Museveni’s plan for BoU after COSASE

President will shake up central bank, insiders say

Kampala, Uganda | HAGGAI MATSIKO | When the committee investigating the central bank over closed banks starts querying the process surrounding the sale of Crane Bank, one particular question will arise again: How did you zero on dfcu Bank as the buyer? The question will be directed at Justine Bagyenda, the former Executive Director Banking Supervision (EDS).

But the quizzing process will rope in the BoU Governor Tumusiime Mutebile, his deputy; Louis Kasekende, and others. Abdul Katuntu, the chairman of parliament’s committee on Commissions, Statutory Authorities and State Enterprises (COSASE), recently put a similar question to Bagyenda as the committee grilled her over the sale of Global Trust Bank to DFCU in 2014. Bagyenda fumbled and was pinned by Mutebile who was backed by BoU Secretary Susan Kanyemibwa. Insiders say this is a ploy to expose BoU officials for corruption, incompetence, and ineptness or all three and more.

And that it has President Museveni’s nod. The president’s plan is to let COSASE strip bare BoU officials to a point where they are beyond redemption in the eyes of the public. The President is also doing his bit. By hinting at where he prefers the COSASE investigators to look.

During a recent Cabinet meeting, sources tell The Independent, President Museveni told his ministers that he tried to advise BoU officials on how to deal with the closure of Crane Bank and COSASE but they ignored his advice claiming that BoU is an independent body.

Museveni had come under pressure by some ministers to end the public undressing of COSASE in public. The President was reportedly explaining that he would not now attempt to block the on-going investigation by COSASE even amidst fears that the committee’s exercise could severely erode BoU’s integrity and hurt the economy.

But the President Museveni went a step further during celebrations to mark the 25th anniversary of Transparency International Uganda (TIU) at Imperial Royale Hotel in the capital Kampala on Dec.04 when he listed BoU amongst the most corrupt institutions.

“We have given enough time for civil servants to expose themselves,” Museveni said, “had we moved against them, we would have been politically isolated, people would have thought we are persecuting them but I can tell you today, the whole population is fed up with these corrupt people.

Civil servants can no longer blackmail us politically that if you touch me, people in my area will vote against the NRM, no.” The two actions are a break from the past when the President has sought to shield BoU from the kind of scrutiny and exposure that the institution currently faces. In March this year, for instance, President Museveni warned officials at BoU and the Inspectorate of Government (IGG) that he was tired of seeing BoU matters in the press.

At the time, IGG Irene Mulyagonja was pushing to start investigating BoU over a controversial February staff reshuffle. President Museveni blocked her effort and instead appointed a committee consisting of some members of COSASE, some BoU board members and representatives from the IGG’s office.

President Museveni directed the team to work quietly and make recommendations to him. It speaks volumes that several months later, he now wants BoU officials to get even more exposed even if that might involve hurting the central bank and the entire economy.

Indeed as COSASE’s investigation into BoU’s closure and sale of seven defunct banks nears its end, this appears at the heart of its current strategy. It has become clear that while BoU can justify why it closed the seven banks, the manner in which it sold these banks is the biggest thorn in their flesh. While appearing before the committee, BoU officials have severally failed to explain how they arrived at who they sold to and cannot provide minutes for negotiations of the sales they made.

In the case of some of the banks, the committee has heard that the companies BoU dealt with have since disappeared in thin air, and that critical documents regarding the sale of some of the banks’ assets like records on the transfer of assets, and records on sale of assets, among others, are missing. Because of this, many are looking for all possible explanations.

Some like President Yoweri Museveni have already pointed to corruption. And in the case of GTB and Crane Bank, some are pointing to the relationship between BoU and dfcu, which bought these banks under controversial circumstances.

When Katuntu asked Bagyenda how she zeroed in on dfcu as the buyer for GTB, the former EDS said that they looked at the potential of other banks. But given that she admitted that there was no bidding process for the transaction, this response did not fly. BoU, dfcu bank links Other critics have pointed out that the fact that BoU staff are shareholders in dfcu and that this could be the reason the bank got these deals. The Independent has seen a copy of dfcu 2017 financial results.

Among others, the document lists two BoU retirement benefit schemes amongst the top shareholders of DFCU bank. These are; Bank of Uganda Staff Retirement Benefit Scheme-SIMS and Bank of Uganda Staff Retirement Benefit Scheme-AIG. For some, this raises a question of conflict of interest.

The other Ugandan shareholders include; National Social Security Fund, Parliamentary Pension Scheme, Uganda Revenue Authority Staff Retirement Benefit Scheme, Centenary Bank Staff Defined Contributory Scheme, Makerere University Retirement Benefit Scheme, and Crane Bank. Former Crane Bank proprietor, Sudhir Ruparelia and Secretary to the Treasury Keith Muhakanizi are also named amongst the top 29 biggest shareholders. Muhakanizi sits on the board of BoU.

Until recently, the most controversial transaction between BoU and dfcu has been over Crane Bank. Tycoon Sudhir’s lawyers have described the deal between DFCU and BoU as a “sweetheart” deal. They claim that BoU blocked all other potential buyers and made sure dfcu bought it a paltry Shs 200 billion. Sudhir valued the bank at Shs. 1.3 trillion.