How Uganda Railways lost 60 acres of land in Kampala

President Museveni has spoken strongly about the need to revive the railway sector as part of his government’s national infrastructural development agenda to lower the cost of doing business, attract investments in the country and create jobs for Ugandans.

But as Mr Museveni drives the revival of the railway sector, officials from Privatisation Unit (PU), apparently on his orders, were busy selling off assets of Uganda Railways Corporation (URC), including residential and commercial buildings, undeveloped plots of land and other key assets they labelled “non-core”.

Proceeding under Public Enterprises Reform and Divestiture Act 1993, Sunday Monitor understands that the Divestiture and Reform Implementation Committee cleared the properties for sale and accordingly, Mr Michael Opagi, who was the director Privatisation Unit at the time, proceeded to sell off the assets now under the Parliamentary scrutiny.
Some plots of land in Kampala were simply transferred to the Uganda Land Commission (ULC) for onward distribution, apparently, on the orders of the President.

Parliament’s Committee on Commissions, Statutory Authorities and State Enterprises (COSASE) previously chaired by Mr Ibrahim Ssemujju Nganda (Kira Municipality) and now headed by Bugweri MP Abdu Katuntu, is probing the circumstances under which URC and PU officials “fraudulently” disposed of the disputed assets and whether Cabinet approved the sale at a time when President Museveni is assiduously pushing for the Standard Gauge Railway.

“We are not going to leave any stone unturned,” Mr Katuntu said. “The people who participated in the sale of railway assets must account. We want to know who authorised the sale, who are the beneficiaries? And where is the money? We have set up a six-member committee to investigate URC land scandals, including the sale of URC assets in the various parts of the country and the status of the left overs.”

Last month, the Katuntu committee met URC officials led by URC managing director Charles Kateeba and demanded a list of properties sold, the price tag for each asset, the beneficiaries and the accountability of the proceeds from the controversial deals. The committee is probing non-valued assets, land deals and unserviced loans worth more than Shs144 billion. However, this figure does not include Nsambya land valued at Shs69.5 billion.

From the meeting, it emerged that URC sold off some assets without an update valuation and did not keep an asset register showing what has been sold and at what price. The assets register was also missing. Currently URC has a cautious value of Shs105 billion in its financial statement as being property, plant and equipment.

Background
Uganda Railways has been in existence for 120 years. It was incorporated in 1992 through the URC Act, 1992. The mandate of URC entails development, operation and regulation of railways in Uganda.

However, the operation mode changed in 2006 when the governments of Uganda and Kenya entered into a concession with Rift Valley Railways (RVR) to run railway services until 2032. This means that RVR will operate parallel with the proposed Standard Gauge Railway (SGR) services. Under the concession, URC conceded critical assets (core) and operations to RVR.

Some of the conceded assets include; trucks, stations, equipment, rolling stock, locomotives, staff, workshops and station reserves (buildings, yard and warehouses). URC, however, remained with the responsibility of overseeing the concession under the terms of the concession agreement as well as the assets which were never conceded – the non core assets.

Analysis into the controversial sale of the alleged “non-core assets” of Uganda Railways has revealed that residential houses were considered “non-core” and currently the bulk of them have been sold off and according to Mr Ssemujju, who first investigated the allegations of fraud at URC, “some assets were sold under unclear circumstances.”

President’s hand
Sunday Monitor investigation into what MPs have called “the fraudulent sale” of URC assets has indicated that when President Museveni and Cabinet resolved to give away 57.93 acres of Nsambya land, valued at Shs69.52b, they allocated more than the available land.

The allocation of non-existent plots in Nsambya reveals the extent of the railway land scandals and offers insights into the gaps in the deal that infuriated URC and PU officials.
According to confidential Cabinet files on the deal, on April 30, 2010, the President wrote to Ministry of Local Government instructing that 57.93 acres of Nsambya land is transferred to Uganda Land Commission. The Cabinet later passed a resolution to give away URC land.

However, according to sources, at first URC refused to abide by the directives and argued that the land in question belonged to URC not ULC.

Information and ICT minister Frank Tumwebaze, however, defended the President on the Nsambya land deal, saying: “It’s within the mandate of the President to promote anything for the welfare and common [interest] of the citizens. The Constitution in Article 99 gives him that executive power.”

“When investments from the private sector are supported with enabling incentives, they provide jobs to Ugandans. We have good precedents to look at such as Kalangala land and BIDCO project and Garden City, etc. Who can compare the value of those investments and the job multiplier effect created by them directly and indirectly, with the value of the previous bushy pieces of land? The value of land is realised if developed?”

To break URC defiance, Ms Syda Bbumba, the Finance minister then, wrote two letters in one week (February 10, 2011, and February 17, 2011) instructing them to transfer only 33.35 acres to ULC.

But after President intervened, she wrote another letter on April 1, 2011, this time requesting URC to “urgently cause the transfer” of all the 57.93 acres of Nsambya land to ULC. ULC later sold the railway land to individuals and companies without advertising at about Shs1.2 billion per acre.

Although Ms Bbumba had promised to compensate URC with Shs69.52b, being the approved value of the land (at Shs1.2 billion per acre), to date URC and PU have not received the money from Ministry of Finance.

And after investors got the land, the President and ministers who ordered URC to transfer the land to ULC have kept silent on the matter even as URC liabilities continue to accrue, currently at about Shs20b.

Investigations into why ministry of Finance has not paid URC, however, provided more depth into the politics of Nsambya land deal.
Responding to letters from URC demanding for Shs69.5b, secretary to the treasury Keith Muhakanizi on November 18, 2013, wrote to ULC raising questions about the swap deal that led to the giveaway of Nsambya land. The President claimed that some investors erroneously got land in Naguru-Nakawa estates and should, therefore, be compensated with the railway land in Nsambya.

Mr Muhakanizi, however, wrote to ULC officials demanding for the unspecified amount of money the investors in Naguru-Nakawa estates had paid to ULC before they lost the land to OpecPrime Properties Uganda Ltd, a UK-based company.
Mr Muhakanizi also demanded for the names of the beneficiaries, the acreage allocated to each of them, photocopies of the lease agreements, certificate of titles and confirmation whether they fully paid for the leases. Mr Muhakanizi did not get any response from ULC and there is no evidence in the ministry of Finance confirming that the investors paid for leases.

“There is no way ST [secretary to the treasury] can pay without getting the details of the beneficiaries of the land,” Mr Jim Mugunga, who speaks for both PU and ministry of Finance, said.

“We wrote to ULC requesting for details of the beneficiaries, the proceeds from Naguru-Nakawa land allocations and evidence of payment for leases so that we can compensate URC and PU for Nsambya land, but since 2013, we have not received any response.”

Nsambya land saga
At first, PU officials led by Mr David Ssebabi wanted to sell off the Nsambya land, including [the run-down] residential houses, to offset NSSF and retirement liabilities to staff and other statutory obligations, but Cabinet insisted the land should go to ULC “as a matter of urgency” and promised to pay Shs69.52 billion.

Although the chairperson of the Uganda Land Commission, Mr Baguma Isoke, was not available to account for the sale of the railway assets, top bureaucrats at PU told MPs on the committees of COSASE and Physical Infrastructure, who previously investigated the railway scandals how they “grudgingly” accepted to transfer Nsambya land to ULC, citing orders from above.

“That’s exactly the information we got from URC officials when we tried to investigate those matters,” Mr Ssemujju said, adding that the proceeds from the sale of Nsambya Uganda Railways land was never transferred to PU and the people who were given the land in question were not disclosed to the committee.

“That land was given away on orders from above and the tenants were not even given opportunity to talk about their rights. The whole transaction was dubious and ULC must explain why they grabbed URC land and sold it to private individuals.”

Another source told Sunday Monitor that before Cabinet passed the disputed resolution on Nsambya land, in April 2010, Mr Museveni also wrote to URC, directing that the land in question be transferred to ULC.

Cabinet sources told this newspaper ministers raised questions after some of the beneficiaries such as National Library disowned the land given to them in Nsambya. It’s not clear how ULC generated the list.

Order from above
In 2012, sources told Sunday Monitor that URC officials attempted to sell off three residential properties it owned in Kenya, claiming they were following “orders from above.”

The buildings were located in Nairobi, Kisumu and Mombasa. The planned sale was later halted by Parliament for what they called “strategic reasons”. Parliament’s Physical Infrastructure Committee members in 9th Parliament resolved that the continued sale of railway assets at a time when the NRM government was pushing for investments in the sector was “a misguided move”.

The intervention of Parliament in 2012 saved majority of the assets in Jinja, Tororo, Gulu and Masindi originally planned for sale although some properties had already been sold during phase 1 without proper valuation.

Sunday Monitor understands that Ministry of Finance through Privatisation Unit was responsible for the sale and URC only got involved after the sale to process the title deeds. The Uganda Railways assets in question were also being sold with valuation of 1998.

PU explains
Mr Mugunga, however, denied reports that there was no proper valuation and explained that: “URC assets are classified into two: core and non-core assets. Core assets remain under URC but assigned to operators through a competitive tender process under relevant laws.

The non-core assets were assigned to be boarded off with receipts going towards meeting expenses related to the cost of divestiture and paying termination benefits of URC workers.”

He added that so far only a part of these were offered through tender and others remain, awaiting government decision while some were reassigned to the SGR project.

Auditor General John Muwanga queried this in his previous reports to Parliament. The revaluation model, according to Mr Muwanga, requires that items of property plant and equipment which are carried out at re-valued amounts should be re-valued with sufficient regularity to ensure that the carrying amounts do not differ materially from those determined using fair value at date of statement of financial position.

Mr Muwanga noted that results of the evaluation of some assets carried out for purposes of concession in April 2005 could not be relied upon for accounting purposes and, therefore, URC financial statements were not compliant with the revaluation requirements, making the transactions suspicious.

Although Uganda Railways assets were sold, URC managers admitted that they were unable to engage a professional valuer to have all assets spread across the country valued due to huge costs involved (about Shs1 billion).

The management, however, told Mr Ssemujju’s committee last year that the required funds had been raised and that the process kick-started. The assets which had been lined up for valuation included land, buildings and railway reserves encroached on by illegitimate tenants.
On account of what MPs have called “connivance and slackness” huge tracts of railway land across the country have over the years been encroached on, putting government plans to revive the railway sector in peril.

“We noted in our report that since 1998, URC’s assets had never been re-valued and URC and PU officials were selling Uganda Railways land depending on values of 1998, meaning that the financial statements produced could be misleading,” Mr Ssemujju said.

Cabinet list of Nsambya land beneficiaries

1. Janet Kobusingye (4 acres)
2. Charles Kimera (0.75 acres)
3. National Library (0 acres)
4. Islamic University in Uganda (7.5 acres)
5. Nakawa Disabled Voc. Training Inst. (0)
6. Quakers (0 acres)
7. Church of Uganda (0 acres)
8. House of Dawda (7.5 acres)
9. CTM (U) Limited (3.5 acres)
10. Alumus Properties Ltd (2.5 acres)
11. William Nkemba (0 acres)
12. Yas Company (3.5 acres)
13. Access U Limited 13.2 acres)
14. Colour Press Services Ltd (0 acres)
15. Fairplay Catering Services (3.6 acres)
16. Zep-Re-Insurance Company (0 acres)
17. Kampala International University (10 acres)