House divided over purchase of Roko shares
Members of Parliament are divided over the proposal by the Government to buy shares worth Shs207 billion in Roko Construction Limited.
The Minister of State for Finance (General Duties), Hon. Henry Musasizi, on Wednesday, 20 July 2022 moved a motion for a resolution of Parliament to approve a proposal by the Government to purchase 150,000 preferential shares in Roko.
Musasizi said that the proposal of buying shares is intended to offer financial support to Roko to enable the company complete government projects that are currently at a standstill owing to liquidity constraints.
“We also want to ensure that the intangible benefits that constitute Roko Construction as a 52-year-old quality Ugandan construction brand are maintained. The Government’s intention is not to own Roko but this intervention is time bound meant to end in the next five years with the company repaying the Government for the financial support it has provided,” Musasizi said.
The minister added that government’s Chief Internal Auditor will ensure the effectiveness and sustainability of the intervention by enhancing internal controls of Roko to validate that the taxpayer’s money is put to good use.
“The company also agreed to restructure its management and recruit a competent Managing Director,” the minister added.
Hon. Keefa Kiwanuka, the chairperson of the finance committee, who presented the committee report in support of the purchase of shares noted that Roko has undertaken the construction of several iconic buildings in Uganda which include, Crested Towers, Worker’s House, Mapeera House, Acacia Mall, Rwenzori Towers and many others making it a competent company that government can partner with.
He added that as a committee, they have been assured by Roko and government that all risks in the proposal shall be mitigated by government appointing representatives to the Roko Board.
“Over the years it has been a leading taxpayer in its sector paying on average Shs15 billion per annum and Shs1.3 billion in pensions. But it faced severe liquidity challenges that included taking expensive loans, bank guarantees of about Shs130 billion, plus COVID-19 which affected many other companies,” Kiwanuka said.
He further mentioned that Roko’s projects worth Shs292 billion had stalled like the Inspectorate of Government Building, Uganda Cancer Institute, the new Parliament Chamber and the finance ministry offices.
Kiwanuka added: “It is against that background that Roko approached the Government to let it acquire 150,000, redeemable, participating shares at a nominal value of Shs1million per share payable over five years. The money is to be used to raise capital to improve operational efficiency on projects and improve liquidity to uptake more projects.”
However, the committee’s minority report presented by the Shadow Minister for Finance, Planning and Economic Development, Hon. Muhammad Muwanga Kivumbi (NUP, Butambala County), recommended a 51 per cent share capital acquisition by government that could amount to Shs16 billion far less than the proposed Shs207.13 billion.
“We recommend that government should acquire 51 per cent of the ordinary shares of Roko as a condition for the acquisition of preferential shares; otherwise, there is a risk that if there is no such condition, government may prioritise the preferential shares. The majority shareholding will require that government has got a stake in ownership and control,” Muwanga Kivumbi said.
He highlighted that Roko has 27 cases in the Commercial Court and that there was no professional report to qualify the proposed Shs207.13 billion to be enough to salvage the company.
He further regarded Roko as a foreign-owned company with its ordinary shareholders not being citizens of the East African states as defined by the Investment Code Act.
The minority report also pointed out that the 15,000 ordinary shares are owned by Swiss nationals and that the timing of the proposal was insensitive during the current hard economic times.
Tororo district Woman MP, Hon. Sarah Opendi, said that more due diligence needs to be done as it was revealed by the UBC Executive Director who compared Roko to a very ill patient and added that it was risky investing in it.
Hon. Lillian Aber (NRM, Woman MP, Kitgum district) supported the funding of Roko. “We must support Roko to consider those special projects like the cancer project at Naguru,” Aber noted.
The Woman MP for Adjumani district, Hon. Jesca Ababiku, said that Roko can be supported as the system is improved for equity to prevail.
“How long are we going to need to rectify the system? My government should work on equity to also support other companies,” Ababiku said.
The Leader of the Opposition, Hon. Mathias Mpuuga, told Parliament that it should be clear if Roko wants a grant, instead of duping people that government is buying shares.
“This House should not be invited to duplicity; this is not a business but a grant, and you know grants also have their terms and conditions. If you have no powers to vote then there is no ownership of the company,” Mpuuga said.
The Speaker of Parliament, Anita Among, guided that safeguards should be instituted to avert the risk of loss of public funds.
She acknowledged that both reports presented by members of the finance committee complemented each other and need to be considered.
“Let us look at the principles to ask the Government to look at all other local companies that may need support,” the Speaker noted and directed the finance minister to address the issues raised by the legislators and report back to the House.