Privatisation was turned into a cash cow for a few individuals
Posted Sunday, September 22 2013 at 01:00
“Lest we forget, there were fiscal, economic and social political reasons that informed the privatisation process. They ranged from desire to broaden share ownership among Ugandans; reduce corruption and abuse of public office; reduce fiscal drain on the Treasury and mobiles resources for treasury among others.”
Years ago, Ugandans woke up to the grim reality that Diary Cooperation had been given to Sameers at one dollar. Why this was done, it is only the Privatisation Unit (PU) and Mr Museveni who can explain.
At the onset of the privatisation process, Public Enterprises (PE) were categorised under five. The first were enterprises where government remained with 100 per cent shares, (these were firms that dealt with sensitive issues such as security) the second were firms where government remained as a majority share holder; the third is where government became a minority share holders, the fourth constituted firms where government pulled out completely and the fifth category were firms that were simply liquidated.
Diary Cooperation was a viable enterprise that would have been in category two or three. It was therefore a surprise that government chose to treat its disposal like those firms whose viability was untenable! Many years down the road, the Ministry of Finance and PU are again at their game to defraud the tax payer! PU is in the process of disposing of Kinyara Sugar Works Ltd to RAI Holdings Limited against agreed procedures.
In 2006/2007, during the initial sale of shares to Rai Holding Ltd, government undertook to offer the remaining 49 per cent shares as follows; 19 per cent shares were to be offered to the public through stock exchange. 10 per cent was to go Omukama of Bunyoro Kingdom; 10 was for the workers and 10 per cent was for out growers.
Since then, PU has mumbled, fumbled and tumbled and now set to cause loss to the taxpayer. Delotte and Touche’ was contracted to carry out a business valuation and advised government on the value of its 19 per cent shares. Upon this, the Divesture Reform Implementation Committee (DRIC) authorised PU to negotiate sale of the 19 per cent government shares at US $11.05million - $12.8 million. Whether it was by coincidence or planned, PU waited when the full Minister was away and renegotiated the price to $9.1 million. This will cost the taxpayer a loss of $3.7million!
In the business proposal, RAI Holdings Ltd offers to increase the capacity of Kinyara to 200,000 tonnes of sugar after investing $55 million, but with a condition that government finds more land for Rai Holding Ltd. Our excited government as usual has already proposed to parcel out public land belonging to Uganda Prisons service at Isimba to the investor. This, is even before RAI Ltd has made full payment.
Also, against the agreed principle, President Museveni went behind doors and ordered Ministry of Finance to give the 19 per cent shares to Rai Holdings instead of putting the shares on stock exchange for the public.
There are two wrongs in this. The first, is that when the President gives this directive, he goes against the privatisation set objective of increasing ownership among Ugandans which by the way is premised on the fact that involving a wider public in privatisation creates the basis for wider economic benefits and raises the acceptance of the implemented measures.
The second wrong is that given that sugar is a desirable good and investment in sugar, a viable business the world over, it does not make sense to give 70 per cent shares to the private investor. Government or the public should have had majority shares so that they can benefit from this lucrative entity.
It is this haphazard and unprincipled manner of disposal of PEs by the PU that caused government failure to realise some of the set out objectives of privatisation process. But, for example, while selling of PEs was to mobilise money for the treasury, by June 1997, the divesture process had accumulated a net deficit of Shs5.6b. The deficit was because many of the public enterprises that had been privatised had not been paid for.
Almost 20 years since the inception of the privatisation process, we expect the Ministry of Finance together and PU to have learnt some lessons and therefore act better and get the public to benefit from privatization. Instead, we see business going on as usual. PU is set to cause loss of $3.7million; they are set to sign an agreement before Rai Holdings Ltd has fully paid up.
Am driven to one of the conclusions on policy failures, that whenever there is resistance to drop or to make changes in the policy circle to a seemingly unworkable policy, it means that there is a clique of people benefiting from the policy process. The Ministry of Finance and PU should come clear on the individuals who turned the privatisation process into their cash cow.
Mr Nandala is the Leader of Opposition in Parliament and Budadiri West MP