Minister Kasaija’s nasty loan deals.

Updated by Faith Barbara Namagembe at 11014 EAT on Wednesday 4 May 2022.

Begged to retire during an emotional and explosive appearance before the parliamentary committee on trade last week, Minister of Finance, Planning and Economic Development Matia Kasaija’s mask of poised calm momentarily slipped.

“If my Jajja [grandfather] can commit our coffee: the livelihood of 12 million Ugandans without a feasibility study. My Jajja, don’t you think it is time for you to go home really?” Jinja North Member of Parliament David Aga Isabirye begged, infuriating the minister.

“Send me to where? Do you control my destiny? You abuse me, I abuse you,” a furious Kasaija retorted.

Kasaija is under fire for signing loan agreements condemned publicly as flawed, and messy, which expose the country’s assets to attachment. In a tweet last week, Nakawa West member of parliament Joel Ssenyonyi said, “The Minister of Finance, Planning and Economic Development should be cautioned and should apologize to the nation for his role in this unfavorable loan (Entebbe Airport expansion) agreement.”

Ssenyonyi’s tweet was about the Entebbe International Airport phase I expansion agreement and the infamous coffee deal with Italian Enrica Pinetti. Ssenyonyi recommended that thorough due diligence must be done before government contracts are signed in the future.

Minister Kasaija is struggling to calm a jittery public unnerved by the glaring flaws in the coffee agreement the minister signed with Italian investor Enrica Pinetti of Uganda Vinci Coffee Company Limited. Some parliamentarians are calling for the minister’s censure. Away from the infamous coffee agreement, Kasaija has signed other agreements. He signed the Phase 1 upgrade of the Entebbe International Airport agreement with the Chinese Export and Import Bank (EXIM) in 2015. He signed another agreement with Aminah Mohammed Hersi of Atiak Sugar factory, and another one, which okayed the establishment of the International Specialized Hospital of Uganda, Lubowa, among others.

While releasing the 2019/2020 report, Uganda’s Auditor General John Muwanga voiced his frustration that loan negotiators had ignored his firm advice to always protect Uganda’s sovereignty and properties. Muwanga noted that although his office had in the previous reports raised concern over loan agreements that exposed Uganda’s properties to attachment and waived the
country’s sovereignty, no action had been taken yet agreements of that nature are dangerous.

He explained, “A review of the new loan agreements being signed indicates an increased waiver of immunity by the Minister of Finance concerning assets of Uganda within and outside. Government irrevocably and unconditionally agreed to waive immunity over Uganda or its properties to which it or may become entitled to at any time whether under sovereign immunity or otherwise from any suit … attachment before judgment [and] attachment in aid of execution to which [Uganda] or its assets may be entitled in any legal action.”

On March 31, 2015, Uganda got a US$ 200 million loan from the Chinese Exim Bank to fund the phase one upgrade and expansion of Entebbe International Airport. The loan was awarded to Uganda at an interest rate of two percent per year with a maturity period of 240 months, a grace period of 84 months, and a repayment period of 156 months. The contract for construction works at the airport was awarded to China Communications Construction Company. Construction began in August 2015 and is scheduled to be completed by December 2022.

In late October 2021, Bukooli South legislator Solomon Silwany reported in parliament serious allegations of mismanagement of funds at Entebbe International Airport and the Uganda Civil Aviation Authority. Then deputy Speaker of Parliament Anita Among (now Speaker) forwarded the matter to the Joel Ssenyonyi-led committee on Commissions, Statutory Authorities, and State Enterprises (Cosase) to investigate.

While presenting the committee findings to parliament on March 10, 2022, committee chairperson Joel Ssenyonyi faulted the Uganda Civil Aviation Authority (UCAA) and the Ministry of Finance for misleading the government into agreeing to the US$ 200 million deal to expand the Entebbe International Airport. Ssenyonyi and the team established that the loan terms for the airport expansion were outrageous. The report stated, “The loan terms referenced above were unsustainable and a huge constraint on the country.

Due diligence on loan financing terms should always be made before signing loan agreements by the government to avoid fatal clauses which become a liability to the taxpayer/country,” he said. The Observer has seen a copy of the Entebbe Airport loan agreement. Some of the contentious clauses are highlighted below. Subsection 2.5 says “the goods, technologies, and services purchased by using the proceeds of the facility shall be purchased from China preferentially.”

Subsection 5.5 reads, “…neither the borrower (Uganda) nor any of its assets are entitled to any rights of immunity on the grounds of sovereign or otherwise from arbitration, suit or otherwise any other legal process concerning its obligations under this agreement, as the case may be in any jurisdiction.”

Subsection 6.12 clause three reads, “All the revenues (proceeds) of Entebbe International Airport (including but not limited to revenues generated from the project) shall be applied in priority in payment of any and all amounts due and payable under this agreement.”

Subsections 8.4 and 8.5 state that the agreement shall be governed by the laws of China, with arbitration of disputes also happening in China before the China International Economic and Trade Arbitration Commission. While appearing before the Ssenyonyi committee, Finance Minister Kasaija apologized. He said the government should not have agreed to some clauses but it was a take-it-as-it-is loan agreement or leave it, which prompted him and the team to settle for the former.

The committee further recommended that Kasaija should be cautioned and must apologize to the nation for signing such an unfavorable loan agreement. The committee agreed with the Auditor General that thorough due diligence must be done by the government before contracts are signed in the future. The agreement with Exim Bank was not a one-off mistake. Kasaija recently signed an US$ 80 million coffee agreement with Italian business lady Enrica Pinetti.

The coffee deal between Uganda and Pinetti also has controversial clauses. Sections 3 and 4 of the agreement reek of favoritism. They offer several unprecedented tax concessions, social security, and provision of priority supply of 60,000 tonnes of Uganda’s coffee beans to UVCC. The ten-year concessions shall be effected when the company goes commercial.

Under section 4, the government of Uganda agreed to support the implementation of the project through the provision of total tax exemptions and the freedom not to pay social security for the staff employed. In subsection 4.1.1, “The Government of Uganda hereby agrees that it shall ensure the company undertakes the operation of the project on a tax neutral basis with the effect that it shall be entitled to all tax exemptions available under the laws of Uganda. The exemptions referred to in this paragraph shall extend to taxes and impositions applicable to all activities of the company and its foreign staff except in respect to the export of green coffee beans.”

Under subsection 4.1.2, the government commits the Ugandan taxpayer to shoulder the cost of taxes in the event that the law prohibits tax exemptions or it is inadequate to provide the company with comprehensive relief from taxes or other impositions. In subsection 4.4.2; UVCC commits to pay for the priority supply of superior quality coffee beans at a premium price to be determined by UVCC but in any case, not below the price approved by UCDA, the coffee regulatory authority.

As the public anger over the coffee agreement boiled over, Minister Kasaija admitted that the coffee deal might not be the best for the country. In an appearance before the parliamentary committee on trade last week, Kasaija said, “Please hit us no more; don’t call us thieves over the coffee deal.”

Kasaija said they weren’t gods but human beings who make mistakes. He called on Ugandans to offer advice instead of harsh criticism. Asked whether his ministry consulted widely before signing the agreement with Vinci, Minister Kasaija said they consulted with Uganda Coffee Development Authority. UCDA officials had the day before appeared in the same parliamentary committee and distanced themselves from the coffee deal.

UCDA said US$ 80 million was not enough investment for Vinci to achieve what had been signed up for in the agreement. Vinci, UCDA said, would need not less than US$ 400 million. Although Kasaija had claimed that his ministry had done the feasibility and market studies before signing the agreement with Vinci, the ministry’s technical staff informed the committee that they based on Pinetti’s findings to sign the contract. They said, “We have not seen, we have not had the data to look at because this is an investment by the private sector. The private investor has informed us that there are matters in the feasibility study that are proprietary to her and the company and it is difficult for her to release this to us.”

Before the same committee, Arua district Woman MP Moreen Asolo asked Kasaija to talk about, “Hawk Company Limited” which has a 96% majority shareholding in Uganda Vinci Coffee Company. Kasaija said he didn’t know the actual majority shareholder. Speaking on Sunday, May 1 during the Labour day celebrations at Kololo Ceremonial grounds, President Museveni said, “They are attacking the coffee deal. I am so happy people have put in their views. It is in writing black and white. You can’t take it back. We are going to study it.”

In 2019, the Parliament of Uganda approved a US$ 379 million (Shs 1.4 trillion) guarantee for the construction of an International Specialized Hospital in Lubowa, Wakiso district. On completion in 2022, the 264-bed specialized hospital is expected to treat cancer, heart diseases, and offer highly specialized surgeries, etc to scale back referrals abroad.

Appearing before the parliamentary committee on Health on April 19, 2022, George Otim, the commissioner for Infrastructure in the ministry of Health, told MPs that construction was delayed by poor weather, the Covid-19 pandemic, and lack of a contractor on site.

“Currently the developer does not have a contractor on the ground but they are in the process of getting another one. As you are aware, they were initially supposed to work with Roko Construction Limited but they fell out. They engaged another contractor who was disengaged and has since left. So, the developer is looking for a new contractor to implement the work,” Otim told the committee.

On a recent visit to the Lubowa hospital construction site, members of the parliamentary committee on Finance found no work going on at the site. There was nothing visible to account for the value of the initial payments made to Enrica Pinetti three years later.

Speaking to The Observer, Paul Omara, a member of the Finance committee, said they found men masquerading as engineers doing some petty construction work. Omara added that the men found at the construction site later confessed that they were not part of the construction company undertaking developments at the construction site.

“We have so far disbursed US$ 94m but there is no value for money on the ground. The investor was supposed to deliver the hospital in two years, which timeline has been extended to 2024 but we doubt that timeline will be met since up to today, there are no contractors or consultants on-site,” Omara told The Observer.

In July 2017, the Government of Uganda extended a US$ 17.4 million (Shs 62.65 billion) loan to Horyal Investments Holding Company Limited, the proprietors of the Atiak Sugar Factory, to support sugarcane out-growers in the region. In May 2018, Uganda, through the Uganda Development Corporation (UDC), took a 10.1 percent ownership in Atiak Sugar Factory (an approximately US$ 5.5 million stake). In July 2018, UDC invested another US$11.6 million raising its stake in the factory to 32 percent.

In April 2019, the company requested another Shs 24 billion (US dollars 6.5 million) in funding to complete the construction of offices and staff houses. The opening was planned for the second half of 2019. This would bring the government’s shareholding to 44 percent. In November 2021, the parliamentary Budget committee rejected a supplementary budget request for Shs 108 billion in additional funding to Atiak Sugar Factory in Amuru district. The MPs said the government had heavily invested in the company and yet the shares remained stagnant.

They said that until businesswoman Amina Hersi Moghe meets her contribution to the investment, they would not provide the funding. Minister of state for Industry, David Bahati had led the team from the ministry of Trade and officials from the Uganda Development Corporation (UDC) to defend the supplementary request for additional funding for the sugar factory.

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