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KAMPALA - President Yoweri Museveni has directed the Ministry of Finance to advance Shs2.3 billion to GBK Dairy Products, to bail the local company out of financial crisis.
The President has directed the ministry to give the ailing dairy company an additional Shs1.6 billion interest-free loan, payable in five years following a two-year grace period.
In a February 7 letter to Dr Ezra Suruma, the Minister of Finance, Planning and Economic Development, Museveni said the money advanced to GBK should be drawn from the School Milk Programme vote.
Museveni directed the ministry to consider GBK as one of the local milk processors to supply milk under the programme to enable the company generate adequate funds for its operations.
“GBK is now faced with financial problems due to high interest
rates on loans they had earlier taken on to manage this factory,” the President wrote.
“Given the significance of the company to supplement the School Milk Programme, the Government has decided to use the funds approved under the programme to offer an advance of Shs2,323,485,550 to the above company,” he wrote.
GBK is owned by Mbarara based-businessman, Mr Godfrey Kacuma.
The company’s operations have been hampered by serious financial problems in recent years.
According to Museveni’s letter, the advance would help the company to sustain working capital in three areas, namely the supply of milk under the School Milk Programme (Shs715,985,000), the supply for other local and external markets (Shs700,000,000), and purchase of a new packing machine, milk cans, collection and delivery trucks (Shs907,500,500).
“The working capital fund amounting to
Shs715,985,000 is to be a revolving facility to be advanced to the company to enable them prepare for the supply of milk under the programme,” Museveni wrote.
The President said the government would slowly recover the money as the investor sells his processed milk.
Museveni’s directive is silent about GBK’s overall financial position and business viability.
The directive is set to raise fresh controversy in Parliament, which recently halted another presidential directive to lease Dairy Corporation to a Thai company, Malee Sampran Plc, for one dollar.
Mr Jack Sabiiti, the Vice Chairperson of PAC, said Museveni’s directive contravenes the Constitution.
“We are aware that he has done it many times. By directing either Ministry of Finance or Bank of Uganda to lend money to some businessmen in town, the President should know that he is breaking the law,” Sabiiti
told The Monitor by telephone.
Sabiiti, also Rukiga County MP, cited Article 159 of the constitution, which provides that “The government shall not borrow or raise a loan on behalf of itself or any other public institution, authority or person except as authorised or under an Act of Parliament.”
Sabiiti called upon the finance minister to table all the President’s recent directives before Parliament so that MPs can determine the way forward.
Suruma yesterday said his ministry had not yet effected the President’s order.
On the legality of the President’s directive, Suruma referred The Monitor to the Attorney General.
This is not the first time the President is directing that a local businessman be bailed out of financial problems.
Last year, Bank of Uganda had to intervene to relieve city businessman Hassan Basajjabalaba of a Shs21 billion debt after his
string of businesses run into trouble.
The BoU Board of Directors had initially resisted the President’s orders saying the move would set a bad precedent for the economy, as government cannot lend to an individual.
The International Monetary Fund said in a recent report on Uganda’s economy that government lending and guarantees to the private sector were troubling.
The IMF cited Basajjabalaba’s bail out and the grant to Apparels Tri-Star, the company manufacturing garments under the Africa Growth and Opportunities Act (AGOA).
The IMF said that non-transparent government support to certain companies reinforces perceptions of corruption. Asked about the IMF’s concerns, Suruma said yesterday, “We shall do what is in the best interest of the country.” |
