The Government of Uganda plans to abandon a move to borrow Euro500M (Shs2.008Trn) from Amarog Capital Ltd, Sovereign Infrastructure Group and other financial institutions, after discovering that Amarog is a private money lender operating in agriculture sectors in Kenya and Uganda.
The Minister of State for Finance (General Duties), Henry Musasizi (pictured), says they need for more time to conduct due diligence on Amarog Capital Ltd. He adds that the money lender has also changed terms of the loan.
“Given the time we have, we haven’t been able to gather all the information that is required to justify why the company should get the arrangement because we have got new developments that the company’s experience is limited. It hasn’t handled transactions of this magnitude and we feel we should do more work to get more information about this company,” Musasizi told Parliament.
While seeking Parliamentary approval to amend his motion and drop the Kenyan money lender, Musasizi added that after the meeting between Ministry of Finance and joint Committees of National Economy and Finance, Amarog Capital Ltd sent Government information that they wanted to change terms of the loan by introducing an item called insurance.
“We hadn’t agreed upon with the company and we feel we should be allowed whether we should proceed with it or not,” said Musasizi.
It should be recalled that this week, while appearing before the joint Committee, John Teira (Bugabula North) was the first MP to question the capacity of Amarog Capital Ltd to provide funding to Government, wondering how the same company that has been operating in Uganda to provide private equity to firms mainly in agriculture to a tune of Shs5M, Shs10M could be in position to raise Shs2.008Trn with hardly a month eft to the closure of the 2022/2023 national budget.
The MPs described the decision by Government to seek funding to finance a national budget as offensive, demeaning for Uganda’s integrity and would raise cost of debt servicing.
Although Minister Musasizi had assured the Committee that a due diligence report had been conducted on Amarog Capital Ltd by the Financial Intelligence Authority, MPs privy to the info were shocked by the request by the Minister to allow Government conduct another probe into Amarog’s financial weight.
This prompted Muwanga Kivumbi (Butambala County) to ask Parliament to allow the report of the Committee to be read in Parliament, describing Minister’s decision to withdraw motion seeking loan from Amarog as a cover up of the financial impunity by officials at the Ministry of Finance.
He said, “The motion pre-empts what the Committee has discovered and that pre-emptying will cause impunity. If the Committee of the report is read and you discover what has happened, heads must roll, there are investigations that must ensure.”
He added: “This cover up of this level where Uganda was to commit Shs2Trn in a shoddy deal will be unprecedented. The report has far reaching implications on how some fellows manage our economy. Uganda has so many bad loans and this one was one of them.”
But Deputy Speaker, Tayebwa called for calm assuring MPs that despite the pre-emptive move by Government to abandon Amarog in the cold waters, the Committee’s report would have to be read.
“But when the Minister has requested to amend the motion, I can’t refuse. That doesn’t stop the Committee from presenting its report. Give him chance, let’s not doubt ourselves, it’s not that the Minister is looking for money for his family,” remarked Tayebwa.
When Robert Migadde, Vice Chairperson read the report to Parliament, he revealed that among the terms agreed upon with Government included the interest and fees payable by the Borrower under the Finance Agreement will be exempt from all tax in Uganda by virtue of the terms of the Facility Agreement and compliance with the applicable laws.
Migadde said, “The committee observes that among the conditions precedent is a tax waiver on the interest and fees paid by the borrower. The budgetary support facility is a commercial loan agreement and non-concessional where the parties are expected to make profit. The committee recommends that Government should always negotiate for the tax regime to apply to non-concessional loans since they are largely commercial so that the citizenry can benefit from the gains in commercial transactions.”
The Joint Committee also unearthed another wicked term in the Amarog loan, raising concerned over the provision requiring Government to waive sovereignty over it’s property both within and abroad, arguing that there are a number of loan agreements which
the government is signing with different lenders indicating an increased waiver of immunity with regards to the assets and property of Uganda within and outside Uganda.”
Migadde added: “This means the Government of Uganda irrevocably and unconditionally agrees to waive immunity over Uganda or
its properties to which it or may become entitled to at any time whether under sovereign immunity or otherwise from any suit. Whereas a number of critical assets have been excluded from the application of the clause, the committee notes this is not sufficient and recommends that Government should always negotiate and ensure that sovereign immunity is not waived.”
The Committee also informed Parliament that Amarog Capital and Sovereign Infrastructure Group did not provide audited books of accounts despite a request by the Ministry of Finance, while Sovereign Infrastructure Group instead provided pro-forma financial statements (cash/income projections) for the years 2021-2024 which could not be relied on as these are just estimates.
“The Committee recommends that the House rejects the proposal by Government to borrow through Sovereign Infrastructure Group
and Amarog capital Limited (ACL) who are expected to raise EURO 5OO million to finance the budget for FY 2022/23, given the concerns raised by the Financial Intelligence Authority and the Committee findings. The Committee further recommends that the officials who sourced and presented this loan proposal be investigated for possible linkage with the possible lender,” urged Migadde.
Parliament agreed with findings of the Committee and while the two funding facilities from the International Monetary Fund was approved, Amarog’s proposal was trashed out by Parliament.