Chris Obore
28 July 2007
Kampala — THE Finance Minister Dr Ezra Suruma can, at will, give billions of public funds to private firms or individuals and the Auditor General will not ask why, as recent actions have revealed.
Article 159 (2) of the constitution stipulates that government shall not borrow, guarantee, or raise a loan on behalf of itself or any other public institution, authority or person except as authorised by or under an Act of Parliament.
The finance minister and a few of his technocrats can, for instance, inject public funds into a private entity without knowledge of parliament and go ahead to declare that funds given to a private firm translates into 49 per cent or less shareholding for government.
Although it is public funds, this level of equity does not allow the Auditor General to monitor the monies injected in the firm because he only audits where government owns controlling shares.
This implies that if the firm where public funds have been injected (deliberately) collapses, it dies with the taxpayers' money. The one with the controlling shareholding then laughs all the way to the bank as Parliament impotently looks on.
Mr Suruma and his technocrats can also gift investors with shares in entities where government has majority shareholding.
For instance, government's shareholding in UTL is now 30 per cent with the Libyan investors owning a controlling 70 per cent stake.
The foreigners who initially owned 49 per cent in UTL, were gifted with more shares because government reportedly could not find money to invest in recapitalisation of the company. In a process called dilution, technocrats in Finance endorsed that government forfeits more shares in UTL.
Parliament learnt of the developments afterwards and looked on impotently. Another deal that underlined the impotence of Parliament involved Libyans and National Housing and Construction Corporation (NHCC), a real estate company.
Highly placed sources have told Sunday Monitor that although the Libyans did not really push the government against the wall into gifting them with NHCC shares, Finance technocrats reasoned that this was the best way to pay the Libyans some $21 million debt.
MPs tried to protest the valuation but were told off by the Finance officials. Instead of giving the Libyans a repayment schedule and even involve a mediator if need be, Ministry of Finance opted for a debt - equity swap enabling the Libyans to take 49 per cent shareholding in NHCC without knowledge and approval of Parliament.
They got a real good deal as they were recently paid dividends of $480 per share implying that NHCC is a healthy investment.
The Libyan investors, according to sources, are now pushing to acquire another 2 per cent to enable them gain a controlling stake in NHCC.
The implication will be that NHCC, will now be under the control and direction of the Libyans, who then will qualify to acquire any amount of land in the country.
"They will acquire land anywhere in the country. But that is dangerous because land is the biggest asset in the country and it shouldn't be placed in the hands of foreigners," said Mr Nathan Nandala Mafabi, the chairman of the Parliament's Public Accounts Committee (PAC).
Mr Nandala said PAC wants to know who made the decision to swap government shares in NHCC with the Libyans' debt and how the valuation was done.
"The public has not been told how the Libyan debt came about. We should also know who was in the board that decided to swap the debt," he said.
But this type of gifting cash to investors is not restricted to foreigners. Dr Suruma or his successors in futrure can give billions of shillings of taxpayers' money to individual business people.
Mr Hassan Bassajjabala, a businessman and an NRM executive member, is a beneficiary of such government schemes.
He was given Shs31 billion, of which Shs25 billion was drawn from Bank of Uganda (BoU) and Shs6.1 billion from Uganda Development Bank (UDB).
Nor did the practice start yesterday. In 1996 Francis Mwebesa, a businessman in Mbarara was advanced a loan of Shs1 billion from UDB with government guarantee to boost his B.M. Technical Services company.
The loan was to be paid back within three years at 15% interest but Mr Mwebesa has only paid back Shs10m.
Lira businessman and NRM activist, Mr Sam Engola was also bailed out with Shs400 million directly from the divestiture funds. Evidence shows that Mr Suruma and his technocrats can also choose to recapitalise any private entity without consent of Parliament.
They can also choose to enter any joint venture with any private business without bothering to seek leave of Parliament. For instance, government has acquired 25 per cent in Meera Investments, which owns Speke Resort Munyonyo. The deal, which costs the taxpayer $7.5 million (about Shs12b) was not approved by Parliament and yet the Auditor General now cannot, by law, be allowed to look into the performance of these funds.
The government also guaranteed $14.2m to Mr Kananathan's Tri-Star, an apparels company in Bugolobi, Kampala. The much-hyped company was mismanaged and collapsed with billions of shillings of taxpayers' money.
The Ministry of Finance is now planning to acquire shares in Phenix Logistics (U) Ltd.
Apparently, government had earlier extended credit of Shs5.09 billion to the same company without Parliament approval. The company has failed to pay back and now wants the credit converted into government shares.
Government had also guaranteed $5.5million (about Shs8.9 billion) to Phenix Logistics from JICA, a Japanese agency. It appears that failure to pay back the loans was a result of losses the company was making. "If Phenix Logistics is making profits, why write off the credit?" Mr Nandala asks.
Mr Suruma could not be reached for a comment. When this writer visited his office, he was reportedly busy at State House.
Asked why government is again interested in owning businesses yet it had earlier sold off public enterprises, the deputy Secretary to the Treasury, Keith Muhakanizi said: "I cannot comment on that. It is a policy matter; you talk to the minister."
Mr Nandala warned that putting public funds in the control of private investors was risky.
"Mr Suruma is doing wrong things. Wherever public money goes, there must be public interest; a private entity does not always serve public interest," Mr Nandala said.
He said if government needed to invest in a given entity, it must do so after people have consented through their representatives in Parliament.
Mr Nandala, an accountant, said that investors may falsify their books of accounts to reflect losses in order to cheat the public. "And the Auditor General will not ask how losses were made because government's shareholding is 49% or less. Sometimes the falsification of accounts is done with the help of technocrats from Ministry of finance," he said.
Impotent Parliament
According to Mr Kaddunabbi Lubega, the chairman of parliament's committee on national economy, MPs will do nothing other than writing quarterly reports complaining about the anomalies.
Mr Kaddunabbi said a lot of public funds have been injected into private companies without approval of parliament, something he described as "wrong unless the Attorney General has another explanation."
"We cannot stop it because parliament is not the treasury. They have the money that is why they spend it without parliament's input," Mr Kaddunabbi said.
He said a good remedy would be found if someone sued government for spending public funds in disregard of the Constitution. And the office of the Speaker of Parliament is equally powerless in this matter.
"We wouldn't even know who is getting the loan or who is making such payments. Those things don't come directly to the Speaker," said Ms Rebecca Kadaga, the Deputy Speaker of Parliament.
Museveni's aide
Asked whether President Museveni was aware of the constitutional provision requiring that public funds put into private ventures must be approved by parliament, Mr Fox Odoi said Mr Museveni is the most informed citizen.
Mr Odoi who is the President's Principal Legal Aide, said: "The decision to expend after Parliament has passed the Finance Act and an Appropriation Act is an executive decision."
Asked why Mr Museveni was personally involved in dishing out financial favours to individuals or companies Mr Odoi said: "The President has got a duty and legal rights to intervene in areas that affect our economy." But Mr Nandala countered.
"To guarantee a loan or to recapitalise any company requires parliamentary approval. They can expend State House budget but not money in the treasury or Bank of Uganda," he said. Apparently, public funds are at the mercy of the executive and a few technocrats at ministry of finance.
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