Fall of the legends

HAGGAI MATSIKO December 24, 2018Cover Story, In The Magazine, The News TodayLeave a comment

From Uganda's celebrated bankers to 2018 bummers

Kampala, Uganda | HAGGAI MATSIKO | In 1991, some of the most powerful people in business and public office In Uganda from western Uganda jointly opened a bank. They called it the Kigezi Bank of Commerce with a commence capitalization of US$20 million.

They included none other than current Governor of the Central Bank, Tumusiime Mutebile. At the time, he was the permanent secretary to the Ministry of Finance Planning & Economic Development. Others were tycoon Amos Nzeyi, current Prime Minister, Ruhakana Rugunda, retired Supreme Court judge, George Kanyeihamba, former Finance Minister, Ezra Suruma, and former Information Minister and decorated bush war heroes, Maj. Gen. Jim Muhwezi, and Mathew Rukikaire. The powerful Asian family; the Mukwanos injected in capital.

A few years later, a Kenyan family of Asian descent called the Gidoomals acquired 86% shareholding in the bank and, along the way, it was renamed the National Bank of Commerce Uganda (NBCU). Later, the Gidoomals sold their major stake to other shareholders. In October 2009, investors from Abu Dhabi, invested US$10 million in the bank. Then in July 2011, Emirates Link, an Abu Dhabi investment company acquired 25% shares of the bank and its owner, Ahmed Darwish Almarar, became Chairman of NBCU.

But these were turbulent times at NBCU as minority shareholders squabbled with majority shareholders about the direction of the bank and the role of the new, powerful, investors.

And that is when Bank of Uganda (BoU) Executive Director Supervision, Justine Bagyenda, in March 2012 seized the opportunity to assert her authority on the commercial banking sector.

Bagyenda's power

Bagyenda appointed a special advisor, Abbas Mawanda, to guide NBCU through the murky phase. Some of these actions prompted a run on the bank of sorts by apprehensive customers.

Then on September 27, 2012, BoU took over NBCU and transferred its deposits and branches to Crane Bank. Court cases ensued that left NBCU's affairs in limbo. But from the ashes of NBCU, Bagyenda showed the steel that had already earned her the moniker of 'Iron Lady' within the corridors of the central bank and strike fear in the managers of commercial banks.

For taking action on a bank owned by some of the most powerful people; Mutebile, Mbabazi, Rugunda, Muhwezi, Rukikaire, Nzeyi, Rugunda, and their Arab tycoons, Bagyenda had showed that nobody in the sector is untouchable.

Bagyenda's power was again revealed in 2014 as BoU moved to takeover Global Trust Bank over alleged mismanagement. This bank had powerful external tentacles, including a former president of a foreign country, who even flew in to meet President Museveni. The shareholders assured Museveni that they were willing to recapitalise the bank and Museveni assured them, GTB would be safe. Museveni was furious and threatened to fire Bagyenda and Mutebile. They remained firm and later convinced Museveni that the bank had to be closed. Museveni nearly apologised to Bagyenda.

She became known for being tough on bankers and was easily the most feared official both within the walls of BoU and throughout the financial sector.

She could fire a bank chief executive officer, a BoU official told this reporter. But how did she do it?

According to revelations from the on-going investigation by parliament's committee on Commissions, Statutory Authorities and State Enterprises (COSASE) into Bank of Uganda's sale of assets of the seven defunct banks, she did it recklessly, with impunity, and without following right procedures.

She also might have enriched herself in the process, insiders claim. The Independent has learnt that in one incident, Governor Mutebile learnt about the sale of another bank in a phone call. In another, Bagyenda simply placed a phone call to the buyer of a bank she had chosen. In yet another case, she sold the bank 15 days before closing it. There is no record of negotiations. Some critical documents are missing. These are some of the findings so far of the on-going investigation by COSASE.

As these cases reveal, the investigation is a climax of scandals that have rocked the central bank violently bringing down its longstanding facade as an island of excellence run by people of integrity.

It appears, however, that Bagyenda's actions had precedents that she had witnessed even before she became BoU's Director of Commercial Banking in 2002.

She possibly was privy to how the BoU took over Teefe Bank (1993), International Credit Bank Ltd (1998), Greenland Bank (1999), and Co-operative Bank (1999), which all appear to have been badly handled. So she possibly did the same with the National Bank of Commerce (2012), Global Trust Bank (2014), and Crane Bank (2016).

The mishandling of BoU's takeover of banks being investigated by COSASE was exposed by the September Auditor General's report, which details concerns over the way the seven defunct banks were closed and sold by the central bank.

More than anything in the history of the central bank, the scandals that have emerged out of these investigations have unmasked the once celebrated regulators of the country's financial sector.

The most exposed officials at this point appear to be Bagyenda, who has since left her post of Executive Director Banking Supervision (EDS) and her former deputy Benedict Ssekabira, who remains at the central bank.

But the biggest victims of these scandals are likely to be Governor Mutebile and his deputy Louis Kasekende. The two have even been asked to resign by, among others, President Museveni's handlers.

For Mutebile who as Governor is directly responsible for supervising the EDS, the question many are asking is; where were you when all this was happening? His deputy Kasekende faces the same question because he sits on the central bank's board that is supposed to play the oversight role over the actions of the central bank.

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Tags BAGYENDA BANKERS BANKING BOU COSASE HAGGAI MATSIKO LEGEND UGANDA