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Uganda: What the NSSF Probe Found

12 October 2008

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Below is an abridged version of the draft report of the investigations into the Temangalo land saga

BACKGROUND

In the wake of the NSSF- Nsimbe Estates botched transaction, on the 6th of September 2004, control of the NSSF was transferred from the Ministry of Gender and Social Development to the Ministry of Finance, Planning and Economic Development. The above transaction led to a loss of billions of workers deposits and consequently dismissal of some of the top managers of the NSSF and the Board of Directors. This matter is still fresh in the minds of the workers and has not yet been resolved as there is an on- going court case and some of the culprits are on the run. The aim of shifting the Fund to the Ministry of Finance was meant, among other reasons, to prevent occurrences like the above-mentioned and to ensure the safety of workers' funds.

The NSSF is by far the largest financial institution in Uganda today with well over Shs1.3 trillion in workers deposits. The Fund has a monthly cash inflow of Shs12.5 billion and pays off benefits of Sh2 billion per month. NSSF also has an asset base of Shs800 billion out of which 75% of the investments are low earning local fixed income items and its overall average return on investments is 11.4%.

The Temangalo land transaction came at a time when the workers had become optimistic about the Fund considering the promised increase of interest on their deposits from 7% to 14%. Thus there is an urgent need to restore their trust and streamline the operations of the Fund.

Terms of reference

The committee defined the Terms of Reference for this investigation as follows; Whether there was conflict of interest by the parties involved; whether there was influence peddling in the transaction; whether there was value for money attained by NSSF in the purchase of the land; whether the procurement process as provided for by the Public Procurement and Disposal of Assets (PPDA) Act 2002 was followed

Background to the sale;

The three parties involved in the transaction informed the committee as follows;

Hon. Amama Mbabazi informed the committee that Mr Amos Nzeyi, a close friend of his and himself decided to purchase the shares of majority shareholders in the National Bank of Commerce Limited who had decided to sell them. Mr Nzeyi persuaded him that the money could be raised by sale of real property or land. Since the only land he had any connection with belonged to Arma Limited, a company in which he holds shares, he persuaded the shareholders to sell the company land.

Mr Amos Nzeyi stated that he had been approached by one Kizito an employee of the NSSF. The two met at the Kampala Golf Club and Mr Kizito inquired whether Mr Nzeyi could sell to the NSSF the land that he had previously failed to sell to Akright Projects. Mr Nzeyi then introduced the idea to Hon. Mbabazi who was agreeable and handed him the Powers of Attorney to act on behalf of Arma Limited.

On the other hand, Mr David Chandi Jamwa, the Managing Director of the Fund in a revealing testimony referred to hereunder informed the committee that the land was 'literally put in the NSSF's mouth'. He said that while the Fund required land for developing real estate considering that it is a dire need for this country, the Fund had not planned to purchase the 'Temangalo land' at the time it did.

Board minutes

The committee examined the minutes of the 68th Board meeting held on Wednesday 31st January 2008 in the NSSF Boardroom in order to ascertain how the decision to purchase the 'Temangalo land' from Arma Limited and Mr Nzeyi was ratified and the dynamics that were involved in the process.

The following findings were made by the committee;

I) Whether there was conflict of interest by the parties involved;

Conflict of interest may broadly refer to a situation in which there are two jobs, aims or roles and it is not possible for them to be treated equally and fairly at the same time.

For example there can be a conflict of interest between one's business dealings and his or her political activities.

Conflict of interest is defined under section 2(1) of the Leadership code Act, 2002; Act 17 of 2002. It refers to a situation where a leader has got to make a decision between his or her personal interests and public interests.

Under section 8(2)(a) of the same Leadership Code Act, conflict of interest shall be taken to arise where a leader deals with a matter in which he or she has personal interests and where he or she is in a position to influence the matter, directly or indirectly, in the course of his or her official duties.

a) Powers of Attorney

Aware that the 'Temangalo land' was owned by Hon. Amama Mbabazi, Minister for Security, according to Board minute 5(ii), the Board decided that the Powers of Attorney for the said land be taken over by Mr Nzeyi on behalf of Arma Limited owned by Hon. Mbabazi and family. This they stated was meant to manage the 'conflict of interest'. In the view of the Board, transacting business with Mr. Nzeyi would absolve the fact that NSSF is a government body that would have been deemed to have carried out business with Hon. Mbabazi a government minister.

The Committee further notes that, the Powers of Attorney were duly transferred to Mr Nzeyi by Arma Limited on that same day, 31st January 2008 when the Board took this decision.

Hon. Mbabazi on the other hand informed the committee as follows;

a) Arma Limited decided that since he was very busy with official work and the rest of the share holders had little experience in doing business, Mr Nzeyi would be requested to carry out the transaction. The latter was given full authority and he successfully performed this task and sold nearly 110 acres of land of Arma limited to the NSSF.

b) There was no conflict of interest in his role because he was not involved even most remotely with the decisions NSSF made in this matter. He did not even discuss the matter with Hon. Dr Ezra Suruma, the Minister of Finance, Planning and Economic Development.

c) Powers of Attorney are signed documents and they can never be instruments of concealment. They were backed by a Board Resolution and signed by one of the Directors of Arma Limited, Mrs Jackline Mbabazi and the minister himself.

In Mr Nzeyi's submission, before the approval of the purchase, he had asked Dr Suruma, the minister of dinance and director in the National Bank of Commerce if he (Hon. Dr Suruma) could help to raise the money for the purchase of some additional shares from the National bank of Commerce.

In the opinion of the MD, there was conflict of interest on the part of Hon. Dr Ezra Suruma.

This is illustrated by the fact that as the appointing authority of NSSF Board and a director in the National Bank of Commerce, he pressurised the NSSF to raise money to save the bank.

Findings

According to the Leadership Code Act, Section 8 and 12, Hon. Dr Suruma put himself in a position where his interests conflicted with his duties and responsibilities.

II) Whether there was influence peddling in the transaction;

Influence peddling according to the Oxford Advanced Learners Dictionary 7th Edition refers to the illegal activity of a politician using his or her position to cause something to be done for himself or herself or for another party usually with monetary implications.

According to Black's Law dictionary it is the illegal practice of using one's influence in government or connections with persons in authority to obtain favours or preferential treatment for another, usually in return for payment.

Minute 7(i) of the Board minutes noted that one of the Directors, Mr Claudius M. Olweny objected to the decision to purchase the Temangalo land on grounds that there was political pressure being exerted on the Fund to purchase the land. Despite assurances that there was no political influence in the transaction, Min 7 (ii) further states that Mr C.M Olweny maintained his position and his objection was duly recorded.

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