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The real problem with Vinci

Pinetti (left) after signing deal with Finance Minister and ministry officials. PHOTO MOF MEDIA

The power, influence, exorbitant dubious deals and the inevitably coming fall of Enrica Pinetti

THE LAST WORD | ANDREW M. MWENDA |  There is a fundamental problem with Enrica Pinetti, the “foreign investor” behind the controversial Vinci Coffee Company. She is also the promoter of Lubowa Hospital. She has been given contracts to build some roads without any competitive bidding. Pinetti seems to enjoy the confidence of President Yoweri Museveni. But rather than use such an asset reasonably, Pinetti negotiates deals that are harmful to the Ugandan taxpayer. But worse still and as a consequence, she has a habit of arrogantly dealing with public officials and agencies that provide oversight on government contracts. She hurls insults and abuses at them, treating them as a house helps. Consequently, she (for now) seems above the law.

Former South African president, Jacob Zuma, had a problem with the Gupta brothers. Museveni has a problem with Pinetti. The Gupta brothers were accused of state capture. What Pinetti has achieved in Uganda is presidential capture. This is why Museveni has even been willing to break the rules, or to disregard both value and price, to give her business. I am not a fan of bureaucratic red-tape. So, violating arcane procedures to secure what is good for the country is ok with me – in certain circumstances. The issue is that Pinetti lacks any credible business record of success to be the beneficiary of multimillion dollar taxpayer funds and other benefits arbitrarily and easily extended to her companies.

Contrary to her critics, I actually do not have a big problem with the terms of the agreement between Vinci and government. As a student of industrial policy, I am aware that to set the industrialization ball rolling, governments need to extend incentives to investors that distort the market and harm some players. These incentives would best be provided, not to an individual firm, but to an entire sector that government considers strategic. And they would include access to cheap/free prime land, tax exemptions of different types, subsidies on electricity, transport etc. As companies grow in scale, they reduce unit costs and therefore become competitive in global or regional markets. Once mature, government can remove the subsidies.

The problem is that Vinci and Pinetti have no prior experience in coffee to justify her getting those incentives. And the incentives are given to a company not the sector ie the coffee industry as a whole. In fact, she represents the biggest problem with Africa – our obsession with foreign investors even when they are of questionable competences. Pinetti has never roasted coffee and sold it on the international market. On what basis did Uganda give her these incentives then?

Andrew Rugasira, a Ugandan businessman of the Good Africa Coffee fame, invested everything he had in this business. He got supermarket shelf space in the leading supermarket chains in Europe and North America and began selling our coffee there. He got into inevitable cashflow problems and sought government support. The greatest government of Uganda could do to support him was $800,000 from UDB.

Pinetti, on the other hand, gets sweetheart deals from government that are exorbitantly expensive to the state of Uganda. Some have failed to take off as promised by her. And when questioned, she yells and insults public officials, refuses to appear before parliamentary committees. Once she blocked legislators, led by the minister of health responsible for oversight over Lubowa from visiting the construction site. She then upped the ante and blocked the prime minister of this country – from visiting her construction site. This, more than the contents of the coffee agreement she recently signed with government, is the crux of the matter.

Yet for all her arrogance, Pinetti has many questions to answer regarding her deals. Government of Uganda contracted Finasi, her company, to source funds, build, equip and for the first eight years manage a first class 264-bed hospital and 60-bed three-star hotel at Lubowa at $250m. Total built up area is supposed to be 72,000 square meters. All the money for this project is an eight years loan at an interest rate of 6.45%, giving an interest cost of $129m, making a total of $379m.

Initially, Finasi entered a contract with Roko Construction Company to build the hospital and the three-star hotel at a total cost of $70m. The two sides fell out and Finasi paid Roko $2m to exit. It then contracted Chinese contractor, Power China International, to do the same job at a cost of $57m, although in her quotation to government the total cost of civil works in building the hospital, the motel and hostels for medical workers and the training school comes to $69m. If total cost of all the civil works in her contract with the Chinese is $57m, where does the balance of $193m go?

Feasibility studies for the project cost $1.7m, the design of the hospital and motel cost $11.26m and the appraisal of the project cost $14.3m. Medical equipment and furniture cost $75m, its delivery and shipment $9m, its installation $14m, testing and commissioning $1.4m and training for equipment use $1.4m. And there is $18m for medicine and consumables for the first one year. I have the entire list of all the equipment and furniture she promises to buy and install in the hospital and motel and their costs – and that is where the problem with Lubowa lies.

Mulago hospital with 900 beds, has just been refitted with state of the art medical equipment and facilities plus an integrated hospital management system recently at a cost $24.3m. Given Mulago’s 640 extra beds compared to Lubowa, we need to question the costs of Lubowa and whether they reflect value for money. The difference between equipping Mulago and Lubowa is very high: $24.3m against more than $100m. Even if we added 10% as profit for the project sponsor, surely making over $140m profit of a project of $250m is just too much for a poor country.

The same Pinetti apparently is now in the road construction business. She convinced the president to give her seven roads without any competitive bidding, which is okay. This is in spite of the fact that she has no known experience in road construction. One of the roads had already been designed by UNRA with estimates on its likely cost. When she put in her bill, the difference between the estimated cost by UNRA and what she asked for was Shs 117 billion. Again, Pinetti got her way.

Pinetti’s seemingly above-the-law behavior is going to bring her trouble regardless of whichever support she feels she has from Museveni. There is a time when a parliamentary committee and the minister of health went to Lubowa to visit the site of this hospital and she locked them outside. The new Prime Minister decided to test Pinetti’s power and went to Lubowa to visit the site. She was literally chased away.

Remember this project is 100% financed by government of Uganda under ministry of health. Parliament, the minister of finance and our Prime Minister have a right and a duty to inspect the works. Pinetti and her people claim they had not been informed in advance to provide safety to the visiting dignitaries. This is a technical excuse not an explanation of humiliating our public officials. This behavior can only be conducted by a person with a very low regard of Uganda’s public institutions and their leaders. It is a behavior this country will not tolerate and her abuse of public funds using exorbitant and inflated costs will not stand.

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amwenda@independent.co.ug

8 comments

  1. Godfrey kambere

    The real problem is how many Pinettis have escaped the eyes of our corrupt journalists?
    The next thing we shall hear is Vinci suing the government of Uganda and winning.

  2. This is an interesting piece of Article from our dear friend (not) Mwenda. It is interesting because either Mwenda feigns ignorance of what Kaguta Tibahaburwa has been all about or Mwenda is stupid.

    Gentlemen and ladies, if you have been following Mwenda’s arguments on TV and in his newspaper, we all know that he has been a government mouth piece telling us how good M7 ‘s government is ; how Uganda has never had it better ; How he /Mwenda wants M7 to be succeeded by his dear son Muhozi Kainerugaba etc…. all the drivel one can imagine. He is also a strong supporter of corruption and unaccountability in his beloved NRM government [ your words not mine Mwenda]

    Mwenda – why do you act surprised that M7 has rammed into the tax payers throats a contract of one of Uganda’s best products – coffee. A contract that does not make sense to any reasonable Ugandan apart from Kaguta , his family and those at the high table with him. Kaguta Tibahaburwa M7 has been raiding roughshod on Uganda ever since he seized power in 1986. He first started with wonderful words and lullabies that sent Uganda to sleep while trusting him.

    Mwenda – tell Uganda, when Kaguta has ever been accountable . Tell Uganda when Kaguta has ever respected any institutions and systems in the country. Have you forgotten about how he has raped Uganda’s constitution to declare himself life president ; have you forgotten how he has attacked the law courts to get his way ; have you forgotten Kasese 2016 / Kampala 2020 / Mukula in 1990s etc… where he has killed with impunity to get his own way to stay in power ; have you forgotten how he rewards all those alleged to have stolen government funds and resources including your sister who is now a minister of Primary health [ She sold 8 legged goats to buy UBC land in Bugolobi !!!!]

    This lady Pinetti is not the first and neither last to get government funds and resources allocated to her without the legal and rightful procedures being followed. Kaguta runs Uganda like an extension of his Rwakitura Estate. You know Hajji Basajjabalaba who is known to have received not less than ug 140 billion to prop up his private businesses on order of the fountain of honour and life president Tibahaburwa Kaguta.

    Mr Mwenda, there is a lot I can write to you about the rottenness of the government you have been cheer- leading since you were on that Damascus Road. Ask yourself this – WHAT DO YOU HOPE UGANDA TO ACHIEVE WITH YOUR DEAR FRIEND MUHOZI IN POWER. You have been the chief cheer leader for the Muhozi Project. Muhozi who adores his father and has watched how the latter has squeezed Ugandans under his thumb. And Muhozi thinks he is the best leader in the world [ from his dumb tweets. He is a bit dumb -isn’t he our future Ugandan Leader ??]. After Muhozi has been installed to power – will you be surprised when we have Kasese 2.0 etc… or Uganda continues to be governed by patronage [ A monarchy by the family for the few Mwendas and the rest get Bonabagagawale or Entandikwa or Emyoga 2.0 ]

  3. Pinetti knows everything is wrong, but she doesn’t care. After all, she is a representative of museveni and his brother Saleh and to some extent Hannington Karuhanga-Janet museveni’s cousin-of Uganda Coffee Development Authority. They tell her not to subject herself to questioning and provide all the protection. Well, one of museveni long term mission since the late 1980’s has always been to control coffee. He has been patient but consistent (see the now Coffee Law in Uganda and how Hannington was appointed in 1989). Coffee has for along time been among the top Uganda’s foreign exchange earner. But most importantly, in Uganda, coffee is very political. It is one of the main traditional sources of economic livelihood of many non cattle keepers (majority in Uganda). Museveni belongs to a clan of traditional cattle keepers. So capturing coffee, implies effectively controlling the economic power of many non m7 tribes, and with economic control comes political control. Those who read Uganda politics so well remember that the first cause of fall out of m7 and Besigye in the early 1990s because of coffee. By then Besigye was naive and didn’t understand how it mattered politically to museveni- afterall farming can be crossing cutting between tribes or even mixed- he was taught a lesson. But what is surprising is the way m7 approaches deals these days!He knows well how to get his way ‘following’ the established procedures and he has always been quite good at that, so what has happened? Has he been consumed by so much power that he doesn’t care at all anymore? Is he doing things so fast to capture economic pillars for the benefit of positioning his anointed son, thinking if they own or control what matters most, Uganda might find it difficult to do without them? Has he sensed that time (age) is not on his side or what? He is in Gold,chasing away people who had genuine licenses, he in driving license and passport processing, coffee, oil, land grabbing. At this level of reckless and rampant primitive accumulation, Uganda needs prayers and liberation

  4. When did Mr Andrew Mwenda start feeling the plight of the Ugandan…I know Mwenda to be self-centred and his argument will always be against common sense… what is not adding up in the Vinci penentti coffee deal…. the answer lies with Andrew Rugasira and Robert Kabushenga. Once these two are called to the round table, Mwenda will suddenly be speaking another language

  5. 1.Its just that we dont read,The AG clarified that there are provisons for tax exemptions.So its not Enrica ‘s fault that she wants to benefit from the tax exemptions that are legal.
    2.I dont know where Ugandans get the nerve to behave they way they do,Let me tell you African is not yet on the same page with the first World you may think that since you are on social media then Elon Musk is your friend .We need the likes of Pinneti to hold our hands and show us around the big boys.
    3.Coffee is consumed by civilzed people who care alot about standards and quality of what they consume.
    4.Any product that generates lots of money for Nation will always have a black market.
    5.So its better to be cheated by middlemen overseas than a middleman who is homemade?
    6.Whats is the difference between being cheated by Enrica and Nestle?
    7.So the Bagishu and Baganda have friends and coffee networks in Europe .What a joke!
    8.Why dont we give this lady a chance?
    9.Someone will always make more money out of your sweat thats how business works.
    10.If Rugasira was that good why did his business collapse?
    11.The Intenationa lMarket is no joke
    12.Rajab is okay to keep silent and eat your mangoes.

  6. Godfrey kambere

    Winnie,if that is your real name .it is the pattern of sugarcoated legitimate government deals that have crippled Uganda’s economy. If you are paying for your own power how do you feel when Mtn charges you for paying tour yaka this is strictly outside what yaka charges for power excluding taxes.How much does Nwsc incurr to clean a cubic metre of fresh water?
    Take time to inquire how much water costs in a desert city like Cairo or a jungle city like Kisangani?
    See how funny our incentives to investors sound ..Do you think a tax holiday or free land is what is priority to any solid investor when our newspapers fill with stories on land conflicts.And you brush off the fall of committed entrepreneurs like Rugasira due to poor politics and unfair local business practices.
    I celebrate a man like Kabushenga Robert because now he can read Harvest money in his newspaper with a sober reality at his feet.
    Here near my home Kasese Cobalt company quetely closed shop and no newspaper ever reported it.
    There are more investors that have ran away and am.sure the reason you see prices of essentials skyrockering is because there is no production taking place in our industrial areas. Ours has remained a supermarket for our prudent neighbours.
    Thank you

  7. @Godfrey:Enrica is going to create more Jobs. and My Name is Winnie
    1.Uganda’s industries rely on imported raw materials hence affecting the price of production and this is not unique to Uganda.
    2.Kabushenga has just joined the coffee business and is overated; He moves with his coffee under his armpits; The way he is in a hurry to make money;the Agricultural business has some blackmail in it dont be surprised if Kabushenga ‘s coffee is blacked mailed that if has some chemicals/toxicities in it.Remember the maize saga between Uganda and Kenya?
    3.Just present a good business plan and see if government wont support you.

  8. Godfrey kambere

    Thanks I have talked to some businessmen from Kenya who despite their assurances that in Uganda our business are having a holiday,I still have a lot of misgivings .I would never touch government money for any reason but would rather think the government ought to rethink this approach .
    Sometime back, UIA was circulating a document obout startups and I think it was compiled from some newspaper series. Knowing the brains in that UIA, I felt very disappointed .One thing we should admit is that there is very low effective demand caused by the bogus taxes and unemployment.
    And finally my opinion o nKabushenga has alwayy been. clouded by the mess he made of Mr Pike’s job.Try reading that newspaper or worse the study materials it spews for the young learners.

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