State House, Ferdsault under scrutiny over REA debt
Discussed in the Committee on Commissions, Statutory Authorities and State Entreprises on August 9th, 2016
The Committee of Commissions, State Enterprises, and Statutory Authorities (COSASE) met in a follow-up meeting, the institution of Rural Electrification Agency (REA) on the Auditor General’s report for financial Year 2013/14. In a previous meeting chaired by Honourable Abdu Katuntu, the Deputy Executive Director, Mr. Godfrey Werikhe and Mr. Patrick Kyakulaga were asked to submit corresponding documents as the evidence for their responses.
Although REA did not have every document as required, management submitted a number of them, inclusive of the notice to extend to Imperial Royale Hotel, funds from the Rural Electrification Fund (REF) to the tune of UGX 263 million. In a letter submitted to the committee, Hon. Daudi Migereko, then, Minister Energy and Mineral Development in the cabinet explained a directive by the President seeking to donate the aforementioned sum to the hotel to buy transformers that would facilitate the media centre for the Commonwealth Heads of Government Meeting (CHOGM) back in 2007, with a promise of reimbursement by State House. However, to date, the money had not been paid and imperial Royale was listed as the debtor not statehouse, a fact that baffled the members present. They also queried why REA had not procured the transformers instead of extending a cash donation as the former was well within REA’s mandate. REA told of the urgency of the matter then and that’s why it had to come as soon as possible .The committee resolved to establish whether in fact the transformers were bought or it was another ploy to fleece Ugandans.
Another debtor, Ferdsault Services Ltd was in attendance of the meeting; the company owes REA UGX 3.08B over a period of 9 years. It’s important to note that Ferdsault had been awarded a lease of 10 years, so it only got one to end. The Although REA made efforts to regain the money, sending demand notes often, their efforts have been futile. Mr. Bonny Kizza the Finance Director of Ferdsault told of the company’s plight, he said that even though they wanted to pay back what was owed, they just did not have the money. When asked why, Ferdsault said the company had not turned a profit, was in financial distress and was even on the verge of liquidation. The company was running on the hope that in a turn of events they will break even or start making profits.
It was also heard that the two parties were involved in other businesses and REA had diligently paid its dues to Ferdsault. REA cited the risk of Ferdsault not fulfilling its end of the bargain on a project it had been procured to accomplish because of lack of funds, thus prompting them to always pay. Members could not understand why it happened the way it had and if it had been the other way round, REA would not be sued.
The meeting also exposed the fact that Ferdsault did not meet the precondition of having a performance bond and were still given the lease by REA for the construction of voltage lines. The legal team of REA told the committee that at the time it wasn’t a precondition but when the anomaly was discovered, Ferdsault was informed and UGX 12M and 60 million was paid to REA. Barclays is indicted as the institution to provide performance security but had since not.
REA also procured a private firm at UGX110 M with the advice of the Office of the Auditor General to audit Ferdsault in a bid to establish whether the latter was able to offset its debt. Although the audit was completed the contents were yet to be shared. Members pointed to the fact that procuring the audit firm was the sole responsibility of Ferdsault and erred by billing REA. Also, Ferdault owes money to the Uganda Electricity Transmission Company (UETCL).
Members still sceptical about the relationship REA had with Ferdsault given the amounts of money involved and no payments had been effected. They also asked the company to deduce a payment method for the UGX 3.08B to REA while the UGX 110M to be paid effective immediately.
The remaining documentary evidence was also requested for by Wednesday, close of Business.