Dubai's Loan Scams For Africa

Multi-million-dollar loans are, it seems, just a mirage

- Jack Lundin

The three Verster brothers of Somerset West were delighted when a supposed global financial giant in the United Arab Emirates (UAE) offered them a loan of US$14 million (R219m) to get their Western Cape start-up company off the ground.

Equally thrilled was budding Johannesburg entrepreneur Fidelis Phiri, to whom the Dubai-based Aras Group offered $7.4m (R115m) to fund his ambitious start-up.

In what appears to be an operation targeted at Africa, Noseweek has details of six more punters – in Botswana, Tanzania and Nigeria – who have received offers of loans from Aras totalling $1.2 billion (R18bn).

However, no one appears to have received a cent, which has aroused the interest of the Hawks, for Aras insists on substantial upfront payments from its loan-seekers. These, they claim, are to pay for the establishment and capitalisation of SPV companies (special purpose vehicles) which they would register in Dubai’s Ajman Free Zone to handle each transaction. Aras would own 52% of these SPVs, with the loan-seekers’ contributions giving them 48%.

In what seems to be a regular pattern, after shelling out these upfront payments – more than $241,000 (R3.8m) each for the Versters and Fidelis Phiri – and with no evidence that Aras has chipped in anything for its 52%, Aras finds spurious reasons, such as late payment of SPV fees or failure to supply required documents, to level large dollar penalties against its clients. And if the loan-seekers don’t pay up, Aras moves to cancel their contracts.

Needless to say, none of the punters’ substantial upfront payments are returned, though when contracts are cancelled Aras graciously offers to offset initial contributions against the hefty additional cost of a new contractual relationship.