Uganda: Govt Loses Shs20b in Tri-Star Scandal
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The Monitor (Kampala)
November 1, 2006
Posted to the web November 1, 2006
Posted to the web November 1, 2006
Charles Mwanguhya Mpagi & Alex B. Atuhaire
Kampala
Kampala
THE government has lost over Shs20 billion in loans
guaranteed to the limping Apparels Tri-Star Uganda Ltd run by Mr Velupillai Kananathan.
The troubled company, incorporated in Uganda in 2002 to export textiles to the United States under the African Growth and Opportunities Act (AGOA), took loans from the Uganda Development Bank (UDB) and dfcu Bank guaranteed by Bank of Uganda, but the two banks seized the BoU securities two months ago.
This was after the company failed to service the loans, Daily Monitor can exclusively reveal. To get it started, the government guaranteed Tri-Star a loan of $5 million (about Shs 9.2 billion) from UDB with a $7.5m (Shs13.8b) BoU guarantee and another $3.5 million (about Shs6.2 billion) later obtained from dfcu Bank in 2003, with a $4 million BoU guarantee. The loan from dfcu also had the government plant at Bugolobi put as additional security.
The two banks in September seized the BoU securities, meaning
that the government had lost the money to the company principally run by Kananathan and Mr Kumar Dewapura.
BoU spokesman Juma Walusimbi could not be reached for comment the whole of yesterday. But the government has vowed to continue supporting the troubled apparels exporter, despite the billions of taxpayers' money spent on the project.
"The government is committed to Tri-Star Apparels and the factory is not closing," Mr Semakula Kiwanuka, the minister of state for Finance in charge of Investment said on Monday. "They are not closing because we are not closing the market," the minister said in an interview.
The government has been paying 71.5 per cent of all taxes on railway transport charges for all the company's raw materials or finished products to or from Mombasa, offered free premises and contributed a substantial subsidy towards training of workers.
But two years after its incorporation in Uganda, a parliamentary report in 2004 revealed that the government withdrew $5m (Shs9.6b) from the consolidated fund to finance the setting up of Apparels Tri-Star U Ltd.
While defending the government's heavy subsidies for the factory, President Yoweri Museveni argued that Agoa had the potential to earn Uganda billions of shillings from garment exports to the US, offer jobs to thousands and invigorate Uganda's cotton production.
Now with the closure, none of these seem to have happened. Instead, for the brief period the company existed, it was more known for its employer Vs employee strained relationship than export of clothes.
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Initially 1,000 girls were recruited from across the country, trained and offered jobs.
But that number kept diminishing and by its closure, about 350 were employed.
But now, the government seems to be resigned to taking over the collapsed Tri-Star Apparels factory in Bugolobi, and sink in more money despite protests from the public and opposition politicians.
The Uganda Peoples Congress said last week that Kananathan should be arrested over the scandal.
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