How billions worth of Covid-19 funds were stolen in Africa

Inflating prices of medical supplies by nearly 1,000 per cent, making relief payments to illegal beneficiaries and rigging of lucrative tenders in the corridors of power are some of the ways Covid-19 funds are being looted in Africa.

It’s impossible to quantify the loss as yet, but the cases exposed so far with regard to crooked procurement of Personal Protective Equipment (PPEs) and diversion of aid money meant for vulnerable people suggest the plunder could run into billions of dollars.  

In South Africa, the auditor-general has uncovered massive corruption in the spending of 500 billion rand ($26 billion; Sh2.8 trillion) Covid-19 relief fund and several suppliers have pleaded guilty of inflating prices of items such as face masks by up to 748 per cent.

Kenya, Zimbabwe, Uganda, Somalia and Nigeria are other countries where cases of graft lords looting Covid-19 funds are public – but it’s feared many more countries will be exposed as aggressive scrutiny and more information comes to light. 

In an example of brazen profiteering, a South African pharmaceutical retailer, LevTrade International (LevTrade), was found guilty of excessive pricing after inflating the price of a box of 20 respiratory masks by 748 per cent.

It increased the price from R139 on February 14 to R310 on March 23.

Yet another, Dis-Chem Pharmacies Limited (Dis-Chem), inflated the average price of a box of 50-piece blue surgical face masks by 261 per cent, as desperate customers scrambled for the protection against coronavirus.

Dis-Chem was selling a unit at R43.47 in February but it increased the price to R156.95 before taxes in March, when the country confirmed its first case of Covid-19.

Reacting to numerous complaints about exorbitant prices for face masks, the Competition Commission on July 7 referred Dis-Chem, a national wholesale distributor and retailer of pharmaceutical products, to the Competition Tribunal for prosecution.

The Tribunal on July 22 found Dis-Chem guilty of charging excessive prices for surgical face masks and fined the firm R1,200,000.

“… the exploitative conduct of Dis-Chem of excessive pricing was particularly reprehensible. It exploited customers desperate to lay their hands on an essential item in the fight against a pandemic of global proportions, with potential consequences for consumers and public health… we consider its conduct was not only exploitative of vulnerable consumers, especially the poor, but was especially egregious,” the Tribunal ruled, according to a statement posted on the commission’s website.

On August 20, LevTrade agreed to pay a fine of R50,000 along with separate contributions to the Solidarity Fund and a children’s home.

Other penalties in the settlement agreement included a contribution of R10,000 to the Solidarity Fund as well as donation of surgical face masks and hand sanitisers valued at R25,000 to the Johannesburg Children’s Home.

The firm was also forced to reduce its gross profit margin on its N95 face masks to an agreed maximum percentage for the duration of the pandemic.

In Nigeria, an analysis by Dataphyte of data from the Open Treasury Portal (OTP) exposed the spending of N5, 600 ($15; Sh1620) on a 500ml bottle of hand sanitiser.

The Federal Road Safety Commission (FRSC), an agency of the federal government, paid ₦5.6 million ($15, 000) for the entire procurement deal, sparking protests.

It is similar claims of price inflation that have caused public outrage in Kenya and triggered an investigation.

Another two separate investigations into the alleged theft of consignments of PPEs from Alibaba founder Jack Ma and the Chinese government are ongoing.

The Kenya Medical Supplies Authority (Kemsa) is fighting accusations it gave out multibillion-shilling tenders at inflated prices and it’s now stuck with costly supplies whose market value has fallen drastically.

One firm caught up in the saga is Kilig Limited, which in January had secured a Sh4 billion offer to supply hundreds of thousands of PPEs. Each kit was to be supplied at an inflated cost of Sh9, 000, from the then market price of Sh4,500.

The complete kit includes N95 masks, body suits, goggles, waterproof shoe covers and gloves. The firm was to supply 450,000 units of each item but Kemsa later cancelled the deal following a disagreement.

Another firm, Shop ‘N’ Buy Limited, which was just four months old, was handed a Sh970 million contract to supply 100,000 PPE kits, each at an approximate price of Sh9,000, earning it Sh900 million. The company was also allowed to supply another 100,000 pieces of KN95 masks at Sh700 apiece.

Shop ‘N’ Buy Limited owner James Kipketer Chululey, however, defended the contract, insisting his company did nothing wrong.

Mr Kipketer told the Nation last month that the prices were high at the time because he had flown in most of the items, paying excessive cargo fees of about Sh2,000 for every kilogramme of import.

“We quoted the Sh9,000 per kit because we were importing by air and a kilo of any import was going for about 20 dollars in March,” Mr Kipketer said.

“Today, it might look inflated, but at that time, that was the price. Kemsa is now at a loss because the prices of some of those kits have dropped since we are now importing by sea.”

These cases highlight how the pandemic has become a gravy train for suppliers.

In some instances, it was outright theft of public funds.

South Africa’s auditor-general this week lifted the lid on the extent of the looting of the nation’s Covid-19 relief fund through overpricing and potential fraud.

In a briefing on September 3, Mr Kimi Makwetu reported the audit on the spending of 500 billion rand ($26 billion) had uncovered “frightening findings”.

In some cases, PPEs were bought at five times the price the national treasury had advised. Some of the complaints relate to price increases of 1,000 per cent and fraudulent relief payments to illegal beneficiaries.

30,000 grants

The BBC reports the audit also highlighted 30,000 relief grants that “require further investigation”.

“A lot of the effort that we put into this on the detection side of things has revealed a number of frightening findings that require to be followed up very quickly so that there is no significant passage of time before the required actions are implemented," Mr Makwetu was quoted by BBC saying at a press conference on Wednesday, September 2.

The allocated funds were meant to assist vulnerable households with food parcels, unemployment grants, support small business, farmers and to procure PPEs.

In Zimbabwe, President Emmerson Mnangagwa has had to fire his Health minister Obediah Moyo on accusations of seeking to enrich himself through a lucrative tender for medical equipment.

Mr Moyo is battling corruption charges related to a $20 million (£16 million) contract awarded to a Hungary-registered firm, allegedly without going through proper processes.

In Uganda, four top officials in the office of Prime Minister Ruhakana Rugunda tasked with overseeing a programme to provide food relief to the most vulnerable ran into trouble with authorities on accusations of graft.

They were arrested on claims they occasioned the government losses in excess of $528, 000.

In Somalia, a court this month jailed four government officials for the theft of public funds meant for Covid-19 emergency response.

Although court documents did not reveal how much each of them stole, in April the Ministry of Health had questioned spending of between $42,000 and $45,000.

World Health Organization Director-General Tedros Adhanom Ghebreyesus has equated corruption in procurement of PPEs to “murder”.

“Any type of corruption is unacceptable. Any level or any type of corruption is unacceptable. However, corruption related to PPE, life-saving…for me it is actually a murder. Because, if health workers work without PPE, we are risking their lives and that also risks the lives of the people they serve. So it is criminal and it is a murder,” Dr Ghebreyesus said on August 22.

By yesterday, Africa had 1,066,906 confirmed Covid-19 cases.

Globally, 25,884,895 Covid-19 cases have been recorded, including 859,130 deaths reported to WHO.

It had been feared that with trillions of dollars flooding in to help nations combat the pandemic, corruption would thrive especially given the emergency nature of the procurement.

The scale of the plunder of Covid-19 funds may not be immediately clear, but past estimates of graft in the health sector offer a clue. 

“The health sector is particularly vulnerable to corruption; it is estimated that at least US$455 billion of the US$7.35 trillion spent on healthcare per year is lost to fraud and corruption,” reports Transparency International (TI).

“With a huge influx of cash flows and medical supply shortages, humanitarian emergencies create fertile ground for fraud and corruption,” says a TI paper on anti-corruption strategies for development agencies during the Covid-19 pandemic.

While the jury is still out on how much will be looted in the fight against the Covid-19 pandemic, which continues to wreak havoc, the few reports so far cast a gloomy image.

These are scams

In late May, the US Federal Trade Commission (FTC) announced more than 52,000 reports of Covid-19 related scams since the beginning of 2020 had been filed, resulting in almost $39 million in losses. The average consumer lost $470.

The US Department of the Treasury has even put an alert about Covid-19 scams.

“If you receive calls, emails, or other communications claiming to be from the Treasury Department and offering Covid-19-related grants or stimulus payments in exchange for personal financial information, or an advance fee, or charge of any kind, including the purchase of gift cards, please do not respond.  These are scams,” reads the notice published on the department’s website.

Audits following past global crises have exposed the corruption that stalks emergency relief aid in times of catastrophes.

TI on its website reports that the International Federation of Red Cross and Red Crescent Societies estimated that it lost over US$6 million due to corruption and fraud during its Ebola operations from 2014 to 2016.

An independent audit by the Global Fund, and later the Associated Press in 2011, revealed that US$34 million of its grants may have been misused in Djibouti, Mali, Mauritania and Zambia.

Richer nations

And the fraud is not restricted to poor countries.  

The US Government’s Accountability Office reported about US$1 billion of payments made by the US Federal Emergency Management Agency during and after the hurricanes Katrina and Rita was improperly distributed and potentially fraudulently obtained.

“Corruption in humanitarian assistance results in a reduced quantity and quality of aid reaching the targeted beneficiaries, and, as a result, may potentially prolong humanitarian crises,” TI cautions.

In a publication on corruption and the Covid-19 pandemic, the World Justice Project warns coronavirus presents a “perfect storm” for graft. 

“Massive resources are being rushed to address both the health crisis and its economic side effects, while procurement oversight and enforcement efforts are relaxed or diminished by the exigencies of the crisis and social distancing,” reports World Justice Project on its website.

“The more funds are distributed, the more likely it is that people are going to try to steal that money,” VOA quoted Jeff Cortese, a former acting chief of the FBI’s public corruption unit saying in a report published on May 5.

Enormous amounts

And the amounts being channelled to fight the pandemic are enormous.

The Global Fund, the largest multilateral investor in grants for health systems worldwide, has offered US$1 billion to help countries fight Covid-19, mitigate the impacts on lifesaving HIV, TB and malaria programmes and prevent fragile health systems from being overwhelmed.

By July, the initial allocation of US$500 million for emergency funding had been disbursed to 72 countries through the Covid-19 Response Mechanism.

Devex, a social enterprise and media platform, has tracked more than 96 grants worth $2.1 billion as well as 35 loans worth $22 billion in West and Central Africa since January.

The US government has pledged more than $775 million to tackle Covid-19 worldwide.

The Department of State and USAID have announced $123 million to $140 million commitments to countries in West and Central Africa.

Regional efforts

They are also providing $10 million for regional efforts in the Sahel and in West Africa.

Nigeria and the Democratic Republic of the Congo are the countries receiving the highest amount of funding with $30 million and $26 million respectively in the West and Central Africa regions.

The European Union’s contribution to the Covid-19 response in sub-Saharan Africa is over $2 billion.

In West and Central Africa, Nigeria and Uganda are the main recipients, with almost $54 million and $32 million respectively.  

The International Monetary Fund has channelled an estimated $6 billion to at least 13 low-income countries in the West and Central Africa region.

The biggest IMF financing package so far is $3.4 billion for Nigeria.

Most of the donor funds are being channelled to health, social and economic ministries on the frontline of the national response.