Uganda: Why is Uganda's NBC Collapsing?

Kampala — When individuals from western Uganda formed the Kigezi Bank of Commerce, their major aim was to transform poor communities in the region through accessing cheap loans.

But, it seems, this dream is yet to be realized.

The bank, which was started by a group of people comprising retired Supreme Court Judge Justice George Kanyehamba, Uganda's prime minister Amama Mbabazi, the ICT minister Ruhakana Rugunda, former finance minister Ezra Suruma and a Kampala businessman Amos Nzei was supposed to operate under the name of Kigezi National Bank of Commerce and, the Bakiga were to be the directors having the first choice shares.

It later changed its name to National Bank of Commerce.

According to George Kanyehamba, who was among the directors, Kenyans of Asian Origin persuaded them to become customers arguing that even though they were banking with KBC, the Bakiga will remain with the majority shares.

"When Mr. Nzei and his friends changed the name to National Bank of Commerce and the Memorandum of Understanding, it gave Asian of Kenya Origin a leeway to buy majority preferential shares.

"This was under the disguise that this will help the bank to expand beyond Uganda an avenue for making a lot of profit," said Kanyeihamba.

According to him, this was illegal changing the name of the bank and MOU without calling the general assembly for share holders who had reached about one hundred.

He adds after realizing that Kenyans had bought the biggest shares, they directed the original bank directors from Uganda to only appoint four directors to be on the board.

Kanyeihamba notes that Nzei appointed Mbabazi, Rugunda , Rukikaire and himself who were key at changing the bank's name.

"Other core directors like Dr Suruma, Jim Muhezi, I and other minority shareholders were left out," he stresses.

Kanyeihamba argues that when the Kenyans realized that the bank was not making profits, they sold their shares to Abu Dhabi based Arabs.

However, when the bank continued not making profits, it prompted the three directors from Uganda to buy it back at a $ 7million.

Kanyeihamba says that Mbabazi contributed much to the returning of the Bank after he sold his Temangalo land to National Social Security Fund at Ush11billion.

It gave the tree director autonomy to own the bank, which angered local share holders who had hit 321.

They later took the matter to courts of Law.

"The victims of the three directors requested me to sue the duo in commercial court on their behalf.

"Since they were managing the bank illegally according to the National Finance and Institution Act and leadership code which limits ministers to become directors," said Kanyeihamba.

He adds that he also sued them for participating in the selling of the bank's shares illegally again to the Arabs.

But when contacted for a comment, one of the accused directors Mr. Amos Nzei explained to East African Business Week that what the petitioners are saying is not true.

He said all the transactions that took place in the bank were legally accepted by all the share holders.

"When they talk of selling shares to the public its true and even the banks constitution provides for that as a way of raising capital.

"Whenever the directors wanted to sell shares, they called for the annual general meeting before they offer the shares to the public" he told EABW on phone.

Kanyeihamba told East African Business Week that when the bank had been bought back, the three directors approached investors from Abu Dhabi to do joint venture business.

They agreed and by October 2009 they invested US$10 million in the bank, without assuming ownership.

But the investors, after realizing that the bank is not progressing want to recoup their money back. They have bought 65% share from the three directors to increase their shares up to 75%.

This led to the affected minority shareholders to call for bank of Uganda's intervention according to Kanyeihamba.

AS a way of protecting them, in July 2011, the Bank of Uganda approved the purchase of up to 49% of the stock of the bank by the Abu Dhabi investment company Emirates Link, owned by Ahmed Darwish Almarar, who became Chairman of NBCU.

The remaining shareholding is still being worked out at this time since in October 2011, following the cash injection of Shs12 billion (approx.US$4.5 million) by the Middle-Eastern investors.

However, following BOU intervention in the management, according to Kanyeihamba, the investors are not at in good terms with management because they want to have more power over it.

It is clear that there is an ownership dispute/wrangle between the majority and minority shareholders.

"At the same time, the three shareholders are facing legal challengefrom the Middle Eastern investors who are dissatisfied with the pace of handover to them as the new majority shareholders," said sources closer to both sides.

After realizing that managing the bank is becoming a big challenge, the Bank of Uganda, appointed a special advisor to NBCU, to advise the bank on its affairs during this period of instability within NBCU.

In May 2012, the Commercial Court directed the bank to appoint a new board of directors and to proceed with recapitalization, in order to stay solvent.

But, since this never solved the problem the central bank decided to suspend the whole management of the bank and appointed a private firm to manage it on behalf of the depositors.

A private firm Crane bank was appointed by BOU to manage NBCU.

"Yes the decision by the Central Bank to run the bank {NBCU] is good but this cannot stop us from blaming the Central Bank since the so called minority share holders started complaining to them at the beginning when our colleagues were tempering with the peoples bank but the Central Bank kept quit this has led the minority share holder to petition the president over the matter," Justice Kanyehamba recounted.

According to the petition letter addressed to the President dated 6/July/2012 which was seen by East African Business Week it asked the president to intervene in the matter as soon as possible.

The petitioners blame Amos Nzei, Amama Mbabazi and Ruhakana Rugunda for "cheating and stealing their little resources" they had acquired by themselves through being share holders in the NBCU formerly Kigezi Bank of Commerce.

"They have climbed onto our backs and stolen the little we had collectively worked for and obtained. There are many projects in which they have cheated us but we are now bitter about one of them namely, our Kigezi Bank of Commerce which they fraudulently stole named illegally renamed National Bank of Commerce" Quoting part of the petition which was addressed to the Head of State

The petitioners added although the bank needed some seven billion shillings to comply with the law, for years its shares have been sold to foreigners and foreign interests by the accused, Nzeyi, Mbabazi Rukikaire and Rugunda.

"The money they received from illegal selling of our bank was not deposited in our bank but deposited secretly in the Islamic Bank of Abu Dhabi and the Libyan Tropical Bank of Kampala in their personal accounts to the tune of over 61 billion shillings and if the head of state was not aware they can prove it by themselves"

The petitioners noted the evidence of the illegal transaction is freely available both at the police and the court.

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