Updated by Faith Barbara Namagembe at 1739 EAT on Thursday 14th July 2022.
MPs on the parliamentary finance committee have questioned the government’s decision to buy shares in indebted Roko Construction Limited.
State minister for Finance (General Duties) Henry Musasizi told the committee that the government had acquired a copy of the resolution for buying shares, but it was pending registration by the Uganda Registration Services Bureau (URSB).
The proposal for the purchase of Roko shares was first tabled before parliament last week when the minister told parliament that Roko is facing severe liquidity challenges that have constrained its ability to execute contracted projects and adversely affected payments to its suppliers.
Roko currently has projects with signed contracts worth Shs 1.064 trillion – of which Shs 696.6 billion is for government of Uganda projects. The company’s indebtedness, as of May 31, 2022, stood at Shs 202.4 billion. It also has contingent liabilities from bank guarantees for ongoing projects worth Shs 130.9 billion while its indebtedness to financial Institutions totals Shs 35.7 million and $20.7 billion and dues to local suppliers stand at Shs 46.8 billion.
Roko’s liquidity situation arose primarily from delayed payments on major projects, failure to refinance expensive loans with cheaper external financing, the impact of the COVID-19 pandemic on the construction industry, escalation of financing costs and weak corporate governance and inadequate management.
It’s on the basis of this that President Yoweri Museveni directed the minister of Finance to negotiate govemment’s acquisition of shares worth Shs 202 billion to salvage the company and allow it to implement its outstanding project contracts.
But Musasizi noted for the process to take shape, the resolution required to be registered with URSB. A special resolution seen by URN was made on October 22, 2021, by the Roko Construction Limited board for 150,000 preference shares to be created and allotted to the government of Uganda.
Musasizi however said that every necessary due diligence will be followed before parliament approves the acquisition of shares. He added that although they had interacted with the company’s creditors and confirmed the outstanding dues, the company has cited confidentiality and non-disclosure agreements they have with their creditors which prevent the circulation of the documents.
This statement by the minister followed inquiries by a section of MPs on whether the ministry of Finance had a resolution from Roko agreeing to sell shares to the government. The MPs also expressed concern that the failure to register the resolution with URSB as required by law was a big omission and would result in legal battles.
“Without the resolution, the rest of what we are doing is academic. He should quash our fears that he has seen the resolutions and has them,” shadow minister for Finance Muwanga Kivumbi said.
Kachumbala County MP Patrick Isiagi said that parliament expects due diligence to have been done and that the process of acquiring the shares should be clear. Isiagi also demanded to know Roko Construction Limited’s creditors, how much is owed to them and the maturity date for each debt portfolio.
“You can see the minister is unprofessional and since we’re moving into buying these shares of the company we’re not going to entertain that creditors are confidential. That one can’t exist because creditors are, first of all, disclosed in the financial statement. So we must know the company we’re buying, and who are the creditors. The minister’s statement says there is a confidentiality clause but am saying that is not right. We must know who is demanding from these companies,” said Isiagi.
Earlier parliament heard that the president’s directive was premised on the absence of a government-owned construction company, which subjected the government to the use of private companies that are nearly wholly foreign-owned and domiciled. The government currently spends Shs 950 billion per annum on projects in the roads and power sectors that are implemented by foreign companies.
The other reasons fronted by the president are that Roko was implementing a significant number of government projects, making it a suitable local partner, the need to lower construction costs for government projects, and the need to build the capacity of local firms in strategic sectors and industries.
Finance committee chairperson Keefa Kiwanuka said that the Roko issue was one of public interest and that it was important that the Finance ministry clarified why taxpayers’ money should be used to purchase preference shares in Roko amidst all the existing concerns. He adjourned the meeting to Friday.