Truth about defunct National Bank of Commerce – Part I

On February 4, former directors and shareholders of the defunct National Bank of Commerce (NBC) were invited to appear before the parliamentary Committee on Commissions, Statutory Authorities and State Enterprises.
I do not know the former director or official who received the invitation. Whoever received it, invited exclusively former directors, managers and shareholders of Kigezi Bank of Commerce (KBC), alias National Bank of Commerce, who support Mr Amos Nzeyi and Mr Amama Mbabazi who have been defendants in several High Court cases initiated by former directors and shareholders of Kigezi Bank of Commerce.

The conflict between those who founded the bank and those who dismantled it has raged on for years. Those who continue clinging on the ideals of legitimate KBC include Prof Ezra Suruma and Maj Gen Jim Muhwezi, among others.
Following the conversion of Kigezi Bank of Commerce to National Bank of Commerce, more than 300 shareholders filed a High Court case against Mr Nzeyi and Mr Mbabazi and others, challenging the legality and seeking the restoration of KBC.

Bank of Uganda (BoU) totally ignored the aims and objectives of KBC and the provisions of the Financial Institutions Act and, worst of all it allowed Nzeyi and Amama Mbabazi to sell NBC to foreigners.
To fully understand the story of this sad episode, it is important to know why and how KBC was founded. It was founded by the Banyakigezi under the auspices of Kabale Development Association, then headed by Mgr Ndamira.
At one of its annual conferences, the association invited a number of eminent professionals including the late Dr Abel Rwendeire, Prof Ezra Suruma and Dr Tumusiime-Mutebile, among others, to brainstorm and interact with the poor and peasants of Kigezi sub-region about what could be done to empower them, to lift themselves out of human misery.

Many of these participants presented scholarly and practical papers, copies of which may be found in the archives of the association. The contributions by Rwendeire and Prof Suruma were so convincing that they constituted the basis and rationale of KBC.
Prof Suruma’s thesis was that a people or a region which is ignorant of banking and the use and exchange of money for goods and services, is doomed to remain primitive and under developed. He further observed that Kigezi was such a big sub-region and its people were poor and unenlightened in the art of banking and lacked the culture of saving money.

Therefore, he strongly recommended that for the purpose of educating and enlightening the people of Kigezi about this phenomenon, the conference should establish a regional bank.
The aim of that bank would not be to make and accumulate wealth for a few individuals but educate the people of Kigezi on the benefits of the banking culture. Potential shareholders would be encouraged to open accounts in Kigezi bank with as little as Shs10,000 or Shs20,000 with those able volunteering to invest more.

The conference emphasised that the bank would be managed and operated strictly in accordance with aims and objectives of the founders. The founders restricted membership to the people of Kigezi. Outsiders could only be investors and creditors of the bank but not shareholders or directors.
Dr Suruma, while still the deputy governor of Bank of Uganda, and this columnist drafted the first Financial Institutions Act, rules and regulations which govern commercial banks in Uganda. It is when that Act, the Companies Act and the regulations of KBC were violated by Mr Nzeyi and his associates that the grieving shareholders of Kigezi bank filed a plaint in the High Court.

The judge disqualified Mr Nzeyi and Mr Mbabazi and their appointed fellow directors and prohibited them from continuing to run and control the affairs of the bank. He ordered that a meeting of all shareholders be held in Kabale where the headquarters of the bank were and only qualified new directors be nominated and elected at that meeting presided over and controlled by BoU.
Nzeyi and his associates defied the court’s orders and instead called a meeting and termed it an ‘annual general meeting’ to be held at the same venue day and time. People close to the group were elected directors of NBC.
This remained the position until the BoU decided to sell by telephone NBC to Crane Bank. We shall discuss the consequences in Part II.