Monday, February 3, 2003
Uganda 'Loses' $1.5m in Payments
By WAIRAGALA WAKABI
THE EASTAFRICAN
A YUGOSLAV firm that supplied 50 lorries to the Uganda government has received double payment, costing the Treasury Ush2.592 billion ($1.5 million).
Information from the Bank of Uganda shows some $1.1 million was paid to Sours Fab-Famous RZ Promet between 1988 and 1991, but the firm in 2001 sued the Uganda government over non-payment and was paid again.
Officials of the Ministry of Finance, Planning and Economic Development have criticised the Justice Ministry for mishandling the case, and have suggested that there could have been negligence or collusion.
The suit was brought through Kampala lawyers Bitangaro & Company Advocates. The court consequently awarded $1.972 million to the company. Justice James Ogola ruled on May 17, 2001, that Uganda owed Sours Fab-Famous $1,304,658, with an eight per cent interest on the debt from the date of filing the case to the date of judgment, and costs of the case.
The central bank released Ush1.338 billion ($765,090) on June 17 last year, in compliance with the court ruling. A further Ush1.23 billion ($716,544) was released on December 18, 2002, bringing the total payment in one year to $1,481,634. Documents from the central bank show that when the firm was awarded the contract on September 19, 1986, it received a down payment of $294,080 of the total contract price of $1,470,400.
On December 9, 1988 it received $200,000. Two years later, on September 10, 1990, it was paid a further $300,000 and on October 16, 1991, it received $600,000. That brought the total amount paid to $1.1 million.
Sours Fab-Famous RZ Promet was then claiming $335,111 from the Ugandan government. But when the court eventually made a ruling, it awarded the company triple what it was actually owed.
In court, the company did not disclose that it had already been paid $1.1 million. Ministry of Justice officials did not bring up this evidence either during the court proceedings.
Last year's payments were authorised by Secretary to the Treasury Chris Kassami. He asked the central bank to use the government's deferred expenditure account to settle the debt. The deferred payments for much of last year have not yet been offset from the consolidated account, meaning the transaction is now hard to trace.
Peter Nkurunziza, a partner in Bitangaro & Company Advocates, said he did not have instructions to reveal details of his client's case to the press. He denied that there had been a double payment, and suggested the differential was accumulated interest. The government last June paid Ush358.4 million ($204,837) to the law firm as costs for the case.
The case is further complicated by the fact that the Yugoslav firm issued a "deed of assignment" for the last payment. This means the money went to a third, unknown party. Central bank sources explained that the method of payment used in the Sours Fab Famous case makes it harder to trace by the Auditor General.
Mr Kassami's direction of payment to the central bank was made while technocrats in his ministry were recommending to the Finance Minister Gerald Sendawula and President Yoweri Museveni that the state should lodge an appeal.
The Inspector General of Government (IGG), Jotham Tumwesigye, said in a letter dated May 28, 2002 that his investigations into the case had revealed a "lack of commitment and a lukewarm response" to the case by officials of the Attorney General's office. The IGG, who communicated his findings to the Attorney General and the Finance and Justice Ministers, called for closer co-operation between government departments in future suits.
Before the suit was brought before court, Sendawula said Uganda would not pay the debt because the provisions of the Highly Indebted Poor Countries initiative shielded the country from the claims on the $335,111 debt. Uganda was also, at the time, suffering low foreign currency reserves. A decade ago, Uganda's foreign reserves stood at $101 million but at the end of 2002 were up to $881 million.
This is not the only case in which a foreign firm has been overpaid by court. The Debt Directory organisation has identified five cases for appeal, in which it says foreign firms Transroad of UK, Bank of Arabe Espanol of Spain, the Iraq Fund, Sour Fab Famous and Industry Machinery Oktobar (also of Yugoslavia) were overpaid a total of $14 million.
The organisation wants external law firms, rather than state attorneys to represent the government in the appeals for fear that they will side with the creditors.
Museveni last year demanded a comprehensive report into all foreign firms that had won cases against the state, after learning of possible collusion of government officials in the suits.
An official said: "Our calculation of interest costs due on the debts from the five creditors amount to only $4.69 million. The lawyers and judges of this country have put these costs at $18.7 million." The extra charges mainly arose from inflated interest rates and principal sums that Uganda was said to owe the creditors.
A report compiled by Ministry of Finance officials accuses Justice officials of failing to put forward this argument and asks Minister Sendawula to inform Museveni about "the incompetence and/or corruption going on in the Ministry of Justice and Constitutional Affairs and the Judiciary."
"Judges might say they have the power to award interest costs of 18 per cent on dollar loans, but they cannot have power to say Uganda owes so much principal when we do not," says the report. "The government must therefore stop payment and appeal where the principal amounts owed are different from the judges' award."
The report says Transroad UK and the Yugoslav companies did not deserve any interest at all. The courts have awarded $16.69 million to Transroad, $8.86 million to Industry 14 Oktobar, $6.43 million to Iraq and $2.65 million to Banco Arabe Espanol.
Transroad's case arose out of Uganda's failure to remit shipment fees for 300 railway wagons shipped between India and Mombasa in 1985. Transroad sued the Bank of Uganda in a UK court in 1990 and won $5.53 million, but the bank did not pay the money. It sued again in Uganda and the local court upheld the UK court's decision, awarding Transroad $10.5 million in 1996, inclusive of accrued interest.
The Yugoslav companies supplied equipment like tractors, while the Iraq Fund and Bank Arabe gave Uganda loans.
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