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Querries about privatised firms

By Cissy Kagaba

Parliament’s proposed probe into the divestiture process is welcome however long over due

Recent media reports have indicated that Parliament is set to commission a probe into the divestiture of over 130 public corporations, formerly under the Uganda Development Corporation.

The hitherto public entities, including Uganda Commercial Bank, National Housing and Construction Company Limited, BAT Uganda, Uganda Air Cargo, Entebbe Handling Services, Nile Hotel, and Uganda Railway Corporation, “were fraudulently divested to a few nationals and foreigners through a non-transparent privatisation process.”

Previous reports on the same unearthed systematic corruption and influence peddling in the entire privatisation process. In essence, the divestiture process was used to enrich a few regime protégés at the expense of Ugandans. The privatisation of public firms was riddled with controversy as witnessed in the cases of Uganda Commercial Bank and Uganda Diary Corporation.

Much as divestiture was a key reform requirement from the Bretton Woods Institutions, the process was handled in a shambolic manner, with many questions still abounding.

How much were these companies sold for? How and where was the money used? Who bought these companies? Why was priority often given to foreigners? Weren’t there Ugandans financially competent and able to buy these companies? Why did it take Parliament long to commission this probe?

Although the Divestiture and Reform Implementation Committee, established under the Public Enterprises Reform and Divestiture Act Cap 98, The Privatisation Unit, and Ministry of Finance were responsible for implementing the government’s policy on reform and divestiture of public enterprises, they immensely failed in this regard.

First, the entire divestiture process was devoid of transparency. Information relating to the actual transactions and sale has never been made public and when it has come to the public arena the economy with truth stands out.

This is in fact in contravention of Public Enterprises Reform and Divestiture Act Cap 98, second schedule on divestiture guidelines, which calls for openness and transparency, making all aspects of the transactions public, issuance of a prospectus or offering memorandum and providing a full body of financial, management and other information.

The entire privatisation process has been shrouded in secrecy, in contravention to divestiture provisions in the Public Enterprises Reform and Divestiture Act Cap 98, which call for fair and equitable bidding procedures.

In essence, divestiture guidelines call for: disclosing the names of the purchasers, the price paid and the conditions of sale; and disclosing the valuation of the assets and the details of all offers received. This has never been the case.

Most of these companies were doled out to foreign individuals and companies, without giving due consideration to Ugandan investors, with exception of a few regimes protégés.   In essence, section 10 of the Public Enterprises Reform and Divestiture Act (1993) encourages employee investment and ownership of divested enterprises.

It states: “A public enterprise may provide for participation in the ownership of the enterprise through investment by its employees in shares and may, to this end, permit— (a) individual, union, collective and institutional ownership of shares; (b) payment of share calls and other dues through discounts, installments, bonus schemes and other arrangements intended to benefit employees”. This kind of approach was seldom, if at all used.

There has been no formal, open and transparent process of informing Ugandan on how funds collected from the divestiture process were used. Anecdotal reports abound of some companies being sold for as low as US$1.

Ugandans hence need a clear accountability on how the billions collected in this process were used. Much as the Public Enterprises Reform and Divestiture Act gives the Minister of Finance powers to use proceeds from the divestiture account to meet costs and expenses associated with termination of contracts of employment among other things, we know that some of the retrenched staff have never received their retrenchment packages.

The Parliamentary probe is therefore welcome. However, Ugandans need assurance that the probe will satisfactorily do its work, given a history of interference and probes that never come to fruition.

Arguments advanced by some skeptics that there is little time remaining for the current Parliament, are null and void. Even with the remaining time, if MPs are committed, like they usually are when passing controversial bills, we believe they can successfully accomplish the probe. The committee can as well start on the work, which could be completed in the next Parliament.

I strongly believe that recommendations from this probe should be made public and fully implemented. With the benefit of hindsight, it should not be a policy of subsequent governments to do away with what was put in place by previous governments.


Cissy Kagaba is the Executive Director of Anti Corruption Coalition Uganda

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