Monday, August 18, 2014

MUKONO-KITOSI ROAD ANOTHER WAKE UP CALL



In case you have been away, the botched Mukoni-Katosi road deal has been dominating our headlines.
These are the facts as we know them.

Government sought contractors to build the 74km road. The cost of the project was put at about sh165b. An American firm Eutaw Construction Company was declared the best evaluated bidder in March 2011. As part of the deal Eutaw was entitled to an advance payment of about sh25b meant for mobilising plant and equipment and generally getting work going.

But in order to get this money Eutaw needed insurance bonds to guarantee they will do the work. Eutaw got some insurance bonds and the money was released to the contractor by the Uganda National Roads Authority (UNRA).

It’s not clear when but after the payment was made in January things started going awry.
Several things emerged that put the whole contract at risk.

It was discovered that the insurance bonds purportedly issued by Statewide Insurance Company (SWICO) were forgeries. The question is does SWICO even have the balance sheet to support such a bond? Secondly, Eutaw turned out not to be the firm everyone thought it was. Checks with the only Eutaw company in the US that deals in construction, revealed that they had no Ugandan office and neither had it ever bid for a project in this part of the world. And finally “our” Eutaw had sub-contracted all the work to a Chinese firm in contravention of the rules governing such contracts.

At this point UNRA may have been best advised to call of the contract. They did not. They got back to Eutaw and asked them to make good on these irredeemable breaches of the original contract.

At this point Eutaw went shopping for insurance firms that would underwrite the project, never mind that the horse had already bolted the barn.

Through their insurance brokers Marsh Uganda they approached three firms, with Insurance Company of East Africa (ICEA) and UAP taking up the offer. Essentially they were shopping for a fall guy, someone who would carry the loss when the deal flopped.

Everything may have gone very well were it not for UAP cancelling the advance payment bond when they realised that the payment they were supposed to be covering had already been made. That in effect means the project now is uninsured and cannot proceed.

The plot thickened when less than a week after President Yoweri Museveni flagged off the project than the Finance ministry Permanent Secretary Keith Muhakanizi wrote on 9th July 2014 requesting the IGG investigate the deal because it had come to his notice that the sh25b advance payment was paid out on the basis of a forged  insurance bond.

The police are now quizzing everyone in connection with the deal but the IGG in her report on the deal has roped in the Works minister Engineer Abraham Byandala as not beyond suspicion.

The devil – literally and figuratively, is in the detail.

Unfortunately as Ugandans this kind of corruption is par for the course. But to put into perspective this what sh25b can do for in Uganda.

According to the finance ministry’s draft estimates for the  year a total of sh347m was budget for general staff salaries in the pre-primary, primary and secondary schools so this money can pay general staff salaries for 72 years. Or pay for immunisation services for 24 years or pay general staff salaries for the health sector for four years.

What is even more shocking is given the smoothness and impunity with which the scam was planned and executed clearly the players were very practiced, which means we are probably haemorrhaging hundreds of billions  a year in such schemes.

This is unsustainable situation that deprives our children of quality social services, our businessmen a conducive environment in which to operate, invariably stains our politics and is fast making his country ungovernable.

To paraphrase the best time to nip corruption was 20 years ago the next best time is now.

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