ROKO plight: Why the taxpayer got involved

Finally, the bubble blew the lid off and what many had known for several years (ROKO) actually went down years ago.

Not completely though, because they and the government think the homegrown regional construction giant can still be saved and revived by availing it of the much-needed capital.   A Shs202 billion capital investment in form of 150,000 preferential shares is needed for the lifesaving injection.

At the height of its might, ROKO Construction Ltd had expanded its presence from Uganda into South Sudan, the Democratic Republic of Congo, Kenya and Rwanda.  

In the last two or so years, the company had handed over most running projects to ROKO Rwanda, a supposed subsidiary, yet the arrangement is publicised as a joint venture.  

Other analysts say the Rwanda "office" is actually the new headquarters of the company, meaning it's now domiciled in the southern neighboring country, though the premises are as quiet as the Kawempe facility.

The plan by the Ministry of Finance, Planning and Economic Development to buy shares in ROKO has revived memories of companies that have 'died' begging the government for a bailout.   These include former East African steel giant, Sembule Steel Mills Ltd, Mukalazi Technical Services and Zzimwe Construction Ltd. The question being asked is; Why ROKO?

"The government has recently been supporting local companies in the construction industry to benefit from the huge investment projects, it will be ironical to leave such a company as ROKO collapse without trying," said an official in the communication department at the ministry of finance.

The support includes ring-fencing smaller or manageable construction projects as well as compelling large multinationals to sub-contract or enter into joint ventures with local companies, with the goal of building local capacity.

Therefore, it couldn't have come as a surprise when in 2019 President Museveni told his minister to negotiate for a share purchase to help ROKO raise money to pay off its rising date and complete running contracts.

No doubt, the company is the biggest local construction company, and arguably the best, considering the projects it has handled including Mapera House, Workers House, Uganda Cancer Institute, Uganda Marty's Shrine Namugongo, Hotel Latitude 0, Mulago Hospital and, unfortunately, the now stalling new parliamentary chambers.

In Rwanda, ROKO built projects include; the new cricket complex in Kigali, Serena Hotel, and Kigali Airport expansion. While in South Sudan, its main contract was the construction of Juba domestic and international airport.

The apparent love for ROKO by the government was also exhibited when the bidding procedure was abandoned and the company was awarded the parliament building contract, at the expense of the likes of China Civil Engineering Company, Seyani Brothers & Co. Ltd, and China National Aero Technology International. 

For President Museveni, his respect for ROKO reportedly dates back to the bush days, according to his earlier comments.  

“During the bush days, my boys informed me that there was a company in Kawempe which was doing good work. By then, I did not know that it was Roko. I instructed the boys not to take any step that would interfere with its operations,” he said at the funeral of Rainer Koehler, a Swiss national and one of the two founders in 2013.

Max Rohrer, the other co-founder, a German national, died in 2005. At his funeral, President Museveni disclosed that Rohrer had met him in a foreign country and handed him a package containing a substantial sum of dollars in the early days of the bush struggle.

The two friends had coined the company name from their surnames. Their determination to stick to Uganda through all the tumultuous years, also earned them respect, especially when Koehler flew from Switzerland, got stranded in Kenya when flights to Uganda were suspended but he decided to borrow a car and drive across when other people were fleeing in the opposite direction.

“At the Malaba border, the authorities thought that this mzungu was crazy. They failed to understand why Koehler was entering the country yet masses were leaving," Brigitte Koehler, his wife was quoted by the Monitor.  

"Nonetheless, they permitted him entrance. He drove up to Kawempe where his business, Roko Construction Limited’s headquarters is located. He then undertook measures to ensure that the company staff and its property were safe. He befriended the soldiers and would buy them cigarettes and beer so that they would not attack the company. He did not leave till the war’s end.”

Since the demise of the original founders, the company has been on a downward path, despite earning lucrative contracts in the region.  

The ministry of finance lists a number of reasons for the decline, like the impact of Covid-19, delayed payments, and failure to refinance expensive shilling loans with cheaper external financing, which all seem a bit beyond the company's control, but only blaming it for "weak corporate governance and inadequate management."

In 2020, the Uganda National Association of Building and Civil Engineering Contractors, pleaded with the government to bailout ROKO as the number of court complainants against it swell to 27.

The companies, mainly suppliers, were petitioning court to declare the company bankrupt after it failed to defend itself.  In other markets, the situation has been the same.  

Last September, the directors of ROKO reportedly sneaked out of Kenya into Uganda after suppliers intensified demand for payments.

The government is not innocent either, as the Minister for Finance admitted in 2020 of delayed payment to the struggling ROKO of about Shs46 billion. 

The company is also one of the Ugandan businesses which have been claiming for compensation for losses made in South Sudan during the wars.

ROKO’s debt arose from a contract for works on the construction of Juba Airport, and the claim amounted to $4.5 million.

There is worry within the public that the planned government investment could end up in losses as is reported to be the case with the Munyonyo Commonwealth Resort, in which government bought 25 per cent shares to facilitate its completion before the 2007 Commonwealth Heads of Government Meeting in Uganda.

Earlier this year, a parliamentary group accused the proprietor, Sudhir Ruparelia of not declaring profits and paying dividends to the government, a claim he refuted.   

In investing in preferential shares in ROKO, the government is ensuring its investment is safeguarded. 

It means that for as long as it holds the shares, it will always be the first to receive dividends before any other shareholder.

In a brief statement, Gen Mugisha Muntu, the leader of the opposition Alliance for National Transformation party, cautioned the government to first get parliament approval before the move.

"Before government buys shares, the parliamentary committee on the economy needs to be fully briefed on the causes of ROKO challenges to avoid putting money in what could be a sinkhole and also ask what is happening with National Housing Corporation before investing in ROKO!"

Other voices have called for the strengthening of the UPDF Engineering Brigade instead of investing in a private company.   Democratic Party president Norbert Mao on his part advised ROKO to instead go to the Uganda Development Bank "for a concessional loan."

Eng. Kabagambe Isaa of CX Engineering wonders why such a huge sum of money cannot be used to recapitalize the state-owned National Housing and Construction Company instead of a private firm.

"If this stake can be added to NHCC, a company that has its bulldozers sleeping, its CAT excavators rotting and its qualified Uganda’s best Engineers underemployed. This would change Uganda’s face; imagine more of NHCC Crested Towers worth USh13 billion rent!" he says. 

Almost Shs700 billion worth of ROKO's Shs1 trillion running contracts are government projects.  

The ministry's statement to parliament says if the company is not helped to complete them, the government will spend an additional Shs120 billion in reallocating the contracts.   

It argues that the company owes suppliers almost Shs47 billion and if not rescued, these could also collapse.  

The other reason is the need to save the hundreds of employees at the Kawempe-based firm.