KAMPALA- Ms Geraldine Ssali, the former Deputy Managing Director of the National Social Security Fund (NSSF), has faulted the justices of the Court of Appeal for upholding the 12-year jail term for David Chandi Jamwa, the former managing director of the Fund.
Ms Ssali said that selling treasury bonds before their maturity, which was the prime crime Jamwa had committed, is a “legitimate business” which managers make from time to time.
As an alternative, Ms Ssali said the State would have gone against Jamwa on other queries like the Temangalo land saga.
On Monday, in a majority judgment of two-one, Jamwa was sent back to Luzira Prison to continue serving his 12-year jail after the two justices of the court said the trial judge John Bosco Katutsi, rightly convicted Jamwa after finding him guilty of causing financial loss of Shs3.1 billion to the Fund.
“I feel strongly about that case because it was a genuine and legitimate transaction a manager is expected to make on quick notice,” Ms Ssali said.
She said managers in big organisations make financial decisions all the time and punishing Jamwa sends a wrong signal to them.
“As a Finance professional, I have never really understood his crime on this very transaction of liquidating a bond earlier than maturity. Bonds carry risks. This means they are also speculative in nature and also carry risk,” she said. “So, a manager can make a decision to exit early if they feel the opportunity cost on the remaining interest is not better than the next best alternative for that money."
She said: "For example, if a one year lucrative fixed deposit opportunity is identified and is closing, I can choose to exit in anticipation for more income from a higher yielding fixed deposit. This is normally referred to as tactical trading. It's therefore normal to make gains or losses in the course of trading.”
She said that based on the risks involved in dealing with bonds, managers are always insured against such liabilities so that once such decisions backfire, the losses are covered.
“This is the reason managers and officers liability insurance exists - to cover any losses incurred in the process of doing legitimate business as anticipated,” Ms Ssali said.
She wondered why many companies that incurred losses in 2015 were bailed out by government instead of their managers being jailed for wrong financial decisions that caused the losses.
About two years ago, a total of 65 companies cried out to the government to bail them out of their financial mess after their businesses became distressed due to non-performing loans.
Ms Ssali said the judges should have considered the decisions in their entirety instead of only looking at the liquidity position of NSSF at the time.
“The judges with all due respect to them may have looked only at the liquidity position of NSSF and ignored all the other factors like interest rates, exchange rates, cost to income ratio and all the other stuff they consider boring. They have set the wrong message,” she said.
“The indirect implications of this ruling are that the judgment has killed a percentage of the secondary and primary bond market. Financial analysts and fund managers may not be willing to participate in these bond markets unless they can demonstrate beyond reasonable doubt, the dire need for liquidity," Ms Ssali warned.