Minister ‘paid himself’ Shs2 billion of our money

A non-governmental organisation (NGO) associated with Mr Haruna Kyeyune Kasolo, the junior Microfinance minister, has been named in a whistleblower’s report to a parliamentary committee in which a conflict of interest is alleged.

It is feared that billions of shillings advanced through the NGO to savings and credit cooperative organisations (Saccos) in Kyotera County, Rakai District, may be unrecoverable.

The minister was a lawmaker for Kyotera between 2016 and 2021, but lost his seat in the last election. Suspicions that he may have abused his position to influence a government lending agency to the preferential benefit of his constituents then are under inquiry.

A probe by the House committee is yet to establish any evidence of wrongdoing by the minister.

Kasolo Foundation Limited is reported to have been involved in the disbursement of the billions from the government’s Microfinance Support Centre (MSC).

As a company limited by guarantee, and which the government set up to extend affordable micro credit services to financially marginalised groups, MSC has two shareholders, namely, the Minister of Finance, and the Minister of General Duties in the Office of the Prime Minister. Both shareholders are represented on its board, with Mr Kasolo representing the Finance ministry.

A board resolution filed with the Uganda Registration Services Bureau on January 30, 2020 names Mr Kasolo as the sole signatory to Kasolo Foundation’s bank account.

On Friday evening, Mr Joel Ssenyonyi, the chairperson of the House committee on Commissions, Statutory Authorities and State Enterprises (Cosase), said “while “many of these things are not [expressly stated] in the Auditor General’s (AG) report” his “journalistic instinct and journalistic background” has led him on a quest that cannot be reduced to a fishing expedition.”

He added about the allegations: “So many of these things are not in the AG’s report, but we get information in various ways.”

Whistleblower’s tip
The committee received the whistleblower’s tip implicating the minister’s NGO just as it began reviewing a report of the AG’s on MSC’s accounts for the year ending June 30, 2022.

In this AG report, it is highlighted that the centre’s loan portfolio performed poorly on recoveries, and that there were lapses in carrying out due diligence during credit appraisal processes—a fact the whistleblower’s tip partly attributed to alleged preferential lending to organisation’s like Kasolo Foundation.

Two years before the AG audited its accounts, MSC’s own 2019/2020 annual report stated that board members have a fiduciary duty to declare potential conflicts of interest, which may undermine the position or service of a director.

A director who may have a material personal interest in a matter that relates to the affairs of the centre must give the other directors prior notice of such interest. In the board resolution filed with the Uganda Registration Services Bureau on January 30, 2020, Kasolo Foundation Limited resolved to open and operate a shilling bank account in Cairo Bank and appointed Mr Kasolo as the sole signatory.

This resolution was signed by Ms Zainabu Namaganda and Ms Sophia Namuleme as company directors. Coincidentally, the 2019/2020 annual report of the MSC lists Kasolo Foundation amongst its partners. It is not clear, however, whether the minister declared his conflict of interest to MSC’s board before his Foundation became a party to the multibillion MSC-related transactions.

It is also not clear from that annual report whether Kasolo Foundation is categorised as a development partner, which provides financing and technical support; or an implementing partner that mediates between MSC and final beneficiaries.

Minister’s response
Speaking to Sunday Monitor recently, Mr Kasolo in a telephone interview said he had not taken a shilling out of the Shs2 billion MSC loan facility.

“They have never lent Kasolo Foundation any money. They never sent any money to the Foundation’s account. The money was lent to individual groups in Kyotera. It was they (MSC staff) who advised that I guarantee the loans. They never handed me any single coin. My crime was to, maybe, want my people to benefit,” Mr Kasolo said.

The MSC is reported to have signed financing agreements with a number of Saccos operating under the wings of Kasolo Foundation.

Sunday Monitor was not able to ascertain whether those Saccos under Kasolo Foundation have repaid their loans, or how much of it remains unpaid. The executive director at MSC, Mr Peter Mujuni, declined to comment, insisting that borrower information is confidential.

“Borrowers, especially when they have done nothing wrong, need protection. A normal borrower needs protection. We should not be publishing borrowers’ [particulars] anywhere unless they have done something wrong. That would be undermining their rights,” he said.

According to the AG’s report now before Cosase, MSC received budget financing from the government through Emyooga grants to the tune of Shs100b and other credit funds worth Shs27.7b for the Financial Year 2021/2022. 

The centre also had on its books Shs40b in internally generated funds from loan processing fees and interest earned. It is part of this money which was loaned out to Saccos like those operating under Kasolo Foundation.

In a bad state
Audits of this money to establish payment performance revealed that the loan portfolio was in a bad state. There was no evidence of monitoring of loans and clients, and loans worth Shs4.1b were disbursed without proper loan appraisals.

Such lapses were some of the emerging concerns as Cosase opened its inquiries.

The failings are consistent with MSC’s previous and long-standing institutional challenges flagged in another report also filed by the AG six years ago in June 2017.

That report said the MSC’s lending policies were not fully adhered to. This contributed to the many scandals that have dogged the agency.

For instance, in 2011 following an investigation by the Inspectorate of Government, the then board chaired by former vice president Speciosa Wandira Kazibwe was suspended due to impropriety.

Nearly three years earlier, an October-December 2009 Budget Monitoring Report of the Ministry of Finance had unearthed widespread conflict of interest by board members who borrowed MSC money but never paid back.

“The same applies to politicians who borrow money and fail to pay back. Loans are at times given to the board members without going through the loans committee … it has become increasingly difficult for staff members to recover money from board members and politicians for fear of losing their jobs,” the 2009 budget monitoring report said.

More recently in 2020, the agency’s head, Mr Mujuni, was charged and remanded to Kitalya Prison over the alleged misappropriation of Shs10.8b meant for the Teachers Savings and Credit Organisation Societies (Saccos).

Speaker’s query
It is against this background that the report of the June 2022 Auditor General on MSC was tabled in the House and is being considered by Cosase.

Now, as an intriguing subplot to the Cosase probe, the Speaker of Parliament has written to the Mr Ssenyonyi stating that the mandate to scrutinise the MSC does not reside with his committee

“My guidance to the committee is to leave the examination of the audited accounts of the Microfinance Support Centre to the committee of PAC (Central) which has the jurisdiction to do so,” Speaker Anita Among’s July 25 letter reads.

Ms Among also indicated to the Cosase chairperson that his committee was handling tasks outsides its scope.

“Government entities such as the MicroFinance Support Centre fall outside of the mandate of Cosase because it is neither a constitutional commission or statutory authority or state enterprise.”

Two days later, Mr Ssenyonyi differed in his response to the Speaker.

“On January 19, the Auditor General’s report on the Microfinance Support Centre was submitted to Parliament and you, Madam Speaker, referred it to Cosase. This was precisely because it falls under Cosase and that is where it has always belonged. That is how as a committee we embarked on inquiring into it,” he wrote on July 27, 2023.

Citing established practice and the Public Finance Management Act, Mr Ssenyonyi argued in his response to the Speaker that MSC is under the jurisdiction of Cosase.

State enterprises are defined in Section 3 of the Public Finance Management Act to include companies registered under the Companies Act in which the government controls the composition of the board, or controls more than 50 percent of the issued share capital.

This legal definition was cited in Mr Ssenyonyi’s written response to the Speaker “because [the] government controls the board and 100 percent of the company (MSC). It is a state enterprise and all state enterprises are under Cosase,” he said.

‘Not shielding’
However, Mr Joseph Sabiiti, the principal press secretary to the Speaker, told Sunday Monitor that the Speaker is the custodian of the Rules of Procedure of Parliament, and it is in this capacity that she authored her guidance to Cosase. 

Mr Sabiiti said Ms Among’s letter should not be seen to be interference in order to shield MSC from scrutiny. Ordinarily, Mr Sabiiti added, these discussions don’t play out in public via leaked correspondences, but behind closed doors between the Speaker and committee chairpersons. 

Whether such a meeting took place or not is a subject of debate, but the exchange illustrates the strained relationship between the Speaker and the Cosase chairperson.

Months ago, the two clashed over Cosase’s probe into Uganda Airlines, with the Speaker intervening to stop presentation, debate and possible adoption of the committee’s report, claiming that it was leaked to the media. This was despite the fact that Cosase had uncovered extensive wrongdoing and financial impropriety by the airline’s top management. 

Mr Ssenyonyi interpreted the Speaker’s intervention as shielding the Uganda Airlines hierarchy from scrutiny and accountability.

They have never lent Kasolo Foundation any money. They never sent any money to the Foundation’s account. The money was lent to individual groups in Kyotera. It was they (MSC staff) who advised that I guarantee the loans. They never handed me any single coin. My crime was to, maybe, want my people to benefit,” Haruna Kyeyune Kasolo, junior Microfinance minister.