Burundi’s Onatel seeks South African govt help to retrieve scam payment

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Burundi’s incumbent Onatel fell for the oldest trick in the book. Three South African businessmen offered the company a substantial loan. But first the alleged fraudsters asked the company to make a 10% “security deposit”. Unfortunately for the Onatel officials, there was no loan: it was simply a face-to-face version of the 419 scam. The promise was of large funds but first it had to pay to secure them. Not a little embarrassed for having fallen for the scam, the Burundi Government and its phone company have been seeking to get help from the South African Government to retrieve the money. Russell Southwood looks at last week’s events and draws parallels with another scam on the continent.

South African businessmen Joseph Lato Tsotesi, Vusumuzi Stanley Mncube and Cyril Morolo (who is a lawyer) went to Burundi and offered Onatel a loan to help the company build a GSM network. They now face charges of fraud and swindling in their native country and possible extradition to Burundi to face charges there. National Police Commissioner Jackie Selebi (who is also the current President of Interpol) met the men in an effort to convince them to return the money they are alleged to have stolen.

On 2 November 2004, the three men representing their own investment company offered to lend the company US$10 million. Despite the fact that the sum involved was substantial, Burundi’s Onatel agreed the offer. On 24 November, it signed a second agreement with the South African investment company. This specified that the investment company would lend Onatel the money in two parts: a first payment of $6 million and a second one of $4 million.

Part of the agreement was that Onatel, to secure the loan, would give the investment company a 10% “security deposit” on the first payment of $600,000. Onatel transferred this into the South African investment company’s bank account. There was no mention of escrow accounts. A Consular Official at the Burundian Embassy in Johannesburg said this was the beginning of the problem:”We thought they would get back to us in one, maybe two months. They never did. We wrote to them, asking them to give back the money and up until today we still have not hear from them.”

“This is a very bad reflection on South Africans who go in and out of our country on a regular basis to do business. The amount they took from us is very huge because we are a poor country. They need to face the justice system in Burundi.” Apparently the Burundian Government even contacted President Thabo Mbeki to get help with retrieving the money. All three are now under arrest and appeared in the Johannesburg Magistrates Court where they were each given bail of R30,000. The Burundian Government was granted an extradition order in December last year.

There are some parallels and some differences with a much less publicised scam that took place in a West African country. The incumbent telco was buying from a reputable telecoms supplier. For some reason a separate company was set up and money was paid to that company. It turned out the company was simply a “shell” and the money had disappeared. The suspicion was that the fraud could only have taken place with some knowledge from those authorising the payments. And in this instance the scale of missing funds was much more substantial.

These types of scams only serve to reinforce the impression that Africa is a high-risk place to do business and it is to be hoped that the money is retrieved and that the alleged fraudsters face their day in court.