“Everybody (yeah), everybody (yeah), just get into it (yeah), get stupid (come on)
Get it started, (come on) get it started (yeah), get it started” – The Black Eyed Peas, ‘Let’s Get It Started’ 2003
Well, this week has been revealing in concerning the supposed newly minted airlines in Uganda. Where the state incorporated Uganda National Airlines Limited in January 2018. However, the supposed registration and certification happen this week. The documentation now shows, that the Ministers are owners of the Airline and it’s registered on the 26th March 2019 and certified on the 27th March 2019.
Alas, the state has already spent close to $30m USD on it, as they have procured several of planes for the operations and the first are supposed to arrive on the 31st March 2019. Therefore, the whole ownership and usage of state funds comes into question. As the Report to Parliament confessed that the state and the two ministries only owned 2 shares out of 2 million, until yesterday, when suddenly the Ministers of Works and Transport and Ministry of Finance, Economic Planning and Development suddenly had 1 million shares each, a 50 50 split.
This all seems suspicious and within reason. Because, it has been done in wrong order and ensured to not follow procedures or anything of that fashion. As the State for the second time are infringed to deliver new funds to State Owned Enterprise, even as the ghosts of owners and registration suddenly appears. You can wonder, if they would have done this, if it didn’t get public scrutiny. Because, the scribbling document of ownership only appeared, when the Observer and other media houses questioned it.
This shows that there was something lurking and weird about it all. Where the insiders and the ones operating it, maybe, had shell-companies and significant portfolios, where they could earn the profits of this state owned enterprise. That would not be shocking, even if all the investments, all the funding and procurement have happen directly from the Ministries and with the blessings from above high.
With all of this in the open. It seriously question the operation, the ownership and who really controls the company as whole, because its hard to believe the two ministries does it. As it was incorporated in January 2018, but was registered shareholders yesterday, a year and two months after. Which is suspicious at best, if not revealing of how the state operates in this matters.
We can play along and act a fool, but that doesn’t change the remaining questions, the lack of trust and also the lack of protocol. As the state have toyed around spent fortunes on establishing, procuring and investing in the company, while it has been a ghost and non existing entity, which could be someone’s secret bank-account.
Certainly, this is not over and will leave a giant paper-trail that somehow will be resolved in the State House and by whoever the benefactor whose project this is. Because, that is the rule of the day and how these things are under this Presidency. It is common knowledge, but never really said or revealed, unless, family members of the President owns it or runs it. Peace.
“Hold fast to dreams,
For if dreams die
Life is a broken-winged bird,
That cannot fly.” – Langston Hughes
Today, there was tabled a report on the 26th March 2019, reported titled: “Report on the Budget Committee on the Supplementary Expenditure 2 for FY 2018/19” especially the vote – “Vote 016 MOWT – USHS 280.046 For Financing Costs of Uganda National Airline”. In this report there are vital information coming up. That I will address, but also show, as it proves how the state plans to invest the taxpayers money on the airline, but also what sort of finance it has already.
The government clearly have already invested money into it, but doesn’t have ownership in it. That is what the report says. It shows intent of investing more in it, but not actual ownership of it. However, not claiming it, which is weird, but that is what they do. They are buying planes for it and investing in it, but not owning it. That is what they are initially saying. This is really rare and weird.
Here is the quotes from the report that matters in my sense:
“The Government of Uganda has injected approximately 29.9 USD million into this company but has only 2 shares allocated to it”
“Ministry of Works and Transport has requested for on additional Ushs 280,046,77 6,933 to cater for investment costs of the Uganda National Airline”
“The Ministry of Finance, Planning ond Economic Development indicated that it was to use proceeds from MTN licence amounting to USD 60 million (approximately UGX 222 billion) to portly finance Uganda National Airlines”
“The shore capital of Uganda National Airlines Company Limited is 200 million divided into 2 million shores of UGX 100. Of the 2 million shares only 2 shares worth UGX 200 to Minister of Works and Transport as well as Ministry of Finance, Planning and Economic Development. This makes both ministries to be minority shareholders holding only 0.0001% of the shores. At the moment the owners of the 99.97 shares are unknown. The owners will only be determined when the Directors decide to allocate the shares. It was asserted that the minority shares will be floated to the public. However contention arose as to whether the minority shareholders can float what they do not own. lt was however asserted that this move was undertaken to limit the liability of government. Hence a concern pertaining intension of government to establish o company that it already roles 10 be huge liability from the onset”
As you see, the $30m been invested in the Airline already. The Government and Ministry of Works and Transport, that they need more funds. Also, telling their lack of the shares in the company, while also planning to use licencing funds from MTN to cover the spending on the Company. Which later, in the Report states they will not, but I added to prove how the state spend the revenue it is getting.
The Uganda National Airlines is clearly not well-managed or well prepared, as it is a pile of expenditure, but not allocated what it needed. Since, the state is in need of more after spending millions already. As the first planes are coming in the coming week. Therefore, the National Resistance Movement and the ones behind it is clearly playing games.
They are spending public funds on a possible Uganda National Airline Company Limited, when they arrive. Since the report turned public the GCIC have claimed this in response to the report delivered. Which clearly shows the significant stature of the ownership in question.
They are claiming this:
“ CLARIFICATION: There has been misleading information regarding shareholding of Uganda Airlines Company LTD. The company was incorporated on 30th Jan, 2018. The company has 2 million shares. Minister for Works was allotted 1 million shares & Minister for Finance, 1 million shares. 3/3: In July, 2018, the management of the company allotted the entire shares of the company as follows:
1. Minister of Works & Transport (represented by Hon. Monica Azuba Ntenge)- 1 million shares.
2. Minister of Finance (represented by Hon. Matia Kasaija) – 1 million shares” (GCIC, 27.03.2019).
This is countering the facts in the report, that even before the ink is dry. Before the time and test of the knowledge given by the Ministry and the Government itself. So why does the GCIC have other indications and facts, than the report. You can wonder who gave them and where it is from? Why wasn’t this given as facts to Parliament and signed of by the Members of Parliament then?
Well, this will be played out in real-time. This is not a fan-fiction, West-Wing drama, no this is real live events of the operations and investing in the resurfaced Airline Company. This shouldn’t be that tricky or played out like this, but it is because the state and the ones involved in it. Because, there must be some loose ends, which is not yet caught. It will eventually. Peace.
“The Policy Coordination Instrument (PCI) is a non-financing tool open to all members of the International Monetary Fund (IMF). It enables them to signal commitment to reforms and catalyze financing from other sources. The establishment of the PCI is part of the Fund’s broader effort to strengthen the global financial safety net—a network of insurance and loan instruments that countries can draw on if confronted with a crisis.” (International Monetary Funds – ‘IMF Policy Coordination Instrument (PCI) 26.07.2017).
This here is really spelling out the missing dots in the budget and monetary policy wise, as the IMF has concluded a visit, but told that certain aspects are missing. Even explaining that the Republic have to be careful about borrowing money. As the Republic tend to do these days for all sorts of projects and building infrastructure all around the country. However, the IMF isn’t praising Uganda, the IMF is telling what it needs, if they want to be part of the PCI. That is important, because being part of that, then the state will have systems and ways to gain outside sources of funding and also safety mechanisms in the needs of rainy days. Therefore, following this program would be healthy for the economy, but will the National Resistance Movement and President Museveni comply to this? Would they?
“The authorities have made progress in setting economic policy objectives for FY18/19 and the medium-term. Fiscal policy seeks to keep public debt at a sustainable level which requires raising tax collection and prioritizing spending needs, while protecting key infrastructure projects and social expenditures. Monetary policy targets core inflation of 5 percent. Bank of Uganda aims to maintain international reserves at 4 to 4½ months of imports. Structural reforms would focus on revenue mobilization, public financial and investment management, reducing domestic arrears, enhancing financial sector stability and development, and putting in place the remaining elements of the framework for managing future oil revenues. The mission reached agreement on many key elements of a possible 3-year program under the Policy Coordination Instrument, but further progress in some areas is still needed. Once the FY18/19 budget has been approved as agreed, the mission could resume discussions” (International Monetary Funds – ‘International Monetary Fund (IMF) Staff Concludes Visit to Uganda’ 31.05.2018).
It isn’t the first time the IMF and World Bank says there policies and monetary programs needs changes, needs to be amended and fixed, so it is safer. This is something that always comes back. The NRM are clearly not listening or interested in listening. They are pre-occupied with the handshakes of the State House and the insider trading that they like to do. Not have accountability and transparency, because then all the tools of the shed is in the open. President Museveni doesn’t want his ghosts, his fake projects and his forged paperwork to be in the open. That would hurt his pride and also humiliate him. That is the reality of it all.
Therefore, the state has a long walk ahead still, even with the new revenue sources, as they are not considering the implications yet on the public. Just more revenue for revenues sake, but not how hard the new taxes really will have. They will hurt the public and the poorest the most. Nevertheless, they are not a concern for the state; they are more bargain chips for needed donor funds anyway.
President Museveni will not be interested in opening the books and showing the reality. We know that, therefore the PCI will not introduced shortly, neither will the accountability or transparency change either. It is not in his interest to revolutionize that. Then he would humiliate himself, which he only does to Opposition leaders, not to himself. Peace.
Bank of Uganda’s late Annual Supervision Report of 2016 is finally out. Instead of mid-year, it was released in September. It must be reasons for that, since this is in the year two banks lost their balance and one was traded to another. The Crane Bank sale-off and losses have started most people, as also the expensive pens of the Bank. Therefore, with the procurement of pens must be the reason why the months from July to September to see the Annual report. The 2016 spreadsheet isn’t a fun read, it is dire and says something about the financial institutions, as well as the economy in general.
This report are telling stories of bad performing loans and the quality of them. When looking into that, you know that this is banking practice that supposed to be profitable. To loan money away that people save in the bank and gain interests. So, when the numbers are this crunching. When the state of affairs are so dire. When Government Securities and shortfall is what they are. Then you know there are failing prospects. As this the year after campaigns and elections. It is usually painful after the heavy spending and brown envelopes to anyone who support Mzee. That is why the costs and the non-performing loans are growing. But where that money went, is only known by the elite and the NRM. Take a look!
“The analysis of default by the banks’ three largest borrowers and an increase in NPLs by 200 percent revealed large potential losses. It showed that if each bank’s three largest borrowers were to default, with a loan loss of 100 percent, 13 banks would become under-capitalised with an aggregate capital shortfall of USh.513.86 billion. If NPLs were to increase by 200 percent, assuming the increase is in the loss category which requires full provisioning, 9 banks would become under-capitalised with an aggregate capital shortfall of Ush.247.39 billion. A decrease in interest income from government securities would not require any additional capital from the banks” (BoU, P: 4-5, 2017).
“The banking sector’s overall asset quality continued to decline in 2016. The ratio of non–performing loans to total gross loans increased from 5.3 percent in December 2015 to 10.5 percent in December 2016. The increase in the NPL ratio was mainly on account of bad loans which more than doubled from USh.573.4 billion in December 2015 to USh.1,203.2 billion in December 2016” (BoU, P: 15, 2017)
Earnings and Profitability:
“There was a drop in profitability of the banking sector in 2016. Annual after tax profits reduced by 44.2 percent or USh.239.1 billion from Ush.541.2 billion in 2015 to USh.302.1 billion in 2016. Average return on total equity (ROE) dropped from 16.0 percent to 8.3 percent while return on assets (ROA) halved to 1.3 percent during that period. Total expenses grew by 9.3 percent, mostly in the form of interest expense on deposits. Increased provisioning for bad debts also reduced the banking sector’s earnings for the year under review. Provisions rose by more than 100 percent, by USh.419.4 billion to reach USh.637.2 billion in 2016” (BoU, P: 16, 2017).
So this growth isn’t making the economy more healthy. It is more bad loans and losses of profits. The bankers are not benefit ting and the costumers will pay for the shortfall in the long run. The assets and the basic needs will not be covered. The dangerous levels of NPL can even kill of more banks. As the reports not spelling out the names, but saying 9 banks could be under-capitalised, that means the government has to come in with security to put the bank on its feet or trade it off. Like it did with the Crane Bank recently.
Therefore, there are warning signs of continuing to borrow without security for repayment on the debt. That gives way for non-performing loans. This is the whole idea and reason for the problems the 9 banks have. As the costumers and corporations borrowing funds, without capacity to repay. That means the planned interest, the planned profits and repaid funds disappear. So, the more borrowed funds to try to catch the losses, is creating a evil spiral of losses. Instead of generating the profits and interests as anticipated.
Clearly, the banking sector needs a revamp and the system needs a push to make sure they are run smooth. As the consequence of continuing like nothing, is that further banks will default and costumers will lose savings and the state has to cough-up funds to save the scraps of a bank. Peace.
Bank of Uganda – ‘ANNUAL SUPERVISION REPORT’ (December 2016) Volume 7 (06.09.2017)