A South African based airline, licensed as a Ugandan national carrier in 2006 following intense political pressure, has picked $250,000 (Shs500 million) of taxpayers' money and vanished.

Investigations show that the government, through the liquidator in the Ministry of Justice, injected the cash into Victoria International Airways to buy a 20 per cent stake in the airline, then being marketed as a national carrier

It was understood that the other shareholders; Intercop Holdings AG and Ruflex Global Ltd - both of Switzerland, City Square Trading 678 (Pty) Ltd of South Africa and Declan Peppard, listed in the business plan, would make a corresponding contribution to raise a total working capital of $1.25 (Shs2.5 billion).

As it turns out, nothing went to plan with Victoria International Airways that the former State Minister for Investment, Prof. Kiwanuka Semakula (now ambassador to Dubai), enthusiastically marketed with a promise to create some 1,000 jobs.

Prof. Kiwanuka in a letter referenced MS/INV/09/05 introduced the investors to Civil Aviation Authority officials in Entebbe as Arch Air (Pty) of South Africa.

However, when technocrats asked for the company profile (managerial and technical teams), business record, types and validity of operating licence, aircraft fleet and audited accounts for previous two consecutive years, the promoters went silent. In a yet unexplained shift, the initial promoters, returned on November 4, 2005 applying for an Air Service Licence in the trading name Victoria International Airways.

Official records show that VIA was incorporated in Uganda on November 21, 2005, which would mean that it formalised its registration here three weeks after it applied for the flight operating licence that CAA provisionally granted during its 83rd board meeting.

Daily Monitor has learnt that in the first evaluation of VIA, CAA discovered that the investors did not understand the local air transport environment, their intended partner Intercop AG could not be traced in Switzerland and had insufficient funding for a joint-venture and could not proceed without the Uganda government contribution.

This financial headache brought in picture both former Finance Minister, Dr Ezra Suruma and the then Solicitor General, Mr Lucien Tibaruha upon whose separate advice the government paid the $250, 000 to VIA by cheque through Standard Chartered Bank on July 21, 2006.

"I refer to the letter by the Solicitor General, Ref No: ADM/11/158/01 dated 25th July 2006 on government shareholding in VIA Uganda," Dr Suruma wrote in an August 4, 2006 letter. "The above letter was a response to my request regarding the payment for investment by government in VIA Uganda. I wish to forward to you the cheque for $250, 000."

Yesterday, bureaucrats in the ministries of Finance and that of Justice each referred to the other for an explanation on how such huge sums of public resources could have been sunk into an airline without insurance - just in case the joint investment went bust as it did in January 2007.

Mr Keith Muhakanizi, the deputy secretary to the Treasury, said his line minister, Ms Syda Bbumba, who was not readily available on phone - or the Attorney General had more authority to comment on the matter that has since drawn the fury of Members of Parliament.

A top official in the Attorney General's office, who asked not to be named due to the sensitivity of the matter, said it is unlikely the government would ever recover the $250, 000 since the fund was not insured and VIA has no physical assets that could be attached and sold to offset the bill.

It has emerged that CAA grabbed a $30,000 bank performance bond executed by VIA to settle rent, air navigation and landing charge arrears accumulated by the company during its November 2006-January 2007 heydays.

During that period, Victoria Airways that apparently leased two Boeing 737-200 aircrafts from South Africa, made dozens of flights, mainly to Nairobi and Johannesburg, before grounding the planes.

Prof. Kiwanuka, the architect of the scheme who in an October 25, 2006 asked ex-CAA Managing Director Ambrose Akandonda to write to Immigrations department to expedite processing of work permits for Mr Ian Bond and Mr William Du Toit, two of VIA's purported expatriate staff; was non-committal when contacted.

"I don't respond to rumours," he said curtly, before dropping the call.

That notwithstanding, legislators yesterday began piling pressure on bureaucrats to recoup the $250,000 after MP Elijah Okupa (Kasilo, FDC) tabled some of the documents detailing the botched joint venture in the House.

"We want our money back," Mr Okupa said, adding: "If Ministry of Finance cannot show us the airline, yet they gave these investors $250,000, then as Parliament, we must pronounce ourselves on this matter."

Transport Minister John Nasasira said last evening that his officials were largely sidelined in arrangements of bringing Victoria Airways and only came in to issue the provisional licence.

"Next time, they should find it right for the right sector ministry to manage such investors. This one was rather personalised," he said.

In a separate interview at his offices in Entebbe yesterday, CAA Public Relations Manager Ignie Igunduura, said VIA officials formally notified them that they had suspended operations to synchronise their electronic booking/ticketing system to international standards but returned later to fly out their ground planes, ostensibly for "safety checks."

"We have not seen or heard from them ever since," he said, adding: "The airport industry is highly competitive and requires a strong financial base for anyone to establish and manage."

He added: "Uganda and CAA in particular will support a strong home-based airline. We regret the failure of all initiatives we have tried to establish such an airline. This points to two things: financial base and predatory competition."

Daily Monitor was told that VIA was being prospected as a national carrier after such failed experiments with East African and Africa One airlines aimed at transforming them to replace the defunct Uganda Airlines.