
Auditor General Edward Akol presents the 2023/2024 Financial Year Audit Report at Parliament on January 15, 2025. PHOTO/DAVID LUBOWA
The Auditor General has revealed that government’s action of acquiring 150,000 shares in privately-owned Roko Construction Ltd nearly a year before Parliament approved the transaction, potentially exposes taxpayers to costly legal disputes.
AG Edward Akol’s findings are contained in his December 31, 2024 annual audit report, which he presented to Parliament last week.
Mr Akol noted that the entire deal was concluded on October 22, 2021, when the company issued the share certificate for the 150,000 redeemable shares to the government, yet Parliament passed the purchase on July 21, 2022.
This implied that the government violated Section 22(1) of the Public Finance Management, which prohibits any government vote (ministry, department, or agency) from entering any contract, transaction or agreement that binds the government to a financial commitment for more than one financial year or which results in a contingent liability, except where Parliament authorises the financial obligation or contingent liability.
Government Chief Legal Officer, Attorney General Kiryowa Kiwanuka, and the Foreign Affairs Ministry, who made this acquisition, when separately contacted, declined to comment on the matter, saying they had not read the AG’s December 2024 report.
Parliament on July 21 passed the proposal by government to acquire 150,000 redeemable shares from Roko Construction Ltd at Shs207.13b.
The proposal that had earlier been brought by the Finance Ministry was rejected, especially from members of the Opposition.
Finance State Minister-in-charge of General Duties Henry Musasizi while presenting the proposal told MPs that Roko had been faced with severe liquidity challenges that constrained its ability to execute 10 contracted projects, which had in turn affected its ability to pay various suppliers and the financial sector.
He added that Roko is currently indebted. Its indebtedness as of May 31, 2022, was Shs202.4 billion, and also has contingent liabilities from bank guarantees of Shs130.9 billion.
Butambala County MP Muwanga Kivumbi, who presented the minority report, dissented on several issues such as lack of due diligence, the case for majority shares and equity, risk of preferential shares, numerous court cases of Roko, unfair selection of Roko, and insensitive timing of the proposal, and others
The Finance committee chairperson, who is also the Kiboga East MP, Mr Keffa Kiwanuka (NRM), recommended that Roko should be expeditiously audited as a condition precedent to signing the share subscription agreement (SSA) by the AG.
But as all this was happening, Mr Akol in his report said the government had already sealed the deal and what Parliament did was just to legalise it.
Roko in its October 8, 2021, special resolution, which was filed at the Uganda Service Registration Bureau (URSB) on July 20, 2022, resolved to create preference redeemable shares each valued at Shs1m and issued at Shs308,367.
In the subsequent October 22, 2021 resolution filed at URSB on July 25, 2022, the company resolved to create 150,000 preference redeemable shares that would be issued at Shs308,367 and allotted to the government.
On the same October 22, 2021, the company resolved to increase its share capital from Shs15b to Shs222.13b, by creating the 150,000 shares that were later allotted to the government.
“The share certificate issued by the company for the 150,000 redeemable shares for government was issued on October 22, 2021,” reads part of the report.
Section 90 of the Companies Act provides that “a certificate, under the common seal of the company or any other title evidencing securities under the Act or any other law, specifying any shares held by any member shall be prima facie evidence of title of the member to the shares.”
The Auditor General discovered another red flag: Roko Construction filed an amended Memorandum and Articles of Association with the Uganda Registration Services Bureau (URSB) on July 20, 2022. The amendment reflected an increase in the company’s share capital to Shs222.13 billion, divided into 15,000 ordinary shares valued at Shs1 million each and 150,000 redeemable preference shares issued at a premium of Shs380,367 per share. Notably, this filing occurred a day before Parliament approved the government’s purchase on July 21, 2022.
“This implied that the prior allotment and purchase of shares were done before Parliament's approval. Furthermore, the failure to follow proper process by the entity undermined the controls in place and may lead to legal disputes in the future,” reads part of the report.
It added: “I noted that the process of purchase of shares and consequently binding government had been completed before the approval of Parliament.”
Akol advised the PS/ST to review the transaction to mitigate any legal risk that may arise, otherwise, strict adherence to government procedures is required. “Additionally, the government should put in place guidelines and clear procedures regarding government bailouts and investments,” he said.