The Deputy Solicitor General, Pius Biribonwoha has appealed to Parliament’s Finance Committee to endorse a proposal by government to acquire 150,000 preference shares in Roko Construction Limited worth 202 billion Shillings.

While appearing before the committee on Tuesday, Biribonwoha said that if the move is not supported, several government projects being handled by Roko will stall.

He said that the proposed intervention by government should be looked at strategically because of the effect it may cause in case the shares are not purchased.

The proposal for the purchase of Roko shares was first tabled before parliament two weeks ago when the Minister of State for Finance, Henry Musasizi told the House that Roko is facing severe liquidity challenges that have constrained its ability to execute contracted projects and adversely affected payments to its suppliers.

Roko currently has projects with signed contracts worth 1.064 trillion Shillings of which 696.6 billion Shillings are government projects.

The company’s indebtedness, as of May 31, 2022, stood at 202.4 billion Shillings. It also has contingent liabilities from bank Guarantees for ongoing projects worth 130.9 billion Shillings while its indebtedness to financial Institutions totals 35.7 million Shillings and USD 20.7 billion and dues to local suppliers stand at 46.8 billion Shillings.

Roko’s liquidity situation arose primarily from delayed payments on major projects, failure to refinance expensive Shilling loans with cheaper external financing, the impact of the COVID-19 pandemic on the construction industry, escalation of financing costs, weak Corporate Governance, and inadequate management.

It’s on the basis of this that President Yoweri Museveni directed the Minister of Finance to negotiate the Government’s acquisition of shares to salvage the company and allow it to implement outstanding project contracts.

MPs sitting on the Finance Committee have in the past weeks expressed mixed feeling over the proposal with a section saying that it was a bad deal for the country.

During their interface with the Solicitor General, Muhammed Muwanga Kivumbi, the Butambala County MP objected to the proposal by government saying that the failed intervention would only affect five commercial banks that extended Roko, bank guarantees worth130 billion Shillings out of the 21 commercial banks in Uganda.

Documents before the committee indicate that as of 31 May 2022, Roko’s debts were equivalent to 202.419 billion Shillings with DFCU Bank, ABSA Bank, and Bank of Baroda.

Charles Byaruhanga, the Ministry of Finance’s Technical Adviser on Budget told the committee that they had held discussions with the Bank of Uganda which indicated that Roko’s indebtedness would have serious ramifications on the financial sector.

Minister Musasizi has in the past days appealed to the committee to approve government’s intervention in Roko saying that the country’s interests would be safeguarded by having representatives on the company’s board.

He also proposed the appointment of a chief internal auditor to manage risks, adding that government will also have veto powers on acquisition of loans and sale of assets.

Keefa Kiwanuka, the Finance Committee Chairperson confirmed that government has addressed some of the fears of the MPs and they are now ready to start writing their report.

Leave a comment

Your email address will not be published. Required fields are marked *