Finance Minister Wasn’t Consulted Prior To NSSF-UMEME Investment

A parliament probe committee into the National Social Security Fund- NSSF has today learnt that the finance ministry was never consulted prior to the purchase of shares in power distribution company, Umeme.

NSSF4
NSSF Acting Managing Director Geraldine Ssali Busuulwa recieves the cheque from Umeme Limited’s Chappman at Workers House.

While appearing before the committee on August 15th, NSSF acting Managing Director Geraldine Ssali said that the investment was approved by the NSSF Board in consultation with Finance minister Maria Kiwanuka as provided for under Section 30 of the NSSF Act.

But today, the committee acquired documents to the effect that the consultation was made long after the investment had taken place.

The documents which entail the communication between the board and the minister show that while the board took the decision to buy the shares on May 8th, they wrote to the minister on May 12th, 2014.

She responded a day later with a warning to the board against rushing into the investment.

In her response, Maria Kiwanuka observed that there should first be an independent verification of issues raised about the proposed transaction.

She equally advised the board to first appoint an independent proven expert committee to review the investment proposal worth Ugx 70 Billion.

During the Initial Public offer of Umeme shares at the Uganda securities exchange in 2012, NSSF purchased shares worth Ugx 36billion which gave it a shareholding of 8.1 % in the utility company.

It made a subsequent investment of Ugx 34billion in May, 2014 which increased its shareholding to 14.3%.

But the fund has consistently been accused of investing in Umeme without following the right procedures which would include among others seeking approval from the Solicitor General and the ministry of finance.

Instead the advice was sought long after the transaction was concluded, according to correspondences tabled before the committee.

Committee members today tasked the Chairman of the NSSF Investment board who also doubles as the deputy Secretary to the treasury Patrick Ochailap to explain why the board did not take heed to the advice of the minister.

The members also asked Ochailap to explain why he permitted the transaction aware that parliament had recommended that the contract of UMEME be terminated.

Ochailap failed to explain why the investment was approved without consulting the minister although he insisted that the investment was profitable to NSSF.

Ochailap further explained that the executive has never communicated such a position and that as far as the NSSF investment board was concerned UMEME is still viable quoting the dividends worth Ugx 3.3 billion shillings which was paid out to NSSF recently.

But Kyankwanzi Woman MP Anne Maria Nankabirwa claimed that UMEME had borrowed funds from Kenya Commercial Bank to pay such dividends.

The committee also queried the state of affairs in UMEME with members wondering the ownership of majority shares since a UK based company-Actis which was a majority shareholder pulled out.

1 thought on “Finance Minister Wasn’t Consulted Prior To NSSF-UMEME Investment

  1. Three concerns:
    1) Borrowing money to pay dividends? At what interest rate? And if UMEME is profitable, why borrow? Suggest UMEME’s financials are scrutinized thoroughly.
    2) Why flaunt the governance processes? If the Minister is part of the decision making structures, why bypass her? The IPO did not come as a surprise – so there was sufficient time to consult properly
    3) There is never one cockroach in the kitchen – something stinky here.

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