On March 12th, Par­lia­ment passed a pro­posal to is­sue promis­sory notes to FI­NANSI/ ROKO SPV (Spe­cial Pur­pose Ve­hi­cle) Lim­ited and this has sparked a num­ber of con­tro­ver­sies from the me­dia, ac­tivists, some mem­bers of the op­po­si­tionCivil So­ci­ety Or­gan­i­sa­tions and pub­lic out­cry in gen­eral. The Gov­ern­ment of Uganda had ap­proved the con­struc­tion of the In­ter­na­tional Spe­cial­ized Hos­pi­tal (ISH) of Uganda in Oc­to­ber 2014[1]. The ap­proval fol­lowed the ne­go­ti­a­tions and agree­ments be­tween Gov­ern­ment and FI­NANSI/ ROKO Con­struc­tion SPV Lim­ited. The con­struc­tion of the World-class hos­pi­tal, ac­cord­ing to the Min­istry of Health, is meant to re­duce ex­penses by the gov­ern­ment on send­ing peo­ple abroad for med­ical treat­ment.

The Se­quence of the Events

On 29th Oc­to­ber, 20l4 a con­cept plan to fi­nance, de­sign, con­struct, equip and op­er­ate the hos­pi­tal was sub­mit­ted to Gov­ern­ment and was ac­cepted.

In No­vem­ber 2014, the pro­ject frame­work agree­ment was signed to guide the ne­go­ti­a­tion of the fi­nal Pro­ject Agree­ments.

In May 2015, the pro­ject works in­vest­ment agree­ment (PWIA) was signed for the de­sign, fi­nance, and con­struc­tion and equip­ping of a 240-bed hos­pi­tal and staff train­ing. It was agreed that con­struc­tion would cost US$ 249.9 mil­lion and the fi­nanc­ing cost of US$ 99.5 mil­lion.

In De­cem­ber 2015, the pro­ject ser­vices agree­ment was signed for the op­er­a­tion and main­te­nance of the hos­pi­tal for a pe­riod of eight (8) years. It was agreed that Min­istry of Health among oth­ers shall pay the hos­pi­tal op­er­a­tions re­mu­ner­a­tions (man­age­ment ser­vices re­mu­ner­a­tions) of US$ 5 mil­lion per quar­ter dur­ing the first year and USD 6 mil­lion per quar­ter in the fol­low­ing years. In ad­di­tion, the Min­istry shall pay an­nual op­er­a­tions ser­vices re­mu­ner­a­tion to be agreed upon by the Min­istry of health and the Hos­pi­tal.

On 27th Jan­u­ary, 2016 Gov­ern­ment en­tered into a Pro­ject Ser­vices Agree­ment (PSA) with the In­ter­na­tional Spe­cial­ized Hos­pi­tal of Uganda Lim­ited to un­der­take the op­er­a­tions and fa­cil­i­ties man­age­ment of the hos­pi­tal for a pe­riod of 8 years from the date of com­ple­tion of the con­struc­tion of the hos­pi­tal from the date of com­ple­tion of the con­struc­tion of the hos­pi­tal.

In De­cem­ber 2018, the Di­rect Agree­ment was signed with the Pro­jec­t’s Promis­sory Note Fun­ders.

On 12th Feb­ru­ary 2019, Hon Ba­hati, State Min­is­ter for Fi­nance, pre­sented the pro­posal to is­sue Promis­sory Notes not ex­ceed­ing USD 379.71 Mil­lion to FI­NASI/ ROKO Con­struc­tion Spe­cial Pur­pose Ve­hi­cle (SPV) Lim­ited to Par­lia­ment which was re­ferred to the Com­mit­tee of na­tional Econ­omy for con­sid­er­a­tion.

On 12th March 2019, Par­lia­ment ap­proved the pro­posal to is­sue the Promis­sory notes to FI­NASI/ ROKO af­ter adopt­ing the re­port by the Com­mit­tee on Na­tional Econ­omy.

Key things to note about con­tract be­tween Gov­ern­ment and FI­NASI/ ROKO

A Promis­sory Note com­mits gov­ern­ment to pay an amount equiv­a­lent to its face value when its ma­tu­rity pe­riod comes due.

Gov­ern­ment has an oblig­a­tion to is­sue a promis­sory note(s) to the com­pany at every stage of im­ple­men­ta­tion upon cer­ti­fied ap­proved com­ple­tion of each mile­stone. Con­se­quently, a Mile­stone Com­ple­tion Cer­tifi­cate shall be is­sued by Gov­ern­ment within 2 days af­ter re­ceipt of the ap­proved cer­tifi­cate.

The promis­sory notes shall be re­deemable af­ter the first two (2) years (af­ter pro­ject com­ple­tion) in line with the Promis­sory Note Re­demp­tion Pro­file Sched­ule-3 con­tained in the Di­rect Agree­ment (DA).

The Min­istry of Health, which will be the owner of the hos­pi­tal, will pay the SPV, through its an­nual bud­get, dur­ing the 8 years of op­er­a­tions.

The hos­pi­tal shall be con­structed on Block 269 at Lubowa Plot No.2772 which is owned by Uganda Land Com­mis­sion (Min­istry of Health), and it has no en­cum­brances.

The SPV is con­sti­tuted by FI­NASI, as the Lender and the Ugan­dan con­struc­tion com­pany ROKO Con­struc­tion Lim­ited and will be in­cor­po­rated in Ugan­dan law. ROKO will exit the SPV af­ter ter­mi­na­tion of the civil con­struc­tion.

The pro­ject model is based on a pro­ject fi­nanc­ing plan, where the se­lected pri­vate bank (African Ex­port-im­port Bank) will fi­nance the to­tal amount of the pro­ject to the SPV for a pe­riod of 2 years of grace and will be re­paid through the fol­low­ing 6 years. The in­ter­est on the prin­ci­pal amount will be re­paid start­ing from the sec­ond year.

As a con­di­tion to the achieve­ment of the con­struc­tion ef­fec­tive date, the Min­istry of Health and Min­istry Fi­nance upon re­quest by the FI­NASI en­ter into Lenders Di­rect Agree­ment with fi­nance par­ties, that is, African Ex­port-Im­port Bank and Bar­clays Bank of Uganda.

The pro­ject fi­nanc­ing plan in­cludes; pay­ment pe­riod of 6 years, grace pe­riod of 2 years, ef­fec­tive in­ter­est rate 6.49% and the bor­rower is SPV (FI­NANSI/ ROKO).[2]

The pa­tient rev­enues gen­er­ated by the hos­pi­tal shall be paid into a rev­enue col­lec­tion ac­count, which shall be opened by the hos­pi­tal un­der the in­struc­tion of the Min­istry of Fi­nance, Plan­ning and Eco­nomic De­vel­op­ment (MoF­PED). The hos­pi­tal rev­enues ac­count shall be op­er­ated by MoF­PED and the pro­ceeds from that ac­count sha11 be paid into the Uganda Con­sol­i­dated Fund.

Con­clu­sion

The con­struc­tion of the In­ter­na­tional Spe­cial­ized Hos­pi­tal of Uganda is a very in­ter­est­ing pro­ject idea which has got its out­stand­ing ben­e­fits that in­clude; re­duc­ing gov­ern­men­t’s ex­penses on send­ing peo­ple for treat­ment abroad and pro­mot­ing med­ical tourism. That notwith­stand­ing, it re­mains un­clear why Gov­ern­ment made a con­tract with ROKO/​FI­NASI be­fore get­ting ap­proval from Par­lia­ment. It is also un­cer­tain why FI­NASI would run the op­er­a­tion and main­te­nance of the hos­pi­tal for a pe­riod of about 8 years yet the pro­ject is ex­pected to be com­pleted in two years.

Al­though the pro­posal by Gov­ern­ment was ap­proved by the Par­lia­ment, some mem­bers of the Na­tional Econ­omy Com­mit­tee did not sup­port it. They wrote a mi­nor­ity re­port and noted that there is no al­lu­sion or ref­er­ence to on open bid­ding or com­pet­i­tive process from which FI­NANSI/ ROKO was eval­u­ated for the job at hand. They also in­di­cated that there was no Pub­lic Pri­vate Part­ner­ship arrange­ment to­wards the pro­ject.

Ref­er­ences

[1] Na­tional Econ­omy Com­mit­tee Re­port, March 2019

[2] MoF­PED, Feb­ru­ary 2019