Basajjabalaba: The merchant of trouble

By Eriasa Mukiibi Sserunjogi

How Museveni pushed ministers, Bank of Uganda to give him billions over market deals

City businessman Hassan Basajjabalaba’s hold on President Yoweri must be quite strong. In two years, the president has written numerous letters, chaired meetings, and ordered various officials to pay him billions of shillings in compensation for income he allegedly lost when the government cancelled his tenders for Kampala city markets.

The President wrote a letter on June 16, 2009, he wrote another on November 24, 2009 and another on Feb. 24, 2010 ordering the Basajjabalaba be paid.

It has now emerged that on June 16, acting on instructions from the Minister of Finance, Maria Kiwanuka, the Governor of Bank of Uganda, Dr Emmanuel Tumusiime Mutebile wrote to four banks guaranteeing credit to Basajjabalaba of US$65.35 (Approx. Shs 186 billion at a rate of Shs 2800 for a dollar). In financial terms, a central bank guarantee is equivalent to cash. This means that in effect, the government has compensated Basajjabalaba that amount.

But KPMG, the international audit firm hired by the auditor general for the government to assess the deal says the payments to Basajjabalaba should not have been made at all and are not legally enforceable.

Surprisingly, days after reports surfaced that the central bank had given Basajja the hefty US$65.35 guarantee,  the government controlled newspaper, The New Vision, ran a story that Museveni had directed Finance Minister Maria Kiwanuka to investigate the payment.

As a result, the Communications Director of the Central Bank, Elliot Mwebya, is to try and recover the monies already passed on to Basajja by several commercial banks under the US$65.35 guarantee.

What is going on? Did Basajja deserve compensation? Can Bank of Uganda recover the money he has already taken?

To answer some of these questions one needs to go back to June 16, 2009. On that day, Museveni wrote then-minister of Justice and Attorney General reminding him about decisions of a meeting he chaired at State House on March 25, 2009 on Basajja’s compensation claim.

In March 2007, following numerous riots by vendors over Basajja’s management contracts over three Kampala City Council (KCC) markets, the government cancelled them.

Subsequently, Basajjabalaba petitioned Museveni over the cancellation and demanded compensation.

Bassajjabalaba’s claims were made by his HABA Group on behalf of his companies – First Merchant Trading Company Ltd (FMTC), which was running Shauriyako Market; Victoria International Trade Company (VITC), which was in charge of St. Balikuddembe Market (Owino); Sheila Investments Ltd (SIL), which was managing Nakasero Market and Yudaya Investments Ltd (YIL), which was supposed to redevelop the Constitution Square.

HABA Group initially hired an accounting consultancy firm, D. Craven & Associates, to prepare the official claim for the Shs 146 billion.  When D. Craven & Associations, basing on documents Basajjabalaba provided, lowered the compensation claim to Shs131 billion, he rejected its report.

But on October 4, 2010, about a year after Museveni’s order for expeditious disposal of HABA’s compensation, the Attorney General and Basajjabalaba agreed on the Shs142.7 billion in a consent judgement signed by both sides before the High Court registrar.

Financial experts have told The Independent that demands for compensation for loss of income in such cases is not illegal. “They are the trigger for negotiation of an out of court settlement,” one of them said. Therefore, Basajjabala is entitled to demand compensation if government took away what lawfully belonged to him.

It is perhaps in this spirit that the meeting of March 25, 2009 that Museveni referred to on June 16, 2009 sat. At the meeting at State House, which the Attorney General and ministers of Finance and Local Government attended, Museveni and his ministry officials agreed that an inter-ministerial committee chaired by the Attorney General be set up to look into the issues. The Attorney General was asked to resolve the matter within 60 days and Basajjabalaba would withdraw a case he had filed against the government.

Dubious claims?

When the compensation was not forthcoming, Basajjabalaba went back to Museveni. That is when Museveni wrote to the Attorney General reminding him of the resolutions of the State House meeting. Again the government officials refused to pay. Basajjabalaba again complained to the President and on November 24, 2009, Museveni wrote another letter to the Attorney General.

Under the subject: Compensation to HABA Group, Museveni wrote: “Reference is made to the above matter and my previous directives on the same. HABA Group has petitioned me…. I hereby direct you to conclusively resolve all the issues raised in the petition. In particular to ensure fairness, the same methodology or formula that was used in evaluating other markets ought to be used in reviewing HABA’s claim. Please handle this matter expeditiously and give HABA a quick response.” It was an order.

But most officials in Bank of Uganda and the ministry of Finance who Museveni ordered to pay Basajjabalaba had resisted the President’s instructions. Until former Finance Minister Syda Bbumba came into the picture, they all treated Basajjabalaba’s claims as dubious.

On Feb. 24, Bbumba, acting on Museveni’s orders, wrote to Mutebile informing him of her earlier reminder, of December 3, 2010, to pay Basajjabalaba.

She said Basajjabalaba had written to her seeking payment of claims in order to repay loans he had borrowed from financial institutions. But before dispatching the letter, Bbumba sent a copy to the Secretary to the Treasury/Permanent Secretary of Ministry of Finance Chris Kassami seeking his advice. In the original letter, Bbumba had written telling Mutebile: “I now write to authorise you to sort out repayment with the said institutions.” By the word “authorise” Bbumba was telling the central bank to pay Basajjabalaba’s creditors off his outstanding compensation money. Bbumba’s statement was in violation of Article 162 (2) of the Uganda constitution which states: “In performing its functions, the Bank of Uganda shall conform to this Constitution but shall not be subject to the direction or control of any person or authority.”

Realising this constitutional hitch, Kassami, writing by hand, amended Bbumba’s statement to Mutebile to read: “in accordance with their (Basajjabalaba] correspondence, this is to request you to sort out repayment with the said financial institutions.”

On the letter to Bbumba, Kassami wrote by hand: “Since an earlier correspondence was made, it is inevitable that the governor has to meet the obligations.”

In a follow-up letter to Mutebile a month later on March 22, Bbumba confirmed her commitment to pay Basajjabalaba. She wrote: “Further to my letters, this is to confirm that you can repay proceeds of the earlier programmes with the banks. As soon as the budgetary arrangements allow, I will authorise repayments to the HABA Group through the Bank of Uganda from which payments you can deduct the extra money to pay the banks the extra loans you will have arranged for HABA Group.”

According to The New Vision, Museveni has directed Finance minister Maria Kiwanuka to investigate how Basajjabalaba was compensated “before it is too late”. The New Vision said Museveni gave the directive on May 8. Does that mean Maria Kiwanuka had not got the letter when she ordered Basajjabalaba paid in June? Or does it mean that she and Mutebile defied Museveni when they paid Basajjabalaba? Or does it point to deliberately blowing the whistle when the looter has got away?

Alibaba’s deals

However, more pertinent to the issue is how Basajjabala actually came to “own” all three big markets in Uganda’s capital city and the country’s treasured Constitution Square.

A letter by then-chairman Kampala District Tender Board, Joje Waddimba to then-mayor Ssebaana Kizito regarding the handling of city markets tender awards to Basajja’s companies sheds some light.

On October 7, 2002, Waddimba wrote to Ssebaana that he was concerned that on September 22, 2002 his board had voted to give Nakasero Market to Basajjabalaba’s SIL.

Waddimba said he was writing to protect himself (and the Board) from aspersions of “undue influence”, “underhand practices”, “favouritism”, or worse”.

Revealing that he was the only one who voted against the award of the tender to SIL, Waddimba wrote:  “The Board is now required to decide on the tender of St. Balikuddembe; and once again, we face the same difficulty as we did with Nakasero. I am fully convinced that the bidder recommended by the Technical Evaluation Team (Basajjabalaba’s VIL) violates Clause 7.2 of the Board’s guidelines, and that this violation undermines the basis for fair competition among the bidders.”

Waddimba informed Ssebaana that he had found out that SIL and VIL Were owned by the same person.

“Finally,” Waddimba wrote, “there are widespread rumours and unsubstantiated allegations that funds have been disbursed by at least one of the bidders in order to influence the decision of the board.”

Other members of the KCC tender board were Lydia Waddimba, John ssebuwufu, and Joyce Kikomeko.

When asked about the letter recently, Ssebaana told The Independent that he was “too sick to speak’.

But a recent Auditor General’s report to Parliament appears to support Waddimba’s fears. The report says the government has lost billions in compensation for “loss of business opportunity” to companies that had “irregularly” acquired city markets and other public places like the Constitutional Square and taxi parks.

Enter KPMG

The foggy nature of Basajja’s dealing is the basis for the international audit firm, KPMG, which was hired by the Auditor General to investigate the validity of his initial Shs142.7 billion compensation claim, trashing it.

KPMG, in a confidential report to the auditor general, questions the reasonability of the ‘consent judgement’ to pay Basajjabalaba as based on “unsubstantiated and unenforceable claims” in law and fact.

It says Basajjabalaba’s claim is based on either invalid documents, expired or non-existing documents and contracts, the totality of which would render his compensation null and void.

The KPMG further recommends that former Kampala Town Clerk James Sseggane be investigated for possible culpability and complicity after he admitted to extending Basajjabalaba’s contracts without authority.

The audit firm says Basajjabalaba, in fact owed the government Shs994 million by the time his contracts were cancelled in March 2007.

The KPMG audit report addresses each compensation claim by Basajjabalaba. It says that SIL claimed a refund of Shs1.7 billion it purportedly paid to Nakasero Market vendors as compensation under the Operator/vendor Reconciliation understanding agreed on in June 2007. SIL reportedly also contracted a law firm, Legal Wise Associates, to compensate the Nakasero Market sitting tenants on its behalf. The FMITC claimed Shs750m for the same purpose in respect of Shauriyako Market.

KPMG says these claims have no merit because by the time his contracts were revoked in March 2007, the original contract periods had expired and the extensions were granted arbitrarily, contrary to the law.

Then-Town Clerk Sseggane admitted to KPMG that a contract signed by the Council could only be amended or extended by a Council resolution, which Basajjabalaba’s contract extensions did not have.

KPMG observed that once a document or contract does not bear the signatures of both the Mayor and Town Clerk as the officers authorised to bind KCC to a contractual relationship, “it is void”.

According to KPMG, former Kampala Town Clerk Ssegane admitted that he signed the letters dated December 9, 2005 and May 4, 2006 extending Basajjabalaba’s contracts for St. Balikuddembe and Nakasero markets respectively, without the prior approval of the Council or the tender board as the “two bodies were no longer holding sessions due to the impending elections”.

The KPMG also noted that Ssegane violated the Council requirements by extending the contract of SIL yet the company was in arrears.

“We recommend that Ssegane be investigated under section 42 of the Public Finance and Accountability Act of 2003 for failing to comply with the PPDA in respect of the renewal of the management contracts over St Balikuddembe and Nakasero markets and section 13(3) of the Leadership Code Act for allowing the aforesaid markets being public property entrusted to his care to be misused, abused or left unprotected,” the KPMG auditors say.

KPMG says its conclusion was informed by opinions obtained from the legal department of the Auditor General’s office and a private law firm, Henry-Oryem & Co. Advocates.

In regard to Shauriyako, KPMG concluded that Basajjabalaba’s FMITC had no sub-lease over the market land registered in its favour or contract and therefore his claims had no merit.

In the case of redevelopment of the Constitutional Square, which was stopped by former Local Government Minister Bidandi Ssali in 2001 before the contract was signed, YIL claimed compensation of US$200,444 for plans allegedly drawn for the developments to be carried out on the Square.

The KPMG auditors say that although they were provided with an agreement between YIL and ID Forum for the preparation of structural drawings and plans, the plans were drawn by ID Forum for KCC and not YIL. “Since we were not provided with plans drawn by ID Forum for YIL, we concluded that the claim was not adequately supported,” the KPMG report states.

KPMG said they were not given any evidence of payment to prove that SIL, FMITCL or Legal Wise Associates compensated the vendors. Neither is there evidence to show that the vendors had a right to the land for which they were supposed to be compensated.

According to the KPMG report, Basajjabalaba based his claims on three grounds; politics, law and financial considerations.

On the political front, Basajjabalaba’s HABA Group argued that their claim had already been evaluated “following a directive from the President that the legal basis of compensation to Hassan Basajjabalaba be looked into”. HABA argued further that the recommendation on compensation by the government’s evaluation committee was “relied on by URA to make an assessment of their claim and thus other government bodies are precluded from reviewing or otherwise dealing with the matter”.

HABA also relied on consent judgements with the Attorney General, and in some cases with KCC and the registrar of titles, which KPMG found wanting, to support its claims.

The KPMG says Basajjabalaba presented to them a copy of ‘consent judgement’ of various civil suits HABA Group filed against the Attorney General but could not trace any file relating to the said cases in court.

“We conducted searches at the registry and could not find the files related to the above cases save for civil suit no 21 of 2006. We noted that the only consent judgement filed at the registry was dated February 1, 2008 and was in favour of KCC against VITCL,” KPGM observes.

The ‘consent judgement’ Basajjabalaba presented to KPMG dated October 4, 2010 and a copy of which The Independent has obtained, indicates that the government accepted to pay Basajjabalaba Shs 142.77 billion. The copy is signed by counsel for the defendant, plaintiff and registrar. Basajjabalaba insists the consent judgement is genuine.

KPMG concludes that the payments to Basajjabalaba should not have been made at all and that his claims are not legally enforceable.

Not enough

But Basajjabalaba told The Independent that based on the dollar exchange rate at the time when President Yoweri Museveni agreed to compensate him, he demands an equivalent of US$30 million for Nakasero Market, US$30 million for Constitution Square, $12 million for Shauriyako Market and US$10 million for Nakawa Market, which translates into US$82m. He wants to be paid at the prevailing dollar rate, which would translate into about Shs234 billion if the rate is Shs2850 per dollar as in early September. This also means you have not heard the last of Basajjabalaba’s claims for compensation over the markets.

Those tasked to recover the monies already passed on to Basajjabalaba face a tough job.  On November 4, 2005, basing on similar guarantees and on orders of President Museveni, Bank of Uganda paid Basajjabalaba’s tax obligations to the tune of Shs134 billion to the Uganda Revenue Authority. The money has never been recovered. As the chairman of the Investment Committee of President Museveni’s NRM party, Basajjabalaba is a powerful man. That much, is obvious now.