A report authored by legislators on the ad hoc parliamentary committee tasked to probe the energy sector has declared power distribution company, Umeme, an illegal entity.
The declaration is based on the inception of Umeme in April 2004 when two companies - CDC Globeq Holdings Ltd and Eskom Enterprises - were merged. Signing on behalf of CDC, according to the committee, was Ezekiel Tuma, while Allan Shonubi signed on behalf of Eskom. Both lawyers work in Shonubi, Musoke and Co Advocates, a prominent law firm in Kampala.
The transaction looked proper until the committee established that the both Shonubi and Tuma had been contracted by the government under a company, Transaction Advisors, during the procurement of the concession from Umeme. This presented a conflict of interest that was never declared by the two lawyers, a finding the committee found disturbing.
The concession of power distribution was aimed at improving quality of service, increasing investment in rehabilitation, restoration and expansion of the power distribution network, reducing losses, increasing new connections, and providing reliable and affordable electricity to Ugandans.
Shonubi, Musoke and Co Advocates told us it was premature for them to comment on the committee's report. It was also discovered that Umeme Limited was not truthful because there is no evidence from the Uganda Registration Services Bureau of powers of attorney or a company resolution from CDC Globleq or Eskom, permitting Allan Shonubi and Ezekiel Tuma to endorse the deal on their behalf.
"The signatures in the Memorandum and Articles of Association for purposes of having Umeme Ltd incorporated are, therefore, from a legal point of view, a nullity and void," reads the report.
The committee also found that Umeme did not file with the companies registry its original memorandum and articles of association from its home country as demanded by the Companies Act.
"Unfortunately, these key documents as required by the law could not be found on the file of Umeme Ltd. Efforts by this committee to secure these documents from Umeme bore no fruits," the report notes.
The report consequently recommended that Shonubi and his partner be held responsible for fraudulently registering Umeme, impersonation and uttering false documents.
The committee notes that the agreements between government and Umeme were tightly guarded as it "became apparent that there was something fishy that both Umeme and the top bureaucrats in government (especially the so-called negotiators) were trying to cover up".
The committee was also disheartened to learn that the negotiations between government and Umeme took place in the US capital of Washington DC with no clear justification. The contracts, according to the report, were skewed in favour of the concessionaire (Umeme) at the expense of the people and government in terms of return on investment, buy-out conditions on termination, arbitration, national sovereignty, and risk management.
The committee's findings, which follow close to a year-long probe of the energy sector, reveal that the bureaucrats who represented the government in the negotiation and signing of the concession were incompetent, something Umeme allegedly took advantage of.
"During their appearance before this committee, a team of bureaucrats who represented government and purportedly negotiated the Umeme concession on behalf of Ugandans, led by David Sebbabi (Director of Privatization Unit, Ministry of Finance, Planning and Economic Development), admitted their lack of experience and technical competence in the sector," the report observes.
Others in the government team included Fred Kabagambe-Kaliisa, Elizabeth Nakungu and Erias Kiyemba (UETCL Managing Director). In their findings, the lawmakers observe that the government team failed to carry out prior benchmark studies and, therefore, lacked critical information needed at the time to plan and conclude negotiations in national interest.
"They did not carry out prior studies to appreciate the state of dilapidation of the distribution network in the country; the actual level of losses (both technical and non-technical); the critical areas of investment and ultimately the level of investments required to rehabilitate and restore the network and reduce losses to acceptable best practice levels," the report states.
The committee as such wants the people who negotiated the agreements to own up and take personal responsibility for the implications of the concession they signed, which they say has led to a high cost of power and low targets for Umeme.
"It is apparent that the problems that afflicted the Ugandan citizenry and government before the unbundling of UEB are prevalent. During this investigation the committee established that the power distribution segment in Uganda is still characterised by high power distribution losses, high billing and collection losses, poor quality services, low access levels, high initial connection costs, lengthy connection time, high operating and maintenance costs, rampant power outages/load shedding and power thefts," the report further notes.