The Minister of Defence and Veteran Affairs, Hon. Kiryowa Kiwanuka, has revealed that the National Enterprise Corporation (NEC)--the commercial arm of the Uganda People's Defence Forces (UPDF)has never been involved in the implementation or operation of the Intelligent Transport Monitoring System (ITMS), popularly known as the digital number plate project.
Appearing before Parliament's Committee on Physical Infrastructure alongside NEC officials led by Managing Director Gen. James Mugira, Kiryowa provided a detailed briefing on the contractual and operational breakdown between NEC and Russia-based firm Joint Stock Company Global Security (JSC GS).
The revelations come amid an ongoing parliamentary inquiry into the ITMS project, with MPs scrutinizing its contractual frameworks, financial terms, security implications, and implementation delays.
According to official documents presented by the Minister, NEC's engagement with JSC GS began on March 22, 2019, when both entities signed a Memorandum of Understanding (MoU) aimed at facilitating technology transfer for the ITMS project.
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The initial MoU was intended for a six-month window to allow for negotiations toward a Joint Venture (JV) Agreement. Four years later, on November 22, 2023, the two parties signed a Cooperation Agreement meant to formalize NEC's participation.
Under this agreement, NEC was promised a 5% share of the fines and penalties collected under the system. In exchange, NEC was expected to provide land, construct essential infrastructure, and deploy skilled personnel to manufacture chips locally.
However, Kiryowa confirmed to the committee that the planned Joint Venture was never realized, leaving NEC entirely out of the project's execution.
"Notwithstanding the execution of the Cooperation Agreement, NEC has never been effectively involved in the implementation or operation of the ITMS project," Kiryowa stated in his written submission to the committee.
"The land which NEC was to provide... was not utilised, the Joint Venture contemplated... was never entered into, [and] NEC has not been integrated into the implementation and operation."
The Minister added that the failure of JSC GS to engage NEC constitutes a serious concern regarding contractual performance.
"In particular, the failure by JSC GS to undertake the agreed obligations necessary to operationalise the partnership and involve NEC in the ITMS Project raises significant concerns regarding non-performance and/or material breach of the Cooperation Agreement," he noted.
During questioning by lawmakers regarding whether the Ministry considered the lack of participation a breach, Kiryowa emphasized the need to focus on the broader strategic intent of the government.
"We don't have a joint venture. We have a cooperation agreement," Kiryowa told MPs.
"What was the strategic intent of the President when he was coming up with this arrangement? It was to run security printing with a view to developing capacity locally and taking over. So if we are not achieving that strategic intention to develop capacity locally with a view to taking over, then definitely we are not meeting the intention of the agreement."
He cautioned against placing sole blame on the Russian firm, pointing out internal oversight lapses within government structures.
"The government anticipated, but what was anticipated has not happened, so JSC proceeded to implement... No, I don't think we should look at only JSC because this is not implemented by JSC alone. All of us... we dropped the ball," Kiryowa admitted to the lawmakers.
"We have a project management team which is supposed to be looking at the interest of government. We need to get into that situation where we understand whose interests are being protected... If we dropped the ball, it is us who dropped the ball."
Addressing separate concerns about how project funds and fines are handled, Kiryowa submitted legal advice regarding the primary ITMS agreement signed between the Government of Uganda and JSC GS in July 2021 (as amended in September 2025).
He explained that payments for digital registration plates go directly to the contractor to recover investment costs and cover operational margins.
Traffic fines collected under the system are subject to a reconciliation process where contractor cost recoveries are deducted before net government revenues are remitted to the Consolidated Fund.
"In my view, this arrangement does not violate the Public Finance Management Act... because the 'actual revenue' would be revenue after removing the investment costs to be recovered by the Contractor progressively," Kiryowa explained.
"The revenue would be what is left after the Contractor is paid in cost recovery."
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He assured MPs that while the contractor holds exclusive intellectual property rights during the contract period, full ownership of the software and system will be transferred to the Ugandan government upon the expiry or termination of the 10-year contract.
Following the physical infrastructure hearing, Kiryowa led the NEC leadership to the Committee on Defence and Internal Affairs to apprise MPs on the broader commercial operations of the military arm.
Kiryowa informed lawmakers that NEC receives a modest allocation of Shs 2 billion annually from the government primarily covering staff salaries and minor administrative expenses.
Due to these limited fiscal resources, NEC relies heavily on joint ventures to fund capital-intensive commercial projects.
Under these joint ventures, private partners supply capital, machinery, and technology, while NEC contributes land, security, and operational support.
Kiryowa revealed that these ventures have yielded over Shs 27.6 billion in cumulative dividends, which have been reinvested into key national initiatives including an oil waste management facility in Kyangwali, an expanded Uzima water factory production line, and a surgical mask manufacturing facility.
