L-R: Officials from Roko including Joseph Kibuuka, Mark Koehler, Jacob Batte appearing before Finance Committee
Roko Construction Company Limited has warned Parliament that if the request by the company to have government inject Shs202.13bn in the struggling construction giant would likely crash Uganda’s economy and affect operations of some commercial banks that lent the company money.
The warning was issued by Joseph Kibuuka, the Transactional Advisor of Roko Construction Company while appearing before Parliament’s Finance Committee to defend the request to have government acquire 150,000 preferential shares from the company to a tune of Shs202.13bn.
This followed a question posed by Basil Bataringaya (Kashari North) on what will happen if the motion is rejected by Parliament, asking, “Supposing us or government or parliament say no, what will happen?”
Kibuuka replied saying Uganda’s banking sector will face operational challenges with a number of its shareholders left to deal with losses that will see other borrowers miss out on access to finances.
“We did think about the possibility but we also thought about effect of government not investing. If banks whose obligations we have now don’t get this money, it rates down the market rating of the country. The banks would have challenges to lend money to other borrowers; they will still have a loss they are registering. But to the bank shareholders, they will still have losses on their books,” Kibuuka said.
However, the officials from Roko Construction Limited found hard time convincing MPs to approve the proposal by Government to inject Shs202.13Bn into the company after being asked for the board resolution that resolved to have government come on board as a shareholder.
This followed a discovery by Xavier Kyooma (Ibanda North) who quoted clauses in the Memorandum of Incorporation Of Roko Construction Limited that barred the current managers to open up selling of shares to the public.
“You seem not to be allowed to issue shares. What is the basis (of selling shares to the Government)? The article reads, that any invitation to the public to subscribe to any shares is prohibited. A company shall not have powers to issue share warrants to bearers,” remarked Kyooma.
Paul Jacob Batte, Legal Counsel of Roko Construction informed the Committee that the Board Resolution is still in draft form and the new changes to bring in other shareholders hasn’t been officially filed with Uganda Registration Service Bureau because Roko was awaiting approval of a tax waiver to a tune of Shs800M in case the Shs202.13bn is injected into the construction company.
His response attracted suspicion from MPs who wondered how the Ministry of Finance could table before Parliament the motion seeking to buy shares in Roko yet the company’s laws at the moment bar such a move.
More suspicion was pointed out by Herbert Tayebwa (Kashongi County), who pointed out that documents from Roko Construction Company indicated that the company made profits to a tune of Shs790m in 2017, Shs4.4Bn in 2018, Shs2.8Bn in 2019 and a loss of Shs3.3Bn in 2020 and wondered why the company didn’t seek for cheaper funding from Uganda Development Bank (UDB) instead of seeking for funding from Government, yet the shares being proposed to Government doesn’t give taxpayers any voting rights.
“Unfortunately with preference shares, you aren’t involved in any strategic decision making because you don’t have voting rights. Therefore, government going into this will not have any impact on the decisions that the directors of the company take,” said Tayebwa.
Mark Koehler, Executive Director of Roko Construction Company revealed that currently, the company has projects in the pipeline to a tune of Shs1.2Trn and of these, projects worth Shs700Bn are coming from Government and the Shs202.13Bn will be repaid within eight years.
This prompted Muwanga Kivumbi (Butambala County) to ask officials of Roko why they resorted to selling shares to Government instead of seeking for funding from Uganda Development Bank (UBD).
“You have said that government projects amounts to Shs700bn. If government has given you projects worth Shs700bn, why don’t you ask for upfront so that you sort out these issues?.. ask for an upfront payment and you will be able to address these issues,” Muwanga said, adding: “Why are you going for preferential shares? Ordinarily we have UDB would you be comfortable for us to give this money to UDB for onward lending to of giving it to you direct?”
Koehler replied saying that the idea by Roko to sell shares to Government was hatched in 2019 at State House where the President argued that Uganda doesn’t have a national construction company and deliver quality products in buildings and roads, and bringing Roko on board would help shield that gap.
According to Roko Construction Company, the Shs202.13bn financial bailout will help the company retire part of its debt and invest in some of the projects in the pipeline.
