Bank

(Bloomberg) -- The Democratic Republic of Congo’s cash-strapped electoral commission paid more than $2 million in fees to a bank with ties to President Joseph Kabila’s family, according to a former senior bank employee. 

That transaction is now drawing scrutiny as a delay to presidential elections -- in part attributed to a lack of funding -- has triggered violence in the mineral-rich country. Belgium’s foreign minister is calling for the deal to be investigated for possible embezzlement. Congo’s government on Tuesday rejected its former colonial ruler’s call for an international probe, saying the country’s own law enforcers would decide whether action is necessary.

At issue are alleged payments made by the country’s electoral commission for a facility that would give it access to U.S. dollars. The Congolese unit of BGFI Bank Groupe SA charged the commission at least $2.4 million for a $25 million overdraft facility in May, according to Jean-Jacques Lumumba, the former head of commitments at BGFI Bank Groupe SA’s Congolese unit. 

The fees were excessive, Lumumba told Bloomberg in an Oct. 17 interview. The charges included a $1 million fee for which no reason was provided, according to bank statements shown to Bloomberg by Lumumba. The transaction was also described by Lumumba in a French-language report on Oct. 29 in the Brussels-based Le Soir newspaper.

The interest and fees paid for the credit facility by the Independent National Electoral Commission, known by its French acronym CENI, were negotiated between the body and BGFI and “do not stray at all from market practice,” the commission’s rapporteur, Jean-Pierre Kalamba Mulumba, said in a statement handed to reporters in the capital, Kinshasa, on Wednesday.

Hot-Button Issue

The commission’s financial health has been a hot-button issue as election-related violence has left at least 50 people dead and threatens to spread conflict in the central African nation. Kabila was scheduled to hand over power in a November election, but the vote has been delayed until 2018 to give the election commission time to complete a complicated voter-registration process. The issues will take at least 17 months to sort out, the commission has said, adding that it needs millions to pay for voter enrollment technology, transport and staff.

BGFI, based in Libreville, Gabon, referred requests for comment to its Congolese unit. The Congolese unit’s managing director, Francis Selemani Mtwale -- who is also the adopted brother of President Kabila -- said it’s “common currency risk-hedged practice” for banks to issue dollar overdrafts pledged against domestic currency. The structure provides “flexibility” to institutions that face a high volume of demand for dollars on a daily basis, he said, describing the cost of the facility as “totally coherent.”

Currency Risk

The election commission had 30 billion Congolese francs ($31 million) on deposit with BGFI, Lumumba said. The commission used the deposit to secure the overdraft allowing it to withdraw funds in U.S. dollars, he said.

The commission needs dollars to buy technology used to register voters from abroad as well as to pay for local service providers operating in a largely dollar-centric economy, CENI President Corneille Nangaa said in an earlier phone call.

There may be a legitimate reason for paying for the overdraft to access dollars rather than converting the Congolese francs, according to two bankers in the country who aren’t familiar with the specifics of the case. Banks in Congo won’t always allow customers to convert large amounts of Congolese francs into dollars, because they don’t need that many francs and don’t want to take on the currency risk, they said. A dollar overdraft secured against holdings in domestic currency is a common way around that, they said.

A copy of the term sheet signed by Nangaa, reviewed by Bloomberg News, shows the bank charged the electoral body a 4 percent fee equal to $1 million for the facility and 8.5 percent in annual interest.

Cash Withdrawals

The $1 million “is related to the 4 percent charged as arrangement fees,” Selemani said Wednesday in an e-mailed response to questions. “We have to stress the level of costs charged in this credit facility is totally coherent and below market benchmarks,” he said.

A typical fee for an overdraft deal in Congo is 1 or 2 percent, even considering the high level of risk in the transaction, said the bankers, who spoke in general about such arrangements.

Within the first three months of obtaining the overdraft, three electoral-commission agents withdrew a total of $7.5 million, in cash, from the account, Lumumba said. Bank records reviewed by Bloomberg News show the withdrawals.

Domestic Concern

It’s unclear how the money was used. Commission chief Nangaa didn’t comment on those specific withdrawals. He noted generally that commission members may need dollars to pay for services in remote parts of a country the size of Western Europe, where many live in villages without road access. Commission rapporteur Kalamba added that the withdrawals were legal and justified.

Belgium’s foreign minister, Didier Reynders, called for an investigation following Le Soir’s report of the overdraft transaction and two other transactions carried out by BGFI.

"At the international level there is the capacity to investigate corruption and embezzlement, so it should be done." Reynders said.

Congolese government spokesman Lambert Mende said the country’s attorney general would open an inquiry only if he determined that one was warranted, and wouldn’t bow to demands for investigations from Belgium.

“On what basis can the Belgian government demand an inquiry into the operations of a Congolese bank that does not concern Belgium?” Mende said by phone on Tuesday from the capital, Kinshasa.

Mende said the government couldn’t comment on CENI’s financial arrangements, adding that the commission is an independent body. He said government agencies often need large amounts of cash to pay for goods, salaries and services in remote parts of the largely unbanked country. It is improper to "manipulate this situation which cannot be avoided and present it as corrupt management," Mende said.

Credit Procedures

Selemani grew up with Kabila and describes himself as the president’s adopted brother. Kabila’s sister, Gloria Mteyu, had a 40 percent stake in the bank’s Congolese unit, BGFI RDC, as of October 2014, according to a copy of the minutes of a board meeting reviewed by Bloomberg. Mteyu, reached by mobile phone on Oct. 18, said she holds an account at the bank but has no financial stake in it. She declined to discuss her financial activities beyond a fashion business she runs.

Lumumba resigned from BGFI on Oct. 12. In his resignation letter, reviewed by Bloomberg, Lumumba said BGFI RDC’s managing director, Selemani, approved the overdraft without following the bank’s credit procedures. Selemani in that case bypassed Lumumba’s department, which is responsible for new credit facilities, Lumumba wrote. 

‘Independent Body’

Lumumba, the grand-nephew of Congolese liberation hero Patrice Lumumba, says he has been receiving threats and has fled Congo.

Kabila’s political opponents say the election delay is a bid by the president to retain power, a charge the government denies.

“There is a perception that it’s the government or the president who organizes elections,” Kabila told reporters in August. “That’s not the case. Elections are organized by an independent electoral commission.”

CENI, in a statement released Oct. 15, said it was solely responsible for the election calendar.

The U.S. and the United Nations have warned that violence in the country could spread if Kabila remains in power after Dec. 19, when he was due to step down. Two wars in the country that killed millions between 1996 and 2003 are fresh in the minds of most Congolese, who have never witnessed a peaceful handover of power.

The U.S. in recent months imposed targeted sanctions against three of Kabila’s generals for their use of violence to intimidate political opponents.

To contact the reporters on this story: Franz Wild in London at fwild@bloomberg.net, Michael J. Kavanagh in Kinshasa at mkavanagh9@bloomberg.net, Tom Wilson in Kinshasa at twilson128@bloomberg.net. To contact the editors responsible for this story: Alan Katz at akatz5@bloomberg.net, Paul Richardson, Pauline Bax