The Auditor General (AG) Mr John F.S Muwanga, has declined to consider documents from Bank of Uganda that could hold clues to how UGX270bn out of the UGX478.8bn that was allegedly used to recapitalise the defunct Crane Bank was used, because they were submitted late.
According to a leaked letter from the office of the Auditor General, that this news site has seen, the BoU Deputy Governor, Dr Louis Kasekende on March 11th 2019, wrote to the AG submitting certain documents that “had not been availed during the audit.”
The audit in question is a special audit ordered by Parliament’s COSASE Committee on 20th December 2018 to among others, establish whether the Statutory Manager (BoU) prepared financial statements for Crane Bank, during the time they were in charge, in line with Section 90(4) of the FIA 2004.
The audit was also to ascertain the liquidity position of Crane Bank during the statutory management period and to establish whether the liquidity support of UGX466bn was used to settle obligations of bonafide customers.
In his February 2019 report to Parliament, the AG noted that whereas the Statutory Manager (BoU) had prepared Crane Bank’s annual report and financial statements for the year ended 31st December 2016 and engaged an external audit firm (KPMG) to audit the financial statements for that period, for more than two years, KPMG had failed to produce an audit report.
The report was very vital and would give clues to who exactly received the over UGX270 billion, that the AG failed to trace, out of the UGX478 billion that BoU injected into Crane Bank as liquidity support.
“According to BoU management, the audited CBL annual report and financial statements for the period starting 1st January 2016 to 25th January 2017 were not submitted to BoU by KPMG, hence I was unable to rely on the accounts to confirm the receipt and expenditure of the liquidity support and other intervention costs amounting to UGX478.8bn injected into CBL between 20th October 2016 and 25th January 2017,” noted the AG in his report titled: “Special Audit Report on the UGX478bn injected into Crane Bank by Bank of Uganda.”
Without the report, the AG then attempted to trace the money himself but out of the UGX478.8 billion, he could not trace the final destination of USD53.1m sent by Telegraphic Transfer from BoU’s Citi Bank Account and UGX77.5bn in cash from CBL currency centres to CBL’s 46 branches, altogether an equivalent of UGX270 billion.
“I cannot confirm that the funds were withdrawn by bonafide account holders at the respective branches because the daily teller transaction reports provided (by BoU) did not indicate the customer account numbers and customer names,” observed the Auditor General.
It is now believed that BoU is trying to table the KPMG audit report to explain the previously unaccounted for UGX270bn.
However the AG has declined to accept the documents saying it is too late.
“Please refer to yours ref: DGV.122.10G dated 1th March 2019 regarding the above mentioned subject. In that letter you requested this office to undertake a verification of the documents that had not been availed during the audit,” wrote the no nonsense John Muwanga to Kasekende, adding: “Regrettably, I am unable to undertake the verification since the report has been issued to the Rt Hon Speaker of Parliament on 8th February 2018.”
“Any additional verifications on the already issued report can only be undertaken with the authority of Parliament. We will keep the documents and wait for further communication from COSASE,” advised Muwanga in his letter to Kasekende, dated 4th April 2019 and copied to the Speaker of Parliament and COSASE Chairman.
Was KPMG covering up for Bank of Uganda?
The sudden appearance of this audit report after the closure of the larger COSASE probe into BoU’s closure and sale of 7 defunct banks recommended that the implicated officers, including Kasekende be held criminally liable, raises key questions as to why these key documents were being withheld by BoU and why chose to release them now?
The other question is whether actually KPMG had genuinely failed to produce the report or whether they were covering up for BoU, giving them time to try to account for the missing UGX270 billion or the main probe to end.
It is also possible that KPMG produced the report but BoU had sat on it, like the many other documents regarding the closure of defunct banks that up to now are missing.
COSASE MPs found out that Bank of Uganda was negligent in disposing off several defunct banks and broke several provisions of the Financial Institutions Act (2004). They also reported that the process of selling the defunct banks on several instances “contravened section 95 (3) of the FIA 2004” and lacked the principles of “prudence, transparency and fairness” enshrined in the constitution and the FIA Act and recommended that the BoU officials involved in the seizure and irregular sale of the banks held responsible.
In the case of Crane Bank, amongst many breaches, the MPs found out that BoU illegally ‘sold’ UGX570bn worth of bad loans belonging to Crane Bank (CBL) shareholders, at a heavily discounted and questionable price of UGX200 billion and in the process “disadvantaged” Crane Bank.
The MPs want the shareholders of Crane Bank compensated for this and the responsible BoU officials held liable.
Dfcu Bank confirms fraud; declines to give details
Dfcu bank, has this evening confirmed that there was indeed fraud at the bank, but declined to divulge details of how much and who was involved, but said investigations were on going.
In a series of tweets, on their official twitter account (@dfcugroup), the bank said that “In May 2019, the Bank detected a case of fraud that was immediately reported to the police (CID HDQTRS GEF 604/2019) and investigations are ongoing.”
The bank which has been mum since the story was broken on Friday, went on to claim that the incident had “been grossly and maliciously misrepresented in an attempt to damage the reputation of the Bank, destabilise the banking sector and the economy in general,” but offered nor further detail on what had been misrepresented.
Several media houses that broke the story have reported that up to $2.6m was lost to hackers who breached the bank’s system, citing unnamed bank sources.
“The Bank takes these malicious reports seriously and reserves the right to take legal action as well as to refer the authors and disseminators to the relevant law enforcement authorities,” the bank threatened in one of the tweets.
Dfcu Bank is one of the domestic systemically important banks (DSIBs) together with Stanbic Bank, Standard and Chartered Bank and fraud at the institution would be of national interest.
DSIB is a term used to describe banks whose business failures may widely impact the economy. These are deemed too big to fail because if their broad business networks across the economy.
UBL board hails Mark Ocitti for resounding growth and innovation
The Uganda Breweries Limited (UBL) Board of Directors, has hailed outgoing its Managing Director, Mark Ocitti for what they called: “great milestones, resounding business growth, capacity expansion, impactful community projects in education, sanitation and a spirited, empowered staff.”
Addressing a farewell press conference, on Thurday, July 11th attended by UBL’s senior and middle management as well as members of the media, UBL board Chairman Japheth Katto, said that Ocitti’s 3 years at the brewery have set up a great foundation to deliver future “great performances” thereby “returning significant value to our investors for years to come.”
“In the last 3 years, the business has registered a year-on-year average growth rate of over 30% in volumes and over 6% in topline delivery, which has cemented our market leadership of over 54% of market share by value in Total Beverage Alcohol (TBA) in beer and spirits,” said an excited Katto.
“We have significantly grown our numeric distribution by over 25%, which has manifested in the distinctive visibility and increased availability of key brands like Bell, Pilsner, Tusker Lite and Guinness. This is reflected in the growth of the retail outlets handling our products by 28,000 outlets in 3 years thus growing the households we impact positively by over 80,000,” he added.
Although Kato did not delve into the specific details of UBL’s financial performance under Ocitti, CEO East Africa Magazine, understands that Ocitti inherited a gross turnover book of UGX377.8 billion and a profit of UGX34.6 billion for the year, ended March 2016.
By end of March 2017, sales revenue grew by 6.5% to UGX402.5bn and in the year ending March 2018, sales revenue jumped by a further 6% to UGX426.7bn- a compound annual growth rate (CAGR) of 4% across the 3 years.
During this time, Ocitti who is a sales and commercial expert by background, narrowed down the gap between UBL and Nile Breweries, their arch-rivals from UGX189bn in 2016 to UGX126.4 billion- UBL’s gross turnover for 2016 was UGX377.8bn compared to NBL’s 567.7bn while in 2017 UBL sold UGX402.5bn worth of drinks compared to NBL’s 528.9bn.
Ocitti’s exciting, challenging and fulfilling 3 years
Mr. Ocitti is heading to Tanzania as the Managing Director for Serengeti Breweries Limited, a member of the East African Breweries Group and as such, part of Diageo, effective August 1, 2019. Ocitti who possesses over 20 years of business leadership in Oil & Gas, telecoms and beverages sectors, is the second Ugandan to lead UBL after Baker Magunda is also the second Ugandan Managing Director within the Diageo family working on the African continent, outside their home market. Ocitti also joins 14 other Ugandans that Uganda Breweries has exported to Diageo’s affiliate companies in Kenya and the United Kingdom.
“On behalf of the Board and our investors, I thank you, Mark for your hard work and delivering on your commitment to build and grow the business you were given charge of. Your stewardship has sustained our leadership in innovation, delivered market share command and significantly improved the opportunity for our consumers to access their favorite brands. We challenge you to carry the winning attitude you infused in the staff and fly the Ugandan flag high in Tanzania and wherever else you will go after that,” he said.
Mark will be succeeded by Alvin M. Mbugua
A seasoned commercial professional, Mbugua joined East African Breweries Limited (EABL) in May 2013 as the Group Finance Controller before transitioning to Uganda as Finance and Strategy Director in October 2015. Prior to his new appointment, Mbugua was Head of Sales of the biggest Sales division in Kenya Breweries Limited (KBL), a role that he has held for the last 17 months.
Mbugua was also recognized as 2017 Chief Finance Officer of the Year and took home the Strategy Execution Award at the Annual CFO Awards organized by the Association of Chartered and Certified Accountants (ACCA) and Deloitte Uganda.
On his part, Ocitti said he was “really honored to have presided over Uganda Breweries at a time when it has achieved the kind of growth that has been spelled out by my Chairman,” he said adding that the three years had been “exciting, challenging and fulfilling all at the same time.”
He said the three years, had “defined the legacy of Uganda Breweries for years to come” as UBL had “received the most overwhelming stamp of approval from our consumers as they sampled one or more each of our wide category of alcoholic beverages.
“I am really honored to have presided over Uganda Breweries at a time when it has achieved the kind of growth that has been spelled out by my Chairman,” he said adding that the three years had been “exciting, challenging and fulfilling all at the same time.”
Truly, truly excited to be back
Welcoming Mbugua, Katto said that he was confident in his abilities to lead the company forward as Uganda’s most trusted, respected and celebrated company.
“I have no doubt that the leader we are getting in Mr. Mbugua will enable us to continue to deliver unprecedented sustainable growth whilst continuing to drive a winning culture for our staff so we can export more Ugandan talent to take over more corners of this continent,” said Kato.
Mbugua, who said he was “truly, truly excited to be back” said his return was a in “a big way a continuation of the building blocks” laid before when he was Finance & Strategy Director and that he returns as a “much more experienced and fine leader” following the commercial role he played in Nairobi, after Uganda.
“I truly feel humbled to be taking the stewardship of the 4th largest tax payer in Uganda. It is no light task, I must bear witness to that. Chairman, with the confidence that comes from the board and yourself, I really want to lay out and commit, on behalf of myself and my team, that we will continue the great work and achievements left by Mark Ocitti and the other MDS who left before,” he said.
“UBL has been around now for over 70 years. We are the generation that is taking UBL into the 2020s and see UBL become 80 years old; it is no mean feat and we do not take it lightly. We understand what our forefathers have done before, we appreciate what Mark and his team have done up to this point and ours is to continue the heritage; that great story and hopefully, pass over a company to the next generation that is far greater than what we found it. That is the only gift that we can give back to Uganda, the young people coming up, and to ourselves, as we serve in leadership at this time,” he said.
Hima Cement former MD Speaks out on why he left his job and why Hima made UGX32 bn losses
Hima Cement, in 2018 made a loss of UGX32.5 billion, down from a profit of UGX71.7 billion in 2017, according to the company’s results, this reporter has had access to.
According to the 2018 audited company accounts, the Lafarge-Holcim subsidiary in Uganda also suffered a 9% drop in sales, from UGX537.4 billion in 2017 to UGX489.5 billion.
This is despite having opened a new USD40 million plant in Tororo, in May 2018, with a promise to increase production from 0.9 million tonnes to 1.7 million tonnes annually.
In June 2019, Nicholas George the Hima Cement CEO suddenly left the company, under unexplained circumstances, just after 16 months, to take up another job outside Lafarge-Holcim in Cambodia.
CEO East Africa Magazine has not yet established a direct link between the CEO’s exit and the poor business performance.
However, a press statement released by the company, at a function to bid farewell to the outgoing CEO and welcome Mr. Jean-Michel Pons (42), the new CEO, Barbara Mulwana the new Hima Cement board chairman said that the outgoing CEO, had helped grow sales as well as Hima Cement’s profits by 15%.
Michel Pons, joins the company from LafargeHolcim Moldova. Pons, who has been with LafargeHolcim Group since 2011, has worked in Russia, Serbia, Algeria, France and more recently Moldova. He brings a wealth of knowledge of the construction industry from his previous deployments.
This reporter, in an email, to Ms. Mulwana asked about the differences between the figures we had had access to and the said 15% growth in profits, but she did not answer back. Attempts by this reporter to also get a statement from the company’s spokesperson about the company’s performance, were futile as the promised response never came through for over 4 days.
According to results available to us, Hima Cement enjoyed good sales growth between 2014 and 2016 in which sales grew from UGX475.2 billion in 2014 to UGX550.1 billion in 2015 and UGX564.1 billion in 2016. Similarly net profits in the same period grew from UGX47.2 billion in 2014, to UGX63 billion in 2015, peaking at UGX72.5 billion at the end of 2016.
However in 2017, sales reduced to UGX537.4 billion and further to UGX489.5 billion in 2018. Net profits also reduced to UGX71.7 billion in 2017, before a tailspin tumble to UGX32.5 billion loss in 2018.
Nicolas George, the former MD responds; blames losses on past mismanagement
In response to our LinkedIn inquiry, Nicolas George clarified that he had left Hima Cement following completion of his assignment to “clean up” the business and that he had received an irresistible offer from his current employers.
“I came to Hima to clean the company following few years of mismanagement. You can easily see it if you read the annual report of Bamburi cement,’ he said, without going into more details.
“The results were negative because we had to write off a lot of things, clean the bad debts that were hidden,” he further explained, adding: “The job was done, the management team completely changed and the company is doing good in H1 2019, except for the loss of Rwanda market due to border closure.”
“My job was completed with success. Feel free to check with Hima management if you want. I left because I had completed the clean-up I was hired for and because I had been with the group for almost 15 years and I got an opportunity I could not refuse,” he said.
Both Dr. John P. N. Simba and Seddiq Hassani the Bamburi Group Chairman and Group Managing Director respectively, in the 2018 Annual Report, blamed Hima’s bad performance on rising costs of operations; namely fuel, coal and petcoke costs following global market price increases as well as slow growth in the cement market and “higher levels of provisioning.”
A provision is an amount of cash set aside from the profits in the accounts of a business to cover a known liability or to account for depreciation of an asset. This lends a lot of Credence to Nicholas George’s earlier claims of past mismanagement and cover-ups that necessitated massive write-offs.
For example, Hima Cement recently had to return hundreds of acres of community land in Tororo, Eastern Uganda, that it said had been bought in ways that contravened Lafarge Group’s known principles and in the process lost several billions of shillings. This is after Nicholas George appeared before the Justice Bamugemereire land probe committee and pledged to return the land.
Leadership cleanup at Hima Cement
Nicolas George who has since taken up a new post as CEO at Chipmong Insee a Cambodian cement company in South East Asia, became Hima Cement CEO in February 2018 replacing Allan Ssemakula, who served in an acting capacity, between November 2017 and February 2018, following the sudden departure of then CEO Daniel Pettersson over what is now believed to be compliance issues.
Much of the bad performance happened during the time Hima Cement did not have a substantive CEO and Nicolas George’s time.
Hannington Karuhanga, then board chairman has quietly left the Hima Cement board and has been replaced by Barbara Mulwana. Semakula has also since left Hima Cement and is now Enterprise Director at Airtel Uganda.
Karuhanga is also Airtel Board Chairman. Losses largely blamed on the cost of provisioning for damages caused by past mismanagement, hidden bad debts and bad procurements
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