[Ugnet] WB Questions Uganda Privatisation As State Dairy Corp is Sold for $1

UGANDAN officials last week met with a six-man team from the World Bank to negotiate funding for an extension of the privatisation process project to January 2007, even as the state dairy company was sold on the direct orders of President Yoweri Museveni to a Thai company for the princely sum of $1.

Officials from the Privatisation Unit (PU) charged with the day-to-day running of the process met with the World Bank team earlier in the week, before the donors met with a team from the Ministry of Finance. The six-man team from the World Bank included the Bank's privatisation task manager Lucy Fye. Sources said they were concerned about lack of transparency and the slow speed at which the process was moving.

The World Bank has funded the privatisation of the country's parastatals since 2001, to the tune of $48.5 million, and the PU wants more funds to complete the process, which in the early 1990s was hailed as a model for sub-Saharan Africa.

A source who attended the meeting between the WB and Finance officials said that political interference in the divestiture process was among the issues discussed. "There are invariably abrupt changes in the sale process and according to the WB team, this is affecting the image of the entire process," said the source.

Last week, in what critics charged was political interference, Prof Peter Kasenene, the Minister of Finance in charge of privatisation, directed the takeover of the profitable Dairy Corporation Ltd (DCL) by a Thai company, Malee Sampran Factory Ltd. The minister said he had been directed to do so by President Museveni.

But Moses Byaruhanga, the president's political affairs assistant, was quoted as denying any political interference in the Dairy Corporation sale and saying that the president used his constitutional right to direct a minister to sell the corporation to the Thai firm for a nominal fee of $1. He said the sale of the corporation was aimed at reducing wastage.

The privatisation of DCL which is located in the Industrial Area, had reached the stage of pre-bidders.

PU has so far completed about 60 per cent of its programme. A total of 115 public enterprises have been divested and 34 major parastatals are on the waiting list.

PU officials blame the delay in the country's privatisation process on delays in the implementation date, in 1993 instead of a year earlier. But other sources say that political interference both from parliament and State House such as in the case of the Dairy Corporation is the reason.

Grace Achire, PU spokesperson, said, "Our officials met with stakeholders to review the process and spelt out what is causing the delays, which are other factors rather than interference of government and parliament."

Some deals have had to be renegotiated or parastatals advertised again for sale as sales were either not concluded for various reasons or buyers who enjoyed political patronage failed to honour their obligations. This was the case with the selling of the Nile Hotel in 1993 to a Tunisian firm; the first sale of Uganda Commercial Bank Ltd to the Malaysian firm Westmont, and the sale of the Sheraton Hotel to an Ethiopian firm, Midroc.

The privatisation process has been controversial and on two occasions, parliament was forced to intervene and carry out investigations. In one instance in 1998, parliament halted the process for several weeks as it carried out investigations into the sale of the Uganda Commercial Bank. The bank, though initially sold to a Malaysian firm, was passed on to a Ugandan company, Greenland Bank, just months after the sale.

Parliament concluded there was political interference, underhand dealings and failure on the part of implementers to follow the laid down procedures.

Ms Achire said it would be up to the Ugandan government to allow for the extension of the PU's tenure. "We were given a job to do by the government and if they want us to complete the work, they will allow the extension. But the government may instead decide to give the remaining work to another organisation," she said.

Some of the parastatals remaining on the remaining list are giant profitable companies and utilities such as the Uganda Railways Corporation, the National Water and Sewerage Corporation and the National Housing and Construction Company Ltd.

Despite education and sensitising of the public on the necessity of the government getting out of managing business, many people have criticised the government for selling off "the family silver," for the benefit of a few individuals.

Additional reporting by David Musoke and Esther Nakkazi

[Ugnet] WB Questions Uganda Privatisation As State Dairy Corp is Sold for $1

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