The stalled works of Lubowa International Specialised Hospital located on the Kampala-Entebbe Road. PHOTOS/DAVID LUBOWA


Coffee, Lubowa hospital deals: State capture or attempt to fight graft?

What you need to know:

  • Commentators say the Lubowa hospital and coffee deals mirror other shady transactions at the behest of a shadow state, writes Emmanuel Mutaizibwa.

Ms Enrica Pinetti, a canny Italian investor behind the backroom deals, could be a conduit of a new systemic form of graft known as state capture, critics have postulated.
Under this veil of secrecy, powerful officials who have unfettered ties to the inner-sanctum are granted juicy deals through informal structures that circumvent officialdom.

“We have had this situation where a lot of important activities and actions take place behind the scenes, so it’s not surprising that a very important development like an agreement involving a key sector of the economy that is the coffee sector is concluded in the most opaque and controversial circumstances,” argues Moses Khisa who is an associate professor of political science in the School of Public and International Affairs at North Carolina State University, United States. 

“We know that very important procurement deals have been concluded through brokerage in the corridors of State House with all sorts of brokers and actors who are lined up to make their cut, so this controversy is not in any case different and is not surprising at all,” he adds. 

The associate director at the Great Lakes Institute for Strategic Studies, (GLISS), Mr Godber Tumushabe, opines: “In traditional nomenclature, we talk about the deep state.  The deep state is what makes a country survive and thrive, it protects national sovereignty and national security and national economic security.”
“In the normal sense, the deep state is your military, is your public service, is your intelligence service and what that means is that those institutions of the state, they work to protect the state at a very broad level,” he says.

Mr Tumushabe describes what is happening in Uganda as state capture.
“Me I think that what we are dealing with is the whole concept of state capture, when you have dysfunctional systems, the shoddy state protects the interests of the individual, in other words you will find that the entire intelligence services is organised around how to protect the President and make sure that the President is in power, so you look at states such as Equatorial Guinea,” he adds.
However, the President’s correspondences suggest that he reached out to foreign actors to try and stamp out graft after growing frustrated with locals who are keen to extort investors. 

Ms Pinetti rose to the spotlight after she was granted two deals ¬— placing Uganda’s coffee sector, which is the pulse of the economy, in her firm grip through a monopoly and to build a modern specialised hospital at Lubowa on Entebbe Road, which has morphed into the proverbial white elephant.  According to the details of the coffee deal, government doled out exclusive rights to Uganda Vinci Coffee Company Limited to purchase all Uganda’s coffee beans for a decade.
During this period, the government will support non-precedent concessions that in essence mean the investor will not be eligible to pay any form of tax from project commencement.

“That you have a transaction like this coffee deal and the Attorney General is saying ‘I approved this,’ the Solicitor General is saying ‘I don’t know anything.’ The minister of Agriculture is saying ‘I don’t know’ and yet the minister of Finance is signing on an agreement that says that we will guarantee the supply of raw material, because these are the ones who look after the agriculture sector,” Mr Tumushabe says.

MPs on the Finance Committee and the line ministers inspect construction works at the Lubowa hospital project last Thursday. Photos/ David Lubowa

‘Weak state institutions’
“So you are talking about the dismembering of the state institutions, the perpetuation of discord, the lack of coordination of state institutions benefits the mafia, benefits the shoddy state, if you have an organised state where institutions account to each other,  the mafias do not have a way of surviving,” he adds.
Assoc Prof Khisa further says the two deals exemplify a weak state.
“It is emblematic of the nature of state we have in place, which one, is bureaucratically weak and, therefore, the existing processes and systems are side-lined and placed behind personal interests,” he says.

“But the second thing is really the broader politics of regime survival in Uganda where the private interests are important for the sustenance and survival of the existing political system and political regime, so those individuals who are doing deals are doing deals at the behest of important and powerful godfathers in the higher places,” he adds.   
The firm, according to the deal, will enjoy exemption in regard to import duties, Value Added Tax, Excise Duty, Stamp Duty, Corporate Income Tax and employment-related taxes, as well as any other tax or imposition levied or charged under the laws or any other laws that may be enacted.

It was also awarded a 49-year lease for a huge chunk of land in Namanve Investment Park.
When MPs recently visited Lubowa, they expected to find brick and mortar squatting on this hospital site.
But there was barely any evidence to prove that Shs348b shillings had been spent on the project. 
The Finance minister, Mr Matia Kasaija, early this week appeared before a House Committee seeking another vote of Shs319b for the project, which was rejected.

“Looking at the work on the ground, they have moved nowhere, we have so far spent more than 37.75 per cent of the contract sum but what is on the ground is basically minuscule, we found out that the contractor and the consulter is not there, they are using basically what they are calling in-house support system,” Mr Paul Omara, the Otuke County MP, revealed. 
On March 12, 2019, Parliament approved funding for the specialised hospital through promissory notes worth Shs1.3 trillion. 
A promissory note is a debt instrument that contains a written promise by one party to pay another party a definite sum of money, either on-demand or at a specified future date. However, before the approval, there were strident voices against this deal.
MPs William Nzoghu (Busongora North), Bernard Atiku (Ayivu County) and Betty Nambooze (Mukono Municipality)tabled a minority report over the legality and economic viability of the loan request.

“It has just been a mob that descended on Parliament and silenced all voices of reason and passed a motion that is going to make Ugandans poorer by Shs1.4 trillion, the fact is that Finasi local company doesn’t deal in hospitals,” Ms Nambooze said shortly after Parliament approved the deal. 
Before the vote in the plenary was conducted, Dokolo Woman MP Cecilia Ogwal raised a procedural matter, arguing that the President had earlier on April 23, 2014, authored a letter, which revealed that the foreign investor would not be given any financial government guarantee for the Lubowa hospital construction. 
She said there was a scheme to approve illegalities in the House.

“Do we have the power to rescind the decision of the President, which is before Parliament and it was laid on the table? I think that this is a smuggled document and Right Honourable Speaker, you know that the women hospital has been built recently at 450 beds at $25m but this is going to be 200 beds at $390m, are we talking with sanity in our heads? There is something definitely wrong, somebody has smuggled something dangerous and they want to impose Parliament to approve what is illegal,” argued Ms Ogwal.  

How Lubowa project was approved
However, then Speaker of Parliament Rebecca Kadaga, who is currently the first deputy Prime Minister, implored the MPs to approve the deal after reading another letter from the President where he had a change of mind.

Mr Museveni defended the record of the Italian investor who he argued would midwife the construction of a world-class hospital offering specialised treatment, including bone-marrow transplants.
“Most doctors leave the country because they are no specialised hospitals where they can practice their speciality. Since the hospital will be here and accessible, they will be able to work and Ugandans will benefit from them,” he said.\

“I, therefore, wish to confirm my support for the international specialised hospital of Uganda and request Parliament to expedite this consideration of the project and accordingly approve the financing arrangements if they are in line with the law,” Mr Museveni wrote in a letter read during the plenary.  
But commentators say the Lubowa hospital and coffee deals mirror other shady transactions at the behest of a shadow state.

Some of these deals that sullied government’s reputation include the sale of Uganda Commercial Bank (UCB) to a shadowy Malaysian bank, the sale of Dairy Corporation for one-dollar, the sale and asset stripping of Uganda Airlines and Uganda Railways Corporation, among others.
Parallels have also been drawn between Ms Pinetti and another powerful lobbyist, Ms Rosa Whitaker, the former US government executive and architect of the African Growth and Opportunity Act (Agoa).

In 2003, Ms Whitaker’s consulting firm received $300,000 from the Ugandan government as a trade expert.
She enjoyed close ties with the presidency and through her leverage and clout, she was able to influence the award of two lucrative deals—the Standard Gauge Railway and Karuma dam.For instance during the fight for the railway, the President sided with Ms Whitaker whom he described as incorruptible unlike other government officials as three Chinese firms engaged in turf battles, each represented by powerful lobbyists.

“Some time ago, our Black American compatriot, Ms Rosa Whitaker, formerly US Trade Representative for Africa, brought to us a Chinese group known as China Harbour Engineering Company (CHEC) that wanted to help source Chinese government soft loans to build the railways in Uganda as well as a port on Lake Victoria,” Mr Museveni wrote then on September 9, 2012, to the minister of Works, Abraham Byandala, drawing his attention to the role of Ms Whitaker, the CEO of the Whitaker Group, a Washington D.C-based consultancy specialising in trade and investment in Africa.
“Ms Whitaker had assured these Chinese that in Uganda there is no need for bribing officials, which apparently is a common practice in many parts of Africa,” he added.
The contract fight involved three rival Chinese government firms; China Civil Engineering Construction Corporation (CCECC), Chinese Communication and Construction Company (CCCC) and China Harbour Engineering Company Ltd (CHECL). 

 Senior government officials, including two ministers then, Works minister Abraham Byandala and his junior had signed separate agreements, each giving the rival firms a due advantage over the other.
It was suggested that the money that could otherwise have been spent on bribes would now go towards building the capacity of the UPDF engineering brigade.
Mr Museveni wrote in his letter:  “No sooner had this proposal been made to us in confidence than some of our corrupt officials, who have been in a dubious relationship with another Chinese company known as the First Highway Construction Company that has been building roads in Uganda, stole the idea of CHECL and gave it to the First Highway Construction Company.”

The President revealed that “in order to block CHECL, which had not paid or promised bribes, some officials brought in the idea that the Uganda government should sign a MoU with the parent company of the two companies known as Chinese Communication and Construction Company (CCCC). The problem was that CCCC is a holding company with no construction capacity and had never come to Uganda.”
Mr Museveni revealed further in his letter that crafty middlemen had infiltrated his meetings, stolen minutes and passed them on to a Chinese firm. 

“These actions by these officials are damaging Uganda’s interest in three ways; damaging Uganda by portraying it as a bribes-taking country, diverting the Chinese money that would have supported the Engineering Brigade of UPDF to bribing corrupt officials of the Uganda government, and deterring future investors from making confidential proposals to us because they are sold to business rivals by our corrupt officials,” he wrote.
The then minister of Ethics and Integrity, the late Rev Fr Simon Lokodo, however, warned that those with ill motives misled the President, yet he had earlier on agreed to give the contract for the railways to CCECC.

Past corruption dealings
 “This is corruption of the highest order. This Chinese company (CCECC) had already carried out feasibility studies, which cost a lot of money. We don’t want to be sued [if] it results in another incident like the Dura cement saga,” he said.
Fr Lokodo, who wrote to the Solicitor General on March 22, 2013, warning of dire legal consequences if CCECC’s MoU was not honoured, further said the Inspector General of Government (IGG) had been asked to investigate this ‘wheeler dealing.’ 

Dr Lokodo warned that these allegations, if proven, “would amount to a breach and would result in financial loss and reputation for the government.”
On April 19, 2013, the Solicitor General replied in a letter signed by F. Lubega that the Attorney General’s letter of April 16, 2012 to the Works minister had revealed the existence of two MoUs involving CCECC and CHECL to execute similar works.
“He [Attorney General] advised the need for the Ministry of Works and Transport to harmonise this position to avoid potential embarrassment,” the Solicitor General wrote.

He added: “Since there is an existing/valid MoU with CCECC, who in accordance with the terms of the MoU have already undertaken a feasibility study, it’s, therefore, proposed that the Ministry of Works and Transport should proceed to the next steps with CCECC.”
Graft continues to seep through the hallowed corridors of power. The jury is still out whether the antidote is to procure the services of foreigners, some of whom do not possess entirely squeaky-clean profiles.