What you need to know:
- Barely two months after Parliament terminated the deal between government and Uganda Vinci Coffee Company Ltd, Ugandans were on July 13 surprised by American actor Terrence Howard’s proposition to President Museveni of pioneering a new hydrogen technology. However, its plausibility was betrayed by the actor’s incoherent scientific jargon. The President is always eager to attract foreign direct investments, but with the processes driven by commission agents seeking the next pay cheque, they become a stillbirth leading to litigation, which results into waste of taxpayer funds, write Frederic Musisi & William Kintu
“The biggest risk is not taking any risk at all,” the American billionaire-internet entrepreneur, Mark Zuckerberg once famously told a Stanford University conference eleven years ago, the quote now acclaimed among investors.
Uganda has been down that risk path countless times and barely any lessons have been learnt.
In the latest series, Parliament last week on Thursday hastily passed the Executive’s proposal to sink Shs207b of taxpayers’ money in Roko Construction Ltd, which has been saddled with debt, through the acquisition of 150,000 preference shares. The 53-year-old firm has for long been dogged by fraud, waste and governance issues.
Discussions for capital injection through Share Subscription Agreement (SSA) into the troubled company were first laid bare early this month before Parliament. The matter was referred to the Committee on Finance, Planning, and Economic Development, to scrutinise the request.
As at the end of May, according to the committee report issued last Wednesday, Roko’s debts had soared to Shs202b, and other contingent liabilities totalled Shs130b.
The committee agreed to the capital injection on basis that the company is still “commercially viable”, but on condition that the company be expeditiously audited by the Auditor General, the SSA be amended to include a reporting arrangement to Parliament on the company’s performance six months after the bailout, and the company lists on the stock exchange in two years—the move that should apply to all corporations in which government shares.
Opposition MPs, on the other hand, in their minority report recommended that Roko shouldn’t be given the bailout.
The MPs also argued that due diligence be undertaken, after which the government acquires equity in form of majority shares of up to 51 percent of any amount of share capital. Based on the current share capital, the government would require only Shs16b.
Towards 7pm last Thursday and without quorum in the House, Deputy Speaker Thomas Tayebwa, who presided over the session, altered the order paper to include this item. He revealed that the Executive had informed him that if Roko is given this saving grace in terms of a capital injection, there were fears that it might fold. Mr Tayebwa then put the matter to a vote, sending the House into acrimony. With scarcely any quorum, he purported to have the motion giving Roko a bailout approved.
With the appointment of DP leader Norbert Mao as Justice minister filtering across newsrooms, this provided the perfect cover to conceal the Roko bailout deal, which was passed without the requisite quorum.
It is alleged that several journalists present were allegedly given an inducement ranging between Shs200,000 to Shs400,000 to let the story pass. A journalist at one of the media houses who spoke on anonymity revealed that this involved not only the distribution of the money, but the deletion of videos that broadcast journalists had earlier on filmed.
The Leader of Opposition, Mr Mathias Mpuuga, addressed journalists in regard to these concerns, but this was largely ignored.
“What happened last Thursday only happens in a banana Parliament like ours,” Butambala County MP Muwanga Kivumbi, also the Shadow Finance minister, told this newspaper.
“That a presiding officer of the moment did what he did; an item is smuggled on the order paper, then disregards all discussion on the matter; it is betrayal and impunity of the highest order. Even journalists too let it pass….! It is shocking.”
Four years ago, in May 2018, the Uganda Development Corporation (UDC), the holding company for government enterprises, sank Shs20b into the share purchase of 10 percent and later another Shs45b for 22 percent shares in the Atiak Sugar Factory in Amuru District.
The factory commissioned in October 2020 is owned by Horyal Investments Holding Company Ltd co-owned by business woman Aminah Hersi. The business venture was conceived to maximise sugar and power production and use the by-products from sugar production and molasses to produce ethanol for domestic and regional markets.
Currently, UDC holds 40 percent shares in the factory. The parliamentary committee on Trade heard mid-last year that government had sunk Shs101b in the venture, which went into share purchase and servicing shareholding loan, including installation of equipment and completion of construction works, which were supposed to be completed by Horyal Investments Holding Company Ltd.
Last December, Parliament approved another Shs108b as a supplementary vote to fund the mechanisation of the sugar factory. Last month, the factory suspended sugar production due to reduction in the supply of sugarcane to the factory.
Roko is not the only eye opener, Mr Kivumbi opined: “Look at Atiak? Parliament resolved that government buys equity and Shs100b was allocated, but we were told the money was used as seed capital to among others, buy equipment. What the money we approved for was different from it eventually did.”
Mr Sarah Bireete, the executive director of Centre for Constitutional Governance, a non-governmental organization, said: “The National Resistance Movement treats Uganda as a theatre. Look at the way they treat Ugandans in the first place? I don’t expect them to do better; the way they behave during elections, disregarding the laws and rules, and you expect them to do better in normal things like doing business?”
“Look at how Uganda Telecom Ltd, which was a large company, was treated? We have even forgotten about that one. Look at how they sold the Uganda Commercial Bank?”
The Atiak-Roko deal came barely two months after a parliamentary ad hoc committee laid bare revelations of how 82.05 acres of prime land, part of the former Nakawa-Naguru estates was distributed after the ruinous failure of earlier plans to establish a satellite city.
According to designs presented to President Museveni, the much-vaunted blueprint would include recreational facilities, places of worship, Nakawa Division headquarters, a 5-star hotel, a referral hospital, an international school and a proposed shopping mall, and low to high-level condominiums.
The investors, the Comer Group owned by billionaire brothers Luke and Brian Comer in partnership with a hitherto unknown local company OpecPrime Properties, had been given land measuring 166 acres in 2005 with approval of Cabinet. The Comer Brothers walked away in 2017 citing the messy local politics and marginal economic prospects because Ugandans are poor to afford the proposed luxury homes.
Mr Luke Comer, one the billionaire brothers, told Irish newspaper The Business Post that “the main problem was the difficulty local people had in obtaining mortgages. Who’s going to give them mortgages? Africa is not a great prospect in that way.”
Mr Comer revealed that the would-be project financers, the Dutch-based Netherlands Development Finance Company, were discouraged by the way Ugandan authorities handled the eviction of about 1,714 former tenants who had been cornered into signing a Memorandum of Understanding detailing that they would be given first priority to occupy the first 1,000 units of the flats/apartments once erected.
While the Comer Group has a track record in real estate development across the United Kingdom, there were questions in regard to the Uganda venture right from the onset. Afraid of critical reporting by the media, several top editors in major newspapers were promised condominiums in the satellite city to halt any ‘damaging stories.’
The project encountered the first headwinds in 2009 when investigations by then Inspector General of Government, Ms Faith Mwondha, halted the redevelopment on ground that OpecPrime and Comer Brothers were allocated the two estates in a fraudulent manner.
Asked about the problems plaguing the project during a December 21, 2008 press conference at State House, President Museveni said “investors should not pay for the mistakes” of government officials.
In a previous interview with Irish newspaper, the Independent, in 2015, the Comer brothers revealed that they were introduced to President Museveni by former British heavyweight boxing champion, Lennox Lewis.
The ground-breaking for the construction of the satellite city happened in 2014, then the project stalled. No sooner had the Comer Brothers walked away in 2017 than the cartels went at work to redistribute the land.
The proverbial curse that has previously plagued similar projects at the former Shimoni Demonstration & PTC, and the Uganda Broadcasting Corporation land in Nakasero caught up with the satellite city. “You see such things happening and you wonder where the technocrats that are supposed to guide government are? Where is the Ministry of Finance? Where is the Solicitor General who clears agreements? But what is the state of mind of the President who blesses these deals,” Mr Kivumbi opined.
“What we have seen so far is an eye opener, but the level of decay in government runs too deep.”
Any lessons learned?
Oftentimes either money or land is lost while the extent of the social-economic disruptions and losses is hard to quantify. But the common thread across these deals usually conducted at the behest of commission agents is that barely any due diligence is conducted on the investors as some turn out to be brief-case firms.
The proposed Nakawa-Naguru satellite city bears parallels with Akon City, the “futuristic” city powered by a cryptocurrency called “Akoin” pitched to President Museveni and his technocrats by the Senegalese-American singer-record producer, Akon.
The Akon city in Uganda, similar to one he pitched in his home country in West Africa six years ago, but has never taken off, is expected to be complete by 2036.
In 2014, one Ugandan living in the United States, Mr Moses Katakanya, a computer programmer, pitched a business deal of setting up a computer factory in Uganda to American businesswoman cum international consultant Toresa Lou. Through contacts, a meeting was secured at State House on October 16, 2006, barely a year after the Nakawa-Naguru project had been blessed.
Immediately, the President was tickled with the idea of establishing the first computer and mobile phone plant in the country and even committed to scouting for more markets within the Common Market for Eastern and Southern Africa bloc. The investors passing as Global Epoint and Avatar Technology Inc demanded enough land to accommodate the future plant. After 50-acres of land was allocated and a lease secured in the Namanve Industrial Park, the computer factory plans fell apart.
Three years ago, after Parliament contentiously approved the Ministry of Finance’s $379m (Shs1.4 triliion) security to a shadowy private investor to finance and construct a world class hospital along Entebbe, a project which has for the most part been mired in controversy, there is barely anything to show on the ground.
The Ministry of Finance had in its budget for this FY2022/2023 sneaked in Shs319b for the same project, but this vote was blocked by MPs.
Seven years after businessman Hamis Kiggundu made his pitch for the redevelopment of Nakivubo Stadium and Park Yard Market to President Museveni at State House Entebbe, the story is not any inspiring. Mr Kiggundu requested the President that government, through the Education ministry in liaison with the Uganda Land Commission, grant him a lease of 49 years to build and manage a business centre on the land.
The new stadium was expected to be completed by 2020 and have an estimated sitting capacity of 35,000 spectators, according to reports, but this is yet to be done.
The Pakwach District Woman MP, Ms Jane Pacuto, who is also the vice-chairperson of the parliamentary Finance committee, said: “I don’t think it is bad for the Head of State to source for investors. The systems and regulations are in place, but there is a tendency of rushing things and we all know how it goes.”
Ms Pacuto added: “This way of doing things is not good; It affects service delivery, and sometimes we are dealing with borrowed money and don’t get value.” Lately, it is common for officials or commission agents to secure appointment with the presidency to introduce investors to him. Hardly a week passes without a group of “foreign investors” and technocrats posing for a photo. Some pundits have since christened State House, a “clearing house.”
Ms Pacuto argued that if the systems functioned independently, there would be no need to involve the president.
Ms Bireete argues that “we don’t benchmark or self-evaluate about what has worked or failed, even when we keep doing the same things the same way”.
“Our laws are clear. They provide for consultation on everything, but orders stem from State House. There is nothing new under the sun until the day the system will change,” she added.
What The law says...
In 2019, the government amended the Investment Code Act, which repealed the 1991 law, detailing changes in approach to attracting investment and dealing with potential investors by strengthening the Uganda Investment Authority (UIA) as a one-stop investment centre.
According to the Act, it is mandatory for foreign entities in Uganda to register with UIA for which failure to comply results into a fine of Shs20m or a term of imprisonment of four years, or both.
Section two details mechanisms for an investor to be granted incentives such as tax holiday, while Section 17 deals with registration of investors; an application for registration shall be accompanied by among others, a certificate of registration of the business, business plan which shall include—the name of the investment and detailed information on the type of investment, the action plan, date of commencement of operations, and detailed information on raw materials sourced in the country or in the locality where the investment is to operate.