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MPs want palm oil project agreement re-negotiated

Officials from the Finance Ministry appearing before PAC

Kampala, Uganda | THE INDEPENDENT |  The Public Accounts Committee (PAC) has directed Finance Ministry to start the process of renegotiating an agreement with an Edible Oil Refinery company-which is in the country to develop the palm oil industry.

Government through the Finance Ministry in 2003 entered an agreement with the company for palm oil development. The government was required to pay Value Added Tax (VAT) on the products of all companies envisaged under the project from the first year of project activities ending after a period of 11 years, from the year of handing over 26,500 hectares of land. 

It was also agreed that the company refunds the VAT paid by government with interest over a period of 8 years in eight equal instalments, including accrued interest starting in the 12th year.

However, during PAC’s meeting with Finance officials led by Under Secretary Betty Kasimbazi, it was discovered that government has breached the contract by failing to provide a balance of 10,000 hectares of land as agreed with no documentation to show that the ministry has made any follow-up on the matter.

According to the Auditor General’s report for June 2018, government’s failure to provide the balance of the required land has seen the Ministry continue to settle all tax obligations on behalf of the company and that Finance has accumulated a total of 64.7 billion Shillings in arrears.

“It is apparent that instead of paying 11 years, Government has so far paid 15 years and is still continuing while the chances of recovery appear to be uncertain. I advised the Ministry to liaise with the Ministry of Agriculture to expedite the process of identifying and procuring all the required land and also seek legal advice from the Attorney General on the possibility of amending the terms of the agreement,” reads part of the audit report.

Kasimbazi told PAC that it was true that government agreed that VAT payable by BIDCO was differed until government hands over all the land agreed upon and that so far, 11,500 hectares in Kalangala (6,500 hectares) and Buvuma (5,000 hectares). She said that there were on-going discussions with land owners in Sango Bay to acquire another 10,000 hectares.

The Under Secretary also noted that the Agriculture Ministry was in negotiations with BIDCO Uganda Limited (BUL) to encourage small holder farmers to be part of the Palm Oil growing project since government is finding it difficult to raise the required land.

PAC Chairperson Nathan Nandala Mafabi wondered what informed such an agreement that is difficult to achieve.

Connie Magomu Masaba, the Project Manager of Vegetable Oil Development Project in the Agriculture Ministry said that not all the required land was to come from Kalangala since 6,500 hectares had been planned to come from Bugala Island and another 3,500 hectares from outer growers and smallholder farmers at the Island.

Magomu said that the first phase of the project was in Kalangala for three years and that the next phase was a further study on Bukakata for the project. She, however, said that when the investors looked at the Bukakata area and did their own tests, they reported that land was too sandy for them to grow oil palms.

Kashari North MP, Wilberforce Yaguma described the project as a fraud saying that it has put a huge tax burden on Ugandans.

He demanded that all government officials who were involved in the negotiation and signing of the agreement be summoned an audit undertaken on the project.

PAC Vice Chairperson Okin P.P Ojara alleged that key government officials had bought land in the project area and that these were hiking fees for the land hence making it difficult for purchase. But Magomu denied the allegations.

Following views from MPs, PAC Chairperson Nathan Nandala Mafabi directed the Finance Ministry Under-Secretary Betty Kasimbazi to start the process of renegotiating the project agreement within six months.

However, Finance’s Director Economic Affairs Moses Kaggwa said that they could not confirm that the agreement would be renegotiated within the set period since there is another party involved. But Nandala insisted on the re-negotiation also tasking the officials to avail his committee with documents concerning the project.



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