Earth Finds

Earth Finds

COSASE Inquiry Continues To Expose Bank Of Uganda Weakness

When the Bank of Uganda (BoU) started closing commercial banks right from 1993 on account of insolvency, the officials there did not at any one time anticipate they would face a parliamentary probe for their actions, for they thought the central bank was independent and could do its business causally without following the established laws and procedures.

That long-held view by the BoU senior staff was to change when some of the owners of the closed banks started complaining of the unfair closure of their branches, even as they pleaded that they be given second chance. Particularly the sale of Crane Bank (CBL)in January 2017 put BoU in disrepute to the extent that parliament ordered the Auditor General John Muwanga to carry out a special audit on the closure of seven banks by BoU. BoU would later resist Muwanga’s probe but later gave in after failing to garner support from the executive.

Muwanga’s well written audit report formed the basis on which the Parliamentary Committee on Commissions, State Authorities and State Enterprises (COSASE) are probing BoU senior staff as the MPs seek answers to the queries raised in the report. The report was published on August 27, 2018 and handed over to the Speaker of Parliament Rebecca Kadaga.

Mr. Muwanga’s report on closure of banks and COSASE’s inquiry have been commended by the members of the public who have been watching the proceedings live on television. The inquiry has exposed BoU as an institution that doesn’t follow its own procedures. It exposed BoU staff as disorgainsed, uncoordinated, negligent, careless and not suitable to hold those jobs, despite having the qualifications. For instance, the inquiry exposed director legal department, Margaret Kasule, as wanting as she could not appropriately respond to questions relating to closure and sale of banks.

The inquiry further has exposed BoU staff as exhibiting corruption tendencies as well as allowing conflict of interest in the transaction. For instance the inquiry established that BoU sold Global Trust Bank Uganda (GTBU) and CBL to Dfcu Bank well knowing that BoU Staff retirement benefit scheme owns 0.59 shares in Dfcu Bank and as such stood to benefit from the two transactions. The MPs in the probe have established that that was foul play, which was accepted by BoU Governor Emmanuel Tumusiime-Mutebile.

Further, the probe has exposed BoU in the conflict of interest scenario. For instance, Dr. William Kalema was both on the boards of BoU and DFCU Bank when the latter bought GTBU. That is the reason why MPs on COSASE dismissed him from appearing alongside BoU staff in the inquiry. BoU has conceded defeat on this, saying it will never happen again, but the damage is already done.

BoU has been further exposed in that it did business with law firms whose directors represent the banks the central banks is supposed to regulate. For instance some of the MMAKS Advocates counsels are directors in some commercial banks. Sebalu & Lule Advocates have had business with BoU, the latter well knowing they did the same with CBL. That raises a question whether BoU can effectively do its regulatory work in such a scenario. The same layers at one time worked for CBL.

The inquiry has still exposed BoU as an institution a careless officials. For instance the Auditor General hired KPMG to produce a financial status report of CBL under receivership but responsible BoU officials did not sign on the report, leaving it hanging. The BoU staff were exposed as careless as they claimed to have spent Shs478.8 billion on CBL in liquidity support yet they cannot account for the money. Interestingly to show their carelessness they sold CBL at Shs200 billion, paid in installments. That is worsened that the bank doesn’t have all documents related to the transaction as they sold banks.

Mutebile recently accepted the faults committed by BoU as it closed banks. “I would like to thank you in particular, for your candid approach to tackling issues that you believe needed to have been addressed, or at least taken into consideration by the staff of the Bank of Uganda. I also would like to express my appreciation to the Auditor General for his report which raised issues that will culminate in an improvement in the operations of Bank of Uganda,” he told MPs on COSASE.

“The Bank of Uganda acknowledges the relevance of this exercise and we are confident that it will enhance transparency and accountability, which are key values that the Bank upholds. This interaction has highlighted the shortfalls within our processes, policies and practices,” he said, adding that the MPs probe had been a learning process not only for the Management but also for the staff. “I am confident that resulting from this process, we will review ourselves, the Banks processes and policies in order to strengthen our capacity to perform the functions of the Central Bank better,” he said.

He said it would be incumbent upon BoU to put in place measures that translate into a stronger institution and visibly boost the confidence of the public in the central Bank. “We want to see a stronger financial sector and economy built on the confidence that the public has in us,” he said.      

SOURCE: EAGLE ONLINE

Why Court Ordered Dfcu Bank To Pay Former Crane Bank Employee

Dfcu Bank will pay Shs62 million to Mr. Shakil Pathan Ismail, a former employee of the defunct Crane Bank Limited (CBL), the Head of the Commercial Court, Justice David Wangutusi has on January 15, 2019 ruled. Mr. Shakil will also get general damages worth Shs20 million.

The special damages come with 21 per cent interest per annum from April 2016 on till payment is made in full. The judge also ordered the bank pays a further 6 per cent interest on damages from the date of judgement till the amount is fully paid.

The judge also ruled that Dfcu Bank meets the costs of the suit that has further tainted the image of the bank in the eyes of the public. The bank continues to be in the news for acquiring CBL and Global Trust Bank controversially. Former workers of CBL are also in the process of demanding compensation from Dfcu Bank for terminating their services in violation of an earlier agreement.

In 2017, Mr. Shakil sued Dfcu Bank for the recovery of Shs62 million which he said the bank unlawfully blocked/deducted from his salary account. That happened after Dfcu Bank bought off CBL on January 25, 2017.

“It is without doubt that the defendant kept the plaintiff (Shakil) out of use of his money. The bank must have used this money for commercial purposes. It is also without doubt that if the plaintiff had borrowed that money from the bank, he would have paid it back at commercial interest rate. What is good for the goose should also be good for the gander,” Wangutusi said in a written judgement.

DfcuBank used MMAKS Advocates in the said suit praying that court allows it to add on CBL in receivership as the second defendant, but the judge dismissed it, saying MMAKS Advocates had once served CBL and now could not be allowed to turn against the same bank as ruled in; Bank of Uganda Vs Crane Bank Civil Suit No.493 of 2017.

MMAKS is forbidden from representing any entity against Crane Bank, secondly Dfcu as a successor of Crane Bank can suffer all all all the previous liabilities inherited from Crane Bank provided the victims of these liabilities were never privy to the purchase of Crane Bank asserts and liabilities.

“It did not matter whether the firm had many lawyers and the one now assigned with the new matter did not personally handle the complainant’s case. Conflict would still be imputed from the “Canteen factor”, he said.

“Canteen factor is this case included social chat between colleagues or with client that gave vital information so if the interaction is between one of the partners it will be imputed to the others,” he explained.

The judgment was delivered in the presence of Mr. Timothy Lugayizi-Dfcu Bank counsel and Ms Daphne Atuhaire-assistant to Mr. Nelson Walusimbi, Counsel for Mr. Shakil.

SOURCE: EAGLE ONLINE

Borrowing For Energy Sector Has Not Benefited Ugandans

By Diana Nabiruma

On Wednesday January 8, 2019, after its 5pm news bulletin, Sanyu FM aired some of its listeners’ views on what their expectations of 2019 are.

Most of the sampled listeners expressed fears of a hard 2019. Worries over economic and political hardships were rife.

One particular listener’s views caught my attention however. In Luganda, he groaned that his two meals a day would be reduced to one in 2019.

Why?

He must have heard the alarm raised by the Auditor General (AG) and civil society organisations (CSOs) about Uganda’s rising debt.

CSOs say Uganda’s borrowing is unsustainable. The AG also expressed discomfort over the country’s debt burden, standing at Shs 41.3 trillion.

Further, in the 2018/2019 financial year, over 65% of revenues collected by government are supposed to be used on debt servicing!

Hence the above listener’s worries.

He said that in 2019, government was going to suck citizens dry to pay the mounting debt.

As such, people such as himself would have to forego basic necessities such as food!

FINANCE MINISTER REACTS

Interestingly, on the day the above listener’s views were aired, Hon. Matia Kasaija, the Finance Minister, held a press conference at the media centre to soothe the public.

He is reported to have told journalists that Ugandans should stay calm.

He said that at a debt to GDP ratio of 41.5%, Uganda’s debt is below international sustainability thresholds of a debt to GDP ratio of 50%.

To further calm Ugandans, the minister is reported to have said that if some of them are still around, there is no way the country would be led into debt stress!

He also reassured Ugandans that because money borrowed has been invested in the productive sectors of roads and energy, the debts would pay off.

HAVE ENERGY SECTOR DEBTS PAID OFF?

However, a look at available evidence and Uganda today shows that the above assertion by Hon. Kasaija’s assertion is erroneous.

Over the last ten years, (2009/2010-2018/2019), government has allocated over Shs 16. 871 trillion to the energy sector. This was 16.57% of Uganda's GDP as at June 2018.

Some of the above money has been borrowed and invested in the construction of dams with the view that electrification will address poverty among other challenges in Uganda.

Indeed, Hon. Kasaija affirmed that monies borrowed have been invested in dams such as Isimba and Karuma.

Noteworthy is the fact that the costs of Bujagali, Karuma and Isimba dams alone cover over 30.4% of Uganda's $10.7 billion debt burden. 

Have Ugandans however benefitted from monies borrowed and invested in the electricity and roads sector? 

Well, in 2015, the World Bank reported that that for every dollar invested in infrastructural projects, less than a dollar is recouped.

In addition, despite all the money that has been invested in the electricity sector, a dismal 22% of Uganda’s population had access to electricity as at June 2018.

Further, a look at the World Bank’s access to electricity data shows that in some instances, development of dams has had a negative impact on electricity access.

For instance, before commissioning of Bujagali dam in 2012, urban electricity access stood at 55.4%. This was in 2011.

In 2012 when Bujagali was commissioned, urban electricity access dropped to 51.2%. By 2015, Ugandan urbanites were in yet to recover with only 51.9% having access to electricity. Our rural counterparts fared worse. 

Even more indicting is the fact that according to 2016/2017 survey results released by Uganda Bureau of Statistics in 2018, poverty levels in Uganda increased from 19.7% in 2012/2013 to 21.4% in 2016/2017. Rural poverty rose to 22.5% and urban poverty to 9.4%! 

How then, are Uganda’s debts expected to pay off as the minister reassured Ugandans if increased borrowing is followed by increasing poverty?

Moreover, with the corruption, high costs of and procurement scandals that rocked the Karuma and Isimba dam deals, power from the two dams is unlikely to be as cheap as government promises it will be.

This means that the envisaged socio-economic transformation arising from completion of the two dams is unlikely to happen!

The author is the Senior Communications Officer of Africa Institute for Energy Governance (AFIEGO).

 

Kabira Football Tournament Returns This March

Football lovers will once again be treated to a competitive but fun day of athleticism, skills, talent showcase and a big deal of networking when the Kabira Football Tournament returns on 31 March at Kabira Country Club in Bukoto, Kampala.

The one day tournaments attracts teams from different corporate institutions and celebrities to play football for fun. The tournament which aims at bringing corporate companies together is also backed by Federation of Uganda Football Association (FUFA). FUFA provides referees and match officials.

Last year in June, over 20 teams, including Yokuku, Bet Yetu, Midocm, Bukoto Heights, Katon Rainbow, JBM FC, Victoria University and Riham, took part in the tournament. Winning teams and individual players took home trophies and cash prizes.

Kabira Country Club general manager Vismay Maniyar said the tournament will go a long way in improving the levels of fitness and standards of the game. “This is a very important tournament as we build to grow the game through bringing together corporates and integrating people with our facilities like pitches, gyms and swimming pools.” he said.

Rajiv Ruparelia, the Managing Director of Ruparelia Group, the conglomerate which owns Kabira Country Club hotel under the Speke Group of Hotels, at the last edition, thanked all corporate companies that accepted and honored the invite for the interactive football tournament.

To register you team, call Ronald on 0702980607.

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