Prime
Sale of UCB betrayed reason for independence struggle
The sale of UCB in the early 1990s to Stanbic Bank was and continues to generate debate to-date. File photo
What you need to know:
- In this second and last edition of a two-part series, Kalundi Serumaga argues that one of the reasons for the bank’s downfall was the illegal access to loans, among others, highlighted below.
But back to the Uganda Commercial Bank (UCB): the President cited three situations as examples of “gross mismanagement” that had led to the bank being insolvent; managers giving themselves unsecured loans; managers taking bribes to give loans to unqualified borrowers; and, failure to follow up on outstanding loans leading to large-scale defaulting that was affecting the lending rate and the rest of the capital market.
This argument only appears plausible only if the rest of the relevant context is left out.
The matter of individuals illegally accessing loans, which all banks everywhere face, is a question of strengthening the bank administration. And since this was a public bank, the state had not just internal bank procedures, but also wider government powers that it could have used to tackle this.
The real problem was that most of this abuse was being done largely by regime cronies whose full untouchability had begun with the slow death of the office of the Inspector of Government (IG) following the 1992 protest resignation of Deputy Inspector General of Government Wasswa Lule.
So, either real political backing to the office of the IGG (which we recently still saw being advised to “go slow” on the “patriotically corrupt” because they invest their loot here), or the bona fide application of the FIA to enable the bank to clamp down on defaulters, could have solved this problem. But that would have been to miss the wider goal, which was that the local credit system had to be destroyed, and the comprador regime doing it needed cronies willing to support it in this work. This is how a neo-colony works.
Former governor of Bank of Uganda Emmanuel Tumusiime-Mutebile was thus a true successor to the two most consequential figures in the story of the colonising of this region to create Uganda: the Muganda General turned quisling Semei Kakungulu, and the politician Apollo Kaggwa, who served as Buganda’s Katikkiro (prime minister). They worked on different aspects of the challenge.
Kakungulu’s job was to mobilise and lead the armies that defeated the native resistance, captured their leaders and militarily occupied their homelands. This process involved levels of bloodshed hitherto unseen in this region, despite the long history of warfare here.
Kaggwa led the political business of establishing colonial authority. This was a task that required seizing political control of the now militarily undefended native governing institutions, and trying to re-fashion the credibility of Buganda native government in particular, to now work in the service of British power. This he did by selling his capture and control of the Buganda government as a new and improved continuation of what had gone before, and then forcibly spread to other parts of what became the colony.
Everywhere, British power reached, authentic legitimate native seats of authority were sidelined or usurped through the imposition of (largely Anglican) colonial appointees.
It is identical in many ways to how the NRA has used the prestige of pan-Africanism to package and sell their imperialist collaboration as a continuation of the earlier anti-imperialist struggles, while in fact working for imperialism to assist in the imposition of American power over the DR Congo, Rwanda, Somalia and South Sudan, as well as at home.
Mutebile’s rise to eventual prominence actually begins after the 1985 Gen Tito Okello Lutwa coup that toppled the Milton Obote II government. During this period, he was promoted up the ranks of the civil service to head policy in the Finance ministry.
Former governor of Bank of Uganda Emmanuel Tumusiime-Mutebile
The coup itself was actually an American plot to take advantage of the crisis caused by the civil war, and obtain direct presence in the British neo-colony as part of the American policy, which began four decades earlier when they made the European empires to give up their colonies as a condition for US support during the 1939-1945 war. Small evidence is in how the new Junta soon closed down the North Korean embassy.
It was there that he was later found by the victorious NRA in 1986, ready to help it in the process of re-orienting away from its pseudo-Marxist flim-flam and become more intentional in the gritty details of implementing policy that the UK had bankrolled them into power to do, before being later taken over by America.
The then British government were not happy about the loss of their good agent Milton Obote. One major British broadcaster described it as a “severe embarrassment for the British government”.
But they were able to recover through buying the leadership of the NRA, and through them, re-purposing the organisation. Unfortunately, once the NRA was firmly in power, the British were reminded once again of their new status as a junior partner in the Western imperialist project, and so the NRA regime also eventually became more a tool of US rather than specifically British interests. As the World (American) Bank’s point-man here, this only strengthened Mutebile’s standing. The story of the decline of British global power will be for another day.
NRA leadership, being generally illiterate in general economics, and almost comically so in anti-imperialist approaches to it, did not know the exact details of what they were going to be asked to do. All they knew - and all they needed to know – was that whatever they were told to do once in power, they were going to have to obey. And they have been very obedient indeed.
It was an upgrade to the clause contained in the infamous 1900 Agreement in which a Kabaka was expected to “follow the advice” of the colonial governor. But at least the two Kabakas of the period had the gumption to repeatedly defy the authorities, unlike this shower of servile ex-peasants, who say one thing in the Western corporate boardrooms, and then the opposite in public.
On September 30, 2001, President Museveni wrote to Governor Mutebile, saying that then parliamentary objections to the proposed sale “do not change my long held view that UCB should be sold as soon as possible, as per our privatisation plan for the whole parastatal sector.”
The President then went to the heart of the matter, saying:
“We should not allow our petty internal disagreements to scare away bona fide multinational investors ... Time has come for all of us to appreciate the necessity to harmonise our positions so as to maintain the hard-earned credibility with our international partners … In order not to damage our image with the investor community and our development partners. I deem it the duty of the entire government system to be fully involved and supportive of the privatisation of the bank.”
This “hard-earned credibility” is in effect an invocation of the spirit of the three key measures described above, where his government has made Uganda safe for foreign capital once again in a manner not seen since colonial rule itself.
Communication
In a later direct communication to the Speaker of Parliament (possibly on the same day, or very soon after), the President went on to tell the House that “when the BoU intervened ... it put in place a number of stringent measures to stop any further deterioration of the bank [which] improved the bank’s solvency”.
“However... this is not sustainable because UCBL must increase its lending capacity to the public as … to undertake large scale commercial lending, which is currently in short supply in our economy,” he noted.
He, therefore, argued, while also reiterating the “investor confidence” argument, that despite this return to profitability, this proposed bank sale was still “necessary to expand access to credit for domestic companies and reduce the cost of borrowing”.
None of this sounds like a person struggling with a decision he does not believe in, or like a President only making the decision because his Central Bank governor persuaded him. Instead, this sounds like a person in full ownership of the decision, and with clearly stated reasons for doing so to the extent that, in fact, he is the one communicating the decision to the one he now says persuaded him.
The reality today of course is that the lending market is neither wide nor affordable. Interest rates remain high locally largely because the foreign private banks dominating the sector find that buying government Treasury Bills is easier than organising loans for Africans (apart from the corporate salary earners they regularly prey upon).
In other words, the sale of UCB did not cure the ills given as the reasons for its sale, and while the foreign investors got what they wanted, Ugandans, on the other hand, did not.
But, when all is said and done, if the President really regrets it, then the decision could simply be reversed and UCB re-nationalised. The problem is he cannot, because for all his tough-talking, he is not his own man in these matters. Any attempts at economic nationalism would see him quickly demonised (like Amin and Mwanga before him) in the eyes of the Western institutions keeping the regime in power. And there are plenty of African leaders among us who would be willing to replace it on behalf of the West.
To repeat, the historical and present struggle of the Africans here has been to throw the colonial-founded economy off our backs. Much as Independence was a half-way house in that process, post-independence regimes had enough leeway to make some policy moving towards that strategic goal.
Back then, we could at least make our own credit and use that to engage in activities that would eventually make us actually independent. This is why, as I have said, the demand for indigenous-based credit was a central demand of the anti-colonial movement. NRA/M killed that.
Mr Museveni certainly does not regret becoming President and he, therefore, cannot really regret the UCB privatisation. Handing the Ugandan credit system over to the imperialists was a consequence of the general terms NRA acquiesced to between June and December 1985, in order for the imperialists to fund the logistics needed for the NRA to make its final push to take power in January 1986. My view is that what the President regrets is having to have his anti-imperialist credentials exposed for what they really are. It is the regret of a man who did not want to end the life of his favourite goat, but also wanted to eat some meat.
In any case since those heady days of privatisation fever, the mounting crisis of the West has exposed this whole thing as a sham. The very laws that the West made, the NRA impose on Ugandans, bringing so much economic hardship, are the very ones the same West violated wholesale when faced with their 2007/2008 financial crash.
Iceland, whose banks had been lending the most irresponsibly, entered that crisis first. To avoid collapse, it sought to withdraw all money its banks had invested abroad in pension funds and bonds operated by the vast local government system in Britain. This would have immediately accelerated the crisis in the UK. So, the UK government simply banned any such flows of currency.
President Museveni
Bail out
The West also bailed out their failing private banks, with large subsidies from the public purse. In at least one case, a bank was actually nationalised so as to shield it from creditors as it went after debtors.
Finally, their central banks followed political orders and lowered base landing rates to just about zero, in some cases.
In the Iceland case, the British government did not even use economic or banking law as such (because there were no real economic justifications to be found in the Neo-liberal mantras they had been selling worldwide). It simply called it a matter of “national security” and invoked the anti-terrorism laws designed to block money-laundering by the likes of Al-Qaeda, to the great fury of the Icelandic government.
In more recent times the United States government has seized first Argentinian and then financial assets just because they have disagreements with their governments.
In short, the West has done and is doing all of the very specific things in their countries that they made the NRA/M agree not to do in respect to Uganda, in order to build a “stable economy”.
And, so, Mutebile’s accusations of Uganda incompetence can now be seen for the racist of a dedicated comprador. Because if it was our Africanness that made us “unable” to run banks, how then did he explain that utter banking meltdown among the white countries?
It is only with this full background, that we may fully grasp the profundity of the NRA betrayal to the cause of African independence and progress. And that is something for Ugandans to truly regret.
Closed banks
Other banks that were closed include Teefe Bank (1993), International Credit Bank (ICB)Ltd (1998), Greenland Bank (1999), Cooperative Bank (1999), National Bank of Commerce (2012), Global Trust Bank (2014) and the sale of Crane Bank Ltd (CBL) to dfcu (2016).
Former Central Bank governor Emmanuel Tumusiime-Mutebile, while appearing before the parliamentary committee on Commissions, Statutory Authorities and State Enterprises (Cosase) on the probe into the closure of the banks in question in 2018, said Central Bank closed the seven banks in question to protect the country’s banking system.
“Bank of Uganda was right to intervene in the financial institutions. Any delay to act or lack of decisiveness on the action taken would have created financial crisis, danger to savers, borrowers, businesses and the economy at large,” Mutebile said.
A 2018 special audit report of the Auditor General (AG) revealed that BoU sold assets of ICB, Greenland, Cooperative, GTB and NBC worth Shs164b at a discount of 80 per cent, yielding only Shs32b.
In the case of ICB, Greenland and Cooperative Bank, the total loan portfolio sold at Shs135b included secured loans of Shs34.5b which had valid legal, or equitable mortgage on the real property and were supported with legal documentation but were sold to Nile River Acquisition Company at a discount of 93 percent.
It was also noted that the liabilities amounting to Shs503.7b were still outstanding at the time of writing the report (August 2018) from a total liability of Shs1.6 trillion held at closure.
For instance, the process of settling liabilities for ICB, Cooperative Bank and Greenland Bank has taken more than 17 years. The AG noted that this has affected the winding up process of these banks.
The AG preliminary report to Parliament also indicated that at least Shs23b from the sale of only Global Trust Bank (GTB) remained unaccounted for, 25 land titles missing, and customer loans inherited from closed banks were sold at an undervalued rate. GTB was closed in July 2014.
In January, the Solicitor General wrote to Bank of Uganda, demanding to know why Cooperative Bank was sold in a controversial deal that has been questioned by the Auditor General and Parliament.
In a January 11 letter addressed to BoU Legal Counsel Margaret Kasule, Mr JBR Suuza, who wrote on behalf of the Solicitor General, asked for all information pertaining to the winding up of Cooperative Bank.
Mr Suuza sought to know why BoU seized and sold assets of the bank that was established under the Cooperative Societies Statute of 1963. The bank was closed on May 20, 1999, over inadequate capitalisation and insolvency.
President Museveni has since given the Trade ministry a go-ahead to re-establish Cooperative Bank to provide financing to the cooperative movement.
