The apparent disappearance of US$332,800 from Namibia's treasury underlines the utility of letters of credit (L/Cs), not only in making sure that goods paid for are delivered, but also in ensuring transparency in public procurement.

Weapons ordered for Namibia's Ministry of Defence for the above amount failed to materialise after the Namibian purchaser apparently agreed to pay 100 per cent up front rather than use an L/C to finance the transaction.

Company dissolved

According to a June report in The Namibian, full payment for the goods was last year paid into the account of an Isle of Man incorporated company, Harvey Logistics. It was dissolved in February of this year, but the Ministry of Defence has not yet received the weapons it ordered.

The Namibian reports that somewhere along the line, the terms of the transaction were altered from an L/C to a pro-forma transaction.

Changing terms

Apparently the deal dates back to April last year and according to the newspaper, Colonel Joel Uutoni of the Ministry of Defence exchanged correspondence with Graham Law on behalf of Harvey Logistics.

A letter printed by the newspaper, quotes Law as saying to Uutoni: "Based on the content of our conversation, it is hereby confirmed that we are now preparing to supply 10,000 pieces 60 mm mortar bombs and 6,000 pieces of primers for 82 mm mortar bombs as per prices contained in our quotation dated March 2001, even though the cost structure has been adversely affected by reduced quantities."

The letter addressed to Uutoni goes on to say that: "at your request instead of payment by Letter of Credit, you will note the pro forma (invoice) states payment terms as an initial pre-payment in advance with the balance against documents. The pre-payment must be no less than 60 per cent of total value."

It remains unclear from reports in the Namibian media as to why officials agreed in July of last year to pay the full invoice amount of US$332,800.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.