By Agather Atuhaire
A contest raging between President Yoweri Museveni and parliament over a new law on Public Private Partnerships (PPPs) could result in a constitutional crisis if no one blinks. So far, in quite unusual style, the MPs have twice refused to do what Museveni wants – give him a free hand to negotiate PPPs without involving parliament.
At present, parliament plays no role in the PPP development, approval, coordinating and monitoring and audits. The government departments develop the PPP, and the Ministry of Finance approves it. In practice, however, most PPP are agreed on either in State House or at retreats of the ruling party NRM and are mostly negotiated by President Museveni.
Some of the most quoted PPP projects are the Bujagali Hydroelectricity Dam, the UMEME and Eskom concessions, and the Rift Valley Railways deal. At a local government level, taxi parks and markets have been concessioned out under PPPs.
Part of the problem is that many PPPs – projects where the government backs a private entity to borrow money, build a public project, and earn a profit even if the cost of the project is eventually borne by the taxpayer – which Museveni’s government has entered into have been problematic.
Many more PPPs remain on paper. These include the proposed project to Develop Serviced Accommodation for the Uganda Police Force, the rehabilitation of the Kilembe Copper Mines, several power stations, and the oil refinery project.
And, since the government appears to finally want to establish a legal framework for the PPPs, the MPs – as representatives of the taxpayers – want a role.
Museveni talks tough
Parliament, matter of fact, passed the Public Private Partnerships Bill on July 18, 2014. However, when it was sent to President Museveni for assenting, he refused to sign it.
He instead wrote back to Parliament on September 29, 2014 stating that he wanted the Bill re-considered and a particular Clause (26) deleted.
Clause 26 (1) says PPPs should not be signed without the approval of Parliament. Clause 26(7) says signed PPPs should only be amended or varied with the approval of Parliament, and Clause 26(8) says Parliament shall not approve an amendment or variation to a project agreement unless the agreement is so amended or varied.
The President said in the letter that the said provisions will take away the constitutional mandate of the Attorney General who is mandated to approve agreements in which government is a party.
Under Section (5) of Article 119 of the Constitution, no agreement, contract, treaty, to which the government is a party, shall be concluded without legal advice from Attorney-General.
The President’s view is that, by seeking to poke its nose into PPPs, parliament was introducing a parallel approval mechanism which would delay the process unnecessarily.
He also argued that the provision will hinder investors who may consider not investing in Uganda as their business decisions will be subjected to parliament approval.
Origin of trouble
The Bill which seeks to regulate public private partnerships had first been tabled in parliament in September 2012 by then-Minister of State for Privatisation Aston Peterson Kajara.
At the time, most people never imagined it would cause so much trouble for the parliament.
After all, the government had approved the PPP policy in 2010 and was selling it as the perfect “tool for the provision of public services and public infrastructure”.
The government argued that PPPs would provide better utilisation of public resources, more efficient delivery, and better quality, and encourage Foreign Direct Investments. Unfortunately, most of this has not been realised.
The PPP model had also, since the 1990s, been favoured by investment finance constrained countries like Uganda that wish to develop infrastructure projects beyond those that can be supported by their on-the-books- borrowing.
This is partly because ideally PPPs should be structured in a way that keeps the government from borrowing. Instead, it is the Special Purpose Vehicle (SPV) created by the private sector or a combination with the public that borrows. In this way, PPP is an “off-balance sheet” financing.
However, Uganda’s case has proved that they come at a high cost and sometimes involve high level corruption.
This is partly because the PPPs involve a higher Weighted Average Cost of Capital (WACC) than if the government was borrowing. Unfortunately, in cases like Uganda where the public debt is already significantly high, further government borrowing is not an option. Inevitably, the governments resort to FDIs and costly PPPs. Parliament appears not to want that. That is how the Bill ran into trouble.
When it was first tabled, Speaker of Parliament Rebecca Kadaga; as a matter of procedure, referred it to the Committee of Finance Development and Economic Planning.
That is when the MPs noticed that parliament had been left out of the process of developing PPPs.
“The committee notes that the bill is silent on the role of parliament in the development of PPPs ,” they wrote in their report to parliament, “ (yet) PPPs have a potential risk of creating future contingent liabilities and in most cases involve implicit financing i.e. guarantees, subsidies, tax waivers or incentives.”
The committee which is chaired by Kyadondo North MP Robert Kasule Sebunya recommended the clause providing for the approval of parliament which Museveni now wants deleted.
After Museveni rejected the Bill, Kadaga again referred it back to the Finance Committee for reconsideration. The committee wrote a report, this time agreeing with the President and saying that since Parliament would be involved at appropriating the money for the PPPs, the approval can be done by cabinet.
They recommended that the bill be amended and passed as the President proposed saying that the relevant minister should just lay the PPP agreements before parliament within one month after they have been signed.
MPs defy Museveni again
But the Committee had not factored in strong opposition from MPs led by the Shadow Minister for Finance, Geofrey Ekanya. This group wrote a minority report which pointed out parliament must uphold Article 26 of the Act arguing that undertaking PPPs without parliamentary approval is backdoor borrowing.
“Honourable members, we have fresh lessons from the Bujagali power project, a PPP project, whose cost increased gradually and the cost of electricity hasn’t reduced,” the report reads in part, “in the best practices of good governance, parliament is mandated to safeguard the interests of present and future generations hence parliament must review terms on which backdoor borrowing is based…”
According to the President, Parliament is already empowered, under Clause 13 (2), to appropriate money for the PPPs since they approve the budgets of ministries. However, the MPs want to approve each PPP instead. The MPs said that seeking parliament’s approval on the PPPs does not tantamount to usurping the powers of the Attorney General since Parliament always approves all borrowing before the AG organises the final signing agreement.
“What is to be hidden in those agreements that we should not know about yet therein are financial commitments to be repaid by present and future generations?” the MPs asked. The MPs said that it would have grave effects if parliament rescinded on the position that empowers it to appropriate which appropriation includes PPP projects adding that it violates the constitution which authorises Parliament to approve any government borrowing.
Parliament adopted the minority report and resolved to maintain Clause 26. The Act was sent back to the President. But in a sign of growing tension, Museveni again refused to sign it and sent it back to parliament.
In a Jan. 7 letter to Speaker Kadaga, Museveni said he was returning the Act because parliament had not made the requisite amendments as he advised.
“I am again returning the Act of parliament because all expert opinion and my own judgment is of the view that debating Public Private Partnerships in parliament deter foreign investment in the country,” the President wrote in part.
Museveni continues to say that the MPs who are pushing for the idea are guided by erroneous thinking that the foreign investors are “dying to come to Uganda.”
“They fail to realise that Uganda is not a china.” He went on, “It is not a compelling magnet that would pull in investors as if they had no alternative. Many of the partners even insist on confidentiality clauses.”
He said that the partnerships are not the same as loans but investments to which a quieter body like Cabinet will give better results.
He accused Parliament of mishandling a number of projects and again former MP and Minister Beatrice Kiraso of misinforming Parliament regarding how Museveni had sold Diary Corporations for US$1 which made the investor to cancel the offer.
“It was in the papers.” Museveni wrote, “The Thai man’s Board cancelled the offer. It took us many years before we got another investor. A number of other opportunities have been lost. Unemployment of the youth is a big threat to the future of the country.”
Now Kadaga has referred the Act to the Finance Committee for the third time.
Amos Lugolobi, a member of the Finance Committee and chairman of the Budget Committee says the President has a point.
He says that approving every PPP might amount to micro-managing and that it is a duty that should be left to the executive.
He, like Museveni, thinks it is time wasting and that the long parliamentary processes might discourage investors. He said that parliament has too much business to handle and that it is unrealistic to assume that it will have time to review and approve every PPP.
“We shouldn’t politicise business,” he said, “A businessman will not have time to wait for parliament to debate and argue about all the pros and cons of every PPP agreement.”
He added that parliament is also associated with unnecessary delays which he says are caused by the different opinions that different people have and emotions, which he says should not be involved in businesses.
“As long as we have strong accountability procedures, we should let the cabinet handle these projects.”
Museveni’s next move
But some economists, like Lawrence Bategeka of the Makerere University Business School, don’t think Uganda has the institutions to facilitate PPPs.
He says that PPPs can only work in places with a strong institutional framework short of which they will be misused for selfish interests.
“Where there are no institutions, PPPs can be abused,” said Bategeka, “people in power tend to use them to leverage public money.”
Bategeka says that PPPs are good because they have the capacity to bridge the infrastructure gap adding that they have worked well in countries like Malaysia.
But he says that the previous PPPs that Uganda has had leave a lot to be desired. He says that in Uganda politicians have hidden behind vague companies to develop their own private businesses at the expense of the citizens. “The agreements must be clear and transparent,” he said, “The companies must be properly and legitimately registered.”
He thinks that there will be fewer cases of flopped PPPs if parliament scrutinises the projects, the companies to undertake them, and the agreements before they commence.
What those opposing Museveni need to factor into their strategy is that the Constitution, in Article 91 allows the President to return any Act to parliament for reconsideration for any reasons that he notifies the speaker about in writing.
However, Subsection five of the same Article 91 says where the President returns the same Bill twice and the Bill is passed for the third time, with the support of at least two-thirds of all members of Parliament, the bill shall become law without the assent of the President.
There is hardly any Bill which has passed into law without Museveni directly getting involved.
When he returned the Private Public Partnership Act for the first time in July, he returned it with two other Bills; the Excise Duty and the Income Tax Bill.
Other times, he calls the MPs from his party and instructs them to make certain amendments in the Bills coming before the House or to reject the amendments he does not want included in the laws.
Museveni sometimes uses strong arm tactics to get his way. During the debate on one of the oil laws, he, at a party caucus asked the MPs who were against the re-committal of Clause 8 to show it by standing up.
Clause 8 was about the powers of the minister and the MPs had earlier unanimously voted to reduce them. But Museveni had asked Energy Minister to re-commit it for reconsideration.
Although most of the NRM MPs remained opposed to it, when Museveni asked them to line up in the parliamentary conference Hall during the party caucus, less than 10 members rose up.
When the matter came back to parliament it passed with ease with only four MPs from the NRM, who are the majority opposing it.
The other cases are the recently passed Registration of Persons Bill, the Public Order Management (Act) and the Anti-homosexuality Act which was annulled by court. How the PPP Bill will end, therefore, appears certain. But surprises happen.