How government lost control over UTL

By Our Reporter

On June 20, 2019, the State Minister for Investments, Evelyn Anite, stunning conceded that Government had lost control over Uganda Telecom Limited. This shocking confession came as Anite addressed Parliament during a plenary sitting. Anite added that utl matters were so big for government that the Auditor General, John Muwanga, had been barred from auditing the telecom company despite government having 31% shares in this business. 

“Whereas Ugandans are very sure they have the Government that is trying to watch over their shares, I am afraid to announce to the nation that the watchman has stopped the owners of the property access to the house, we can’t go to UTL to find out what is happening, we don’t know how much money the company is making. The Minister of Finance is concerned, I am concerned and the country is right to be concerned,” Anite said.

The Minister added: “We now don’t know the status of the company and how it is operating. It is just very clear that as founding shareholders of the company, technically we have lost control over the company.”

Her remarks were in response to a matter raised by Yorke Odria (Aringa South) who laid a series of documents showing that UTL hadn’t been audited as required by the National Audit Act 2008.

Section 18 of the National Audit Act stipulates: “The Auditor General may inquire into, examine, investigate and report, as he or she considers necessary, on the expenditure of public monies disbursed, advanced or guaranteed to a private organisation or body in which Government has no controlling interest.”

Anite then lifted lid on bickering between the Ministry of Finance and the Registrar General Bemanya Twebaze with the Attorney General, William Byaruhanga, having been called on to give a legal opinion on how the current administrators can be held accountable for work at UTL.

She said when the Minister of Finance, Matia Kasaija asked the Auditor General to audit UTL, he admitted being incapacitated to do so.

“The Auditor General wrote back saying this is a court-led process, he can’t audit this company. I said since UTL is under the Ministry of Finance, we should get an internal auditor to audit this company, the administrator wrote back to me saying that they will not allow the internal auditor of ministry of finance to go and audit this company because he can only account to the court,” said Anite.

With Ugandans getting accustomed to the dramatic scenes in several Government entities, Bemanya played true to the script when he addressed journalists, reminding Anite that it was Government that voluntarily surrendered their powers and he is in charge of UTL.

“The shareholders voluntarily ceded their powers to run the company so the administrator can sell assets of the company in piece meal and these powers are derived from the insolvency laws of Uganda,” Bemanya reportedly said.

He even bragged that UTL’s performance had improved under his watch, with the telecom now collecting monthly revenue of Shs2.6bn compared to Shs2.2bn in 2017. He also said the telecom’s debt had declined from Shs940bn to Shs530bn since April 2017 and monthly operational expenditure declined from Shs5.7bn to Shs1bn in May 2019.

However, Anite rubbished the ‘glossy’ figures and threatened to tear down the walls of UTL and get hands on the financial reports of the company.

It should be recalled that Government advertised for potential investors to take over UTL and over 17 expressed interest. The prospective candidates were subjected to financial intelligence, with a firm from Mauritius emerging with heaviest financial muscles but it was sidelined. Government then settled for Nigeria’s Taleology Limited who presented a bid value of USD71m (about Shs 259,845,742,953bn) compared to the Mauritius firm’s USD45m.

And despite warning from the Financial Intelligence Authority (FIA), cabinet settled for Taleology but it wasn’t long before Uganda realized the Nigerians had offered a raw deal after the latter failed to raise even one dollar of the USD71m they had promised.

Anite admitted that Government has gone back to the market hunting for an investor, although the announcement raised questions from MPs like James Kakooza (Kabula County) who questioned the kind of information the investor will rely on to make an investment decision with absence of UTL’s financial reports.

 “The Minister has said Government holds 31% shares; in every year according to the laws of Uganda you must declare the assets and liabilities of that company. How do they know that they hold 31% shares, don’t they depend on audited book of accounts?” Kakooza wondered.

He added: “If you say you are calling an investor, what are you going to say to that investor without knowing your portfolio? Unless otherwise, there is hidden information, there is nobody who is going to invest in the company where they don’t know the shareholding and its portfolio.”

GENESIS OF UTL’S WOES

Ugandans first got a glimpse into UTL’s woes in November 2016 when Nathan Nandala Mafabi, (Budadiri West) tabled a dossier unearthing the mismanagement at UTL characterised by asset stripping, insider trading and a skyrocketing debt eating into the company’s coffers.

Nandala Mafabi alleged that as UTL was choking on debts of Shs669, 689,047,609, top bosses including then Managing Director Mark Shoebridge, Finance Director James Wilde, Board Members David Nambaale, Stephen Kaboyo and Moses Mwase were making millions in perks while the company was in free fall.

Among the entities that were demanding UTL included; Uganda Communications Commission (UCC) demanding Shs22bn in license fees, MTN and Airtel Shs22bn in interconnectivity fees, URA Shs92bn in tax arrears, Huawei Technologies Shs24.244bn for the equipment supplied and Shs16bn in unremitted employee savings to NSSF since 2013.

The expose’ prompted Speaker Rebecca Kadaga to constitute a seven-member select committee to probe the management and operations of UTL, investigate UTL’s state of health, determine its economic value and also advise on whether government should continue holding shares in the company.

The Select Committee headed by Okin Ojara also comprised of Michael Tusiime (Mbarara Municipality.), William Nzoghu (Busongora North), Thomas Tayebwa (Ruhinda North), Paul Akamba (Busiki), Lillian Nakate (Luwero Woman) and Paula Turyahikayo.

However, while appearing before the committee, David Bahati, the State Minister for Planning, noted that although UTL has its share of problems, the company enjoys a niche in land lines that can be capitalised on for it to bounce back on the market.

“UTL is facing some serious financial and Management challenge. This Company is on financial oxygen, but it isn’t dead and we still think it can be rescued based on the new business plan and obligations we are to put on the majority shareholders,” Bahati told the committee.

UTL currently supplies 350 government Ministries, Departments and Agencies (MDAs) with internet and telephone services from 118 before it was placed under administration.

Bahati said that Government was coming up with a new business plan with Libyans having promised to invest in the company, although this plan fell apart after Libya recalled all the top five directors.

Bahati said that Government had tried to intervene in UTL. “We still believe that the Company can be rescued despite the dire situation. We are thinking of turning the debt into equity so as to increase our shareholding capacity,” he said.

Upon receiving UTL, Libya promised to invest US$18m, but the investment never occurred, with Libya blaming the situation on the United Nations sanctions that were slapped onto it following the 2011 Arab spring that led to the ouster of Libyan President, Muammar Gadafi.

However, Libya’s argument was rejected by MPs who wondered why Libya didn’t follow through with the investment after sanctions were lifted. They also warned Bahati against making baseless statements, pointing out that UTL wasn’t among the companies UN had sanctioned.

However, some MPs asked Government to bury UTL since it is more or less a “dead horse”.

This was after Godfrey Mutabazi, the Executive Director UCC called for liquidation of UTL and allow Government to take over its full ownership.

Mutabazi also described as a ‘hoax’ the proposal by the Libyan Government to inject US$72m to rescue UTL, arguing that no amount of money will be in position to get UTL out of the dungeon of debts that had abused all the licensing provisions.

 “UTL has violated every provision of the law. Its license should have been revoked long ago. Something should be done because the weakness of UTL affects the whole industry and the country. As a Regulator, I think this Company shouldn’t be running. If there is any other view, let someone come and convince us,” Mutabazi said.

The regulator scoffed at the promise made by Libya Post, Telecommunication & IT Holding Company to recapitalise UTL with USD71.9m saying Libyans must first explain why they didn’t inject the money five years ago when they took over management of the company.

According to UCC, UTL’s woes started in 2010 and for long, the telecom had been battling legal breaches in a dynamic industry, failing to keep up with the high pace of innovation that has left it lagging behind in market competition.

“You can’t allow a weak company to compete with no innovation and while defaulting still operating on 2G network and you think you can survive in this industry,” Mutabazi said.

He told Parliament that attempts to revoke UTL’s license were hampered by cabinet memos that ordered UCC to reconsider the revocation and let the two Governments to settle the matter diplomatically — the latest attempt to withdraw UTL’s spectrum occurred in September 2016.

This angered MPs who faulted UCC for giving special treatment to UTL at the expense of other players in the industry. MPs wondered if UCC would have the moral authority to reprimand other players in the industry, if they get caught up in the same scenario yet special treatment has been given to UTL.

Mbarara Municipality’s Michael Tusiime blamed UCC for the mess at UTL saying the regulator hadn’t assisted Ugandans in saving UTL from sinking.

“This matter came up five years ago with consistent noncompliance and you abdicated your mandate to clamp down on UTL. It is extremely painful. Would you have given MTN the same treatment? MTN would have closed down,” Tusiime charged.

But Mutabazi denied bending rules and failing the industry by failing to revoke UTL’s license despite the numerous breaches. He argued that he was simply protecting the interest of Government.

However, Tusiime rejected the explanation, saying the regulator is incompetent.

Mutabazi told MPs that the only solution to UTL’s woes is to liquidate the company, and expressed reservations about Libya bringing the company back to its foot.

“I don’t believe these people (Libyans) are serious. I don’t believe they have got that money. Even if they brought money, assuming they hit a jackpot who is going to change UTL-the team that has been leading the organisation to come and revamp! The team that has been running the company should step aside. I don’t believe that the current team can revamp UTL. It can’t work. There is no point.”

Meanwhile, The Second Opinion has learnt that Minister Anite was reportedly directed to apologize to cabinet over the mess at UTL.