UGANDA FOREX TRADING HOUSE COLLAPSES CAUSING HUNDREDS GRIEF

Rachel’s (not real name) marriage got off to a rocky start.

Last year Rachel got sucked into the hype about foreign exchange trading. She was pointed to Reilag Investments Ltd the biggest forex trading house around. She signed up with an initial $2,500 based on a sales pitch that she would earn 20% per month on her money, meaning she would double her money every four months.

She got paid the first month and then the second and then she had a brainwave. In August her wedding fundraising meetings kicked off and she thought it might be a good idea to invest the collections from the meetings with Reilag.

Suddenly Reilag started falling back on its payments to her before stopping altogether.

The long and short of it is that her wedding was a lot less glamourous than was initially planned and the newlyweds are barely on talking terms.

Reilag through a Cyprus based broker, Fx Pro, was trading on the most liquid market in the world. The currency market has an estimated daily turnover of up to $4 trillion dollars or the equivalent of the total economic activity (GDP) of Germany, the world’s fourth largest economy.

"Trading involves betting that one currency will move in your favour against another in a currency pair. The forex market also allows for heavy leverage, so that with relatively small sums one can trade in volumes of as much 300 times your initial input magnifying profit but similarly affecting losses...

So for instance if you enter a trade with $50 leverage will allow you control a contract of $15,000 and assuming a one percent profit on this contract would leave you $150 richer but a similar loss would set you back a similar loss

At the height of the Naguru-based company’s operation it was said they had 700 investors and $12m having passed through their account.

Investors were seduced by the promise of a 20% monthly return on their money, which means they would recover their initial investment in five months with subsequent payments pure profit.

But in December last year Reilag management informed investors that the money was all gone except for a “meager” $100,000...

In a December 3rd meeting managing director John Kasumba blamed the collapse of the company’s accounts to a “pittance” on turbulence in the euro zone.

He pledged that the company could recoup that losses in 70 days and pleaded that investors stop harassing him and his family so he could concentrate on making the money back, according to minutes from that meeting.

Kasumba was held on several occasions on the prompting of irate investors.

It is at this point that investors in a last ditch attempt to recover their monies constituted a committee to oversee the running of the company and recover investors’ money.

Eighteen days later the committee threw in the towel, reporting that Kasumba had not been cooperative and suggesting that the case be forwarded to police.

“It is on this premise that OPH 100 has decided to compose a communiqué, which will be addressed/delivered to the Inspector General of Police and copied to the various heads of security agencies to arrest JK(Kasumba) and SK (Sheila Kagunda), such that they are apprehended and pay for their crimes according to the Laws of The Republic of Uganda,” the committee said in its second and final report to investors.

Kagunda and Kasumba were the company’s main traders.

“Finally, Operation Hope 100 (OPH100) has agreed to disband and relive itself of its duties, which involves working to ensure investors principal monies are recovered from Reilag Investors,” the committee reported at the end of last year.

Sources familiar with the events say however that Kasumba presented himself to the committee and promised to be more cooperative. No report has been released by committee subsequent to this development.

Kasumba could not be contacted for comment on the matter but several investors the New Vision talked to had no kind words for the fallen financial wizard.

“I had $20,000 with Reilag and that has all disappeared, we will not let Kasumba get away scott free, if he thinks he will get away with our money he is joking,” one investor said on condition of anonymity.

Money managers in Kampala would have predicted the collapse if they had been consulted and felt investors did not do enough due diligence. Theye were seduced by the huge returns and ignored the risk.

“Before you invest the key thing is to find out whether the industry is regulated, a regulator will ensure that operators meet set standards, fully disclose the risks of the ventures and ensure that players are run by credible managers. If there is no regulator as an investor you have no fallback position,” fund manager African Alliance boss Robert Kitariko said.

Reilag was a company set up under the company’s act and was not supervised by Bank of Uganda, Capital Markets Authority or any financial industry regulator.

The police said they had recorded no complaint yet but Kampala Metropolitan Police spokesman Ibin Ssenkumbi, was reported to have said that since the victims willingly entered into a contract with the company as shareholders, they know that they have to share the risk of their business except if fraudulent activities can be proved.
“If it was a case of fraud, then it would be a criminal offence and the culprit would have to be arrested and prosecuted as a criminal,” he said. “But if it is a business loss, then it is a risk that they should be ready to bear.”
This will serve little consolation for James (not real names) who ploughed a huge chunk of his retirement benefits into the scheme.
“I cannot afford the loss at this stage in my life. What am I supposed to do now?” he asked tears welling up behind his spectacles.

WARREN BUFFET’S LESSONS FOR THE NEW YEAR

My banker friends tell me 2012 is going to be a tough year. They are already chasing down defaulters, slowing down on lending and bracing themselves for layoffs and branch closures.

Banks are normally a good indicator of where the economy is going. And then you have to love a democracy KACITA last week gave banks an ultimatum to stop charging higher interest on running loans that were contracted before the rate increases (a fair request) and vowed to stop paying UMEME bills because they are too high and they don’t like the distributors contract. They have given government 10 days to respond after which they will shut their shops in protest. Maybe the opposition should also stop paying taxes because they don’t like the government regardless that they use our roads, enjoy police protection of life and property. Actually if KACITA really wanted to make appoint they should draw up a list of protesting traders sending to UMEME asking them to come and disconnect them and take away their meters.

Anyway that aside I thought I would reharsh a column form March this year. These were excerpts from the world’s best investor Warren Buffet, who over the last nearly 50 years has built a company, Berkshire Hathaway which is valued at three times the economy of the East African community.

He is talking about America but looking to the New Year – one will call for serious belt tightening for everybody, the lessons are very applicable in Uganda.

On the economy,

“Throughout my lifetime, politicians and pundits have constantly moaned about terrifying problems facing America. Yet our citizens now live an astonishing six times better than when I was born. The prophets of doom have overlooked the all important factor that is certain: Human potential is far from exhausted, and the American system for unleashing that potential – a system that has worked wonders for over two centuries despite frequent interruptions for recessions and a Civil War – remains a live and effective”



On Managing managers/companies,

“At Berkshire, managers can focus on running their business: They are not subjected to meetings at Headquarters nor financing worries nor Wall Street harassment. They simply get a letter from me every two years and call me when they wish….. There are managers to who I have not talked in the last year, while there is one with whom I talk almost daily. Our trust is in people rather than process. A “hire well, manage little” code suits both them and me”

“Berkshire’s CEOs come in many forms. Some have MBAs; others never finished college. Some use budgets and are by-the-book types; others operate by the seat of their pants. Our team resembles a baseball squad composed of all-stars having vastly different batting styles. Changes in our line-up are seldom required.”


On Corporate culture,

“Cultures self propagate …. Bureaucratic procedures beget more bureaucracy, and imperial corporate palaces induce imperious behaviour. … As long as Charlie (Munger, vice-chairman) and I treat your money as if it were our own, Berkshire’s managers are likely to be careful with it as well.

“Our compensation programs, our annual meeting and even our annual reports are all designed with an eye to reinforcing the Berkshire culture, and making it one that will repel and expel managers of a different bent. This culture grows stronger every year, and it will remain intact long after Charlie and I have left the scene.”

On Investment,

“You can be highly successful as an investor without having the slightest ability to value an option. What students should be learning is how to value a business. That’s what investing is all about.”


On corporate governance, (in letter to his managers)

“The priority is that all of us continue to guard Berkshire’s reputation. We can’t be perfect but we can try to be. As I’ve said in these memos fro more than 25 years: “We can afford to lose money – even a lot of money. But we can’t afford to lose reputation – even a shred of reputation.” We must continue to measure every act against not only what is legal but also what we would be happy to have written about on the front page of a national newspaper in an article written by an unfriendly but intelligent reporter.”

“Sometimes your associates will say “everybody else is doing it.”… It is totally unacceptable when evaluating a moral decision. Whenever somebody offers that phrase as rationale, in effect they are saying that they can’t come up with a good reason. If any one gives this explanation, tell them to try using it with a reporter or a judge and see how far it gets them.”

The 26-page letter is devoid of illustrations and graphics but still makes for compelling reading.

BESIGYE EXIT POINTS TO POLITICAL SHIFT

Weekend reports that Kiiza Besigye is stepping down from the helm of FDC will predictably weaken the party in the short run as they adopt to changing political priorities.

Besigye, who in the last ten years has come through as the most credible challenger to President Yoweri Museveni, it was reported was taking the action to give his successor sufficient time to plant roots ahead of the 2016 elections.

However according to the FDC constitution the party’s leader need not be its flag bearer in a presidential election, so one cannot count out a fourth bid at the presidency for Besigye.

But the alternative, that the pugnacious doctor from Rukungiri has thrown in the towel and moved on, makes for more interesting speculation.

Speculation has already turned to who will replace Besigye as the de facto leader of the opposition. The usual suspects have already come up for mention; the genial Major General Mugisha Muntu, the reinvigorated Nandala Mafabi and even a few dark horses like the irrepressible Salamu Musumba have enjoyed a passing mention.

"The major pitfall for the opposition can be found in the constitution or more specifically in the way we carry out elections in this country...

Unlike in the UK but like in the US, our presidents are elected directly. In the UK the electorate votes for the party and its leader becomes prime minister. This system as has been shown in the US, means that the electorate is wont to vote for personalities over policy, and therefore likable, well known personalities are likely to be successful as opposed to technocratic, doers with wooden personalities.

This is an important distinction that should not be overlooked.

When asked at the end of her husband’s term in office why a woman has never been US president while UK has already had a female prime minster, Hillary Clinton said in the UK a woman can propel herself to the top of her party and during election time the party machinery will ensure she is elected while in the US presidential candidates – while helped by the party, find that they are running more on personal merit.

Over the last 25 years no one comes closer to near universal face recognition in this country than Museveni and that gives him a few yards over his challengers in any electoral campaign.

"So by bowing out, Besigye has with one hand given a chance for renewal while with the other taking away arguably, the only other politician with a national profile...

In the run up to the last election some members of his FDC party grumbled that Besigye was so seduced by the possibility of making it to state house as leader of a badly cobbled opposition alliance, he paid little heed to building his own party structures.

The dissenters argued even then, that a win was impossible because there was no impetus behind his race from the party, beyond the feel good anticipation of an opposition alliance. The rest as they say is history.

But there too lies another problem. In building parties around personalities, the party structures – if there are any, are subjugated to the leading personality of the day to the detriment of long term sustainability of the party.

As a result we can expect to see infighting in the FDC as the contenders jostle for power without credible party structures to moderate tempers and mediate between contending factions.

"The Honourable Ronald Reagan Okumu fired the first salvo, declaring shortly after the polls, that no “westerner” will succeed Besigye as the leader of the FDC. This ourtburst was triggered by the frustration felt by a fringe element in the FDC who felt that Besigye, a “westerner” was in the way of their plans of ethnicising the last campaigns, which they felt was their best hope of a smash-and-grab victory against Museveni...

One can expect ethnic undertones will continue to colour the debate in FDC for some time to come.

But that could be a mistake if the last election were anything to go by.

Observers were convinced ahead of the last election that with the northern war over for all practical purposes, the main issue will be Museveni’s record and more specifically his government’s perceived tolerance of corruption.

However the opposition were caught flatfooted when the Museveni team made the campaign about the future, read the youth and less about the past – textbook tactics for a running incumbent.

Besigye recognized this probably a bit too late, as evidenced by his championing of the walk-to-work demonstrations earlier this year.

Barring any accidents expect subsequent elections in this country to be about cross cutting issues, namely the economy and less and less about tribe or religion.

"So if Besigye’s exit sharpens ethnic lines within the party, expect that FDC and the leader who will emerge to be less of a threat to the NRM in 2016...

2011: THE PERFECT ECONOMIC STORM

According to the statistics the year started on a rather benign note.

Inflation in December last year was 3.1%, the more than doubling of the rate from November’s 1.4% could explained away easily as due to the festive season. Petrol was selling for less than sh3,000 a liter and unsecured lending rates were just about 20%. Foreign exchange reserves stood at 5.2 months of imports.

Fast forward to today. Inflation in November slipped to 29% from a record high 30.4% in the previous month. Petrol is on the verge of touching sh4000 a liter at the pump and lending rates are now up to more than 30%. Foreign reserves have plummeted to 3.7 months of imports in October. To put that in perspective we shed about $500m or sh1.5trillion in reserves between December and October this year.

The more reserves a country holds the better a government can cope by battling inflation and stabilizing prices and smoothing out currency fluctuations, both of which if left unchecked can sink economies.

We might have to go back ten years or more to find a time when our reserves were less than four months of the imported goods and services.

But for the man on the street he did not need official statistics to tell him something was badly wrong.

"When sugar became scarce for the first time in more than 20 years, alarm bells went off. Sugar scarcity is a throwback to a time an older generation would rather forget and an inconceivable occurrence for a younger generation. As a symbol of things gone bad, few things beat sugar shortages in this country...

It is safe to say that no one saw this coming, and for good reason.

A perfect storm is used to describe the coincidence of adverse events to make an already bad situation worse.

Regional drought and famine that stressed local food stocks, an election year, with its attendant fiscal loosening, a deepening Euro crisis, which caused a dollar appreciation, dampened demand in our traditional export markets, reduced foreign direct investment and remittances from Ugandans abroad, all conspired to create our perfect storm.

Uganda’s predominantly subsistence agriculture sector has failed to respond adequately to growing regional demand. This was made worse by failed harvests in the Kenyan rift valley due to drought in the early part of the year. This was important because not only did we start feeding western Kenya but food demand, which was previously covered by our eastern neighbor, from Southern Sudan shifted to Uganda.

When food prices, which constitute the biggest single component of how we calculate inflation, rise general prices follow suit.

According to official statistics the food price increases peaked in March before beginning to slide starting in May.

The presidential and parliamentary campaigns not only served to cause more money to come into circulation but also caused some uncertainty, which held back inflows as investors adopted a-wait-and-see attitude – a now traditional occurrence ahead of the last three elections.

Diminished hard currency inflows put the shilling under pressure forcing import costs higher, most especially for fuel. Fuel prices are an important component of all product prices on our shelves or services we consume.

In a related incident the Euro crisis seemed to come to a climax this year with real fears that the Eurozone was likely to break up and the short lived Euro currency in its final days.

The crisis which has its roots in the global financial crisis that kicked off in 2008 saw the weaker European states – Portugal, Ireland, Greece, Spain and more recently Italy straining the Eurozone’s resolve to remain afloat. Massive bailouts of Greece, Portugal and Italy have cause uncertainty which has served to further strengthen the dollar.

It has been reported that as a result of our remittances have never recovered to the pre-global financial crisis $1b as our relatives in the diaspora tighten their belts in anticipation of tougher times.

All this also fed into our power situation with government being forced to make the choice between the discomfort of loadshedding or paying out billions of shillings to subsidise the expensive thermal power generators. The lifesaving hydroelectric power expected from the Bujagali power dam missed deadline after deadline and is now expected to come on line by the end of April next year.

But finance officials believe we have got over the worst part and barring any other shocks inflation should return to single digits next year, while the exchange rates have already begun to slide following determined and consistent action from the central bank all year long.

As we wind up the year there is evidence that export earnings are picking up, with export figures for September up more than 50% from the same month last year.

"The main lesson from 2011 seems to be that we need to shore up out food production. The reality is that as the East African Community takes hold and the continued free moment of goods and services gets entrenched we will not be producing for our own consumption any more. This will require a reorientation of our farming methods and a determined push into agro-industry...

With the Eurozone crisis far from resolved, the ever unpredictable weather patterns it would be full hardy to make any predictions going into 2012.

UGANDA LESSON 2011; FOCUS ON THE PRODUCERS

Aga Sekalala Senior is easily Uganda’s largest agro-industrialist.

Over more than 30 years of deliberate, painstaking work Sekalala has built a multi-million dollar operation that processes animal feeds, chicken, fish, vanilla and its derivatives and extracts plant oils.

Tucked away in Namulonge, off the Gayaza-Zirobwe road, his industrial estate employs more than a hundred people while providing income for hundreds more local out growers, suppliers and retailers.

But the reclusive Sekalala, more likely to be found overseeing his enterprise in overalls and gum boots than decked out in a power suit and poring over revenue projections, is not a happy camper these days...

In the space of two months the shilling has appreciated nearly 20% from the September low of sh2,900 to the dollar, threatening to decimate his margins and forcing him to wonder aloud about the priorities of the country’s economic planners.

People respond to incentives -- factors that enable or motivate a particular course of action, or counts as a reason for preferring one choice to the alternatives. That is as much an economic truth as a universal truth.

This year’s economic crisis – a delayed reaction to the global meltdown that kicked off in 2008, should force us to take a hard look at our own economy and the incentives we provide.

Inheriting empty coffers in 1986 the National Resistance Movement, under pressure to generate revenues fell in line with the World Bank, IMF-led donor community.

This entailed reining in government spending, privatizing inefficient public enterprises and allowing the free flow of capital into and out of the country.

Subsidies for production were frowned upon under tightly prescribed spending plans, which were flaunted at the risk of losing regime-propping aid.

"The net effect of this is an economy, which subsidises the urban elite at the expense of the rural masses by cutting government spending in agricultural extension, health and education to a bare minimum while keep exchange rates stable, allowing for importation of luxury goods to stoke the insatiable appetite of the urban wannabes...

In all fairness, that is the price we as a country had to pay to stabilize the economy up to this point.

Now that we are generating up to a thousand times more revenue than we did in 1986 a rethink of the way we do things is long overdue.

A budgetary shift away from consumption towards production would be welcome. Support for big agricultural concerns that incorporate local farmers in their plans, in the way of tax breaks, infrastructural aid, concessional loans, a focus on research and marketing assistance for exports would be useful.

I shudder to suggest a discretionary process overseen by our local technocrats because it can easily succumb to corruption, politicking and mismanagement, but the point is government needs to step up its game if we are to become a middle income country in our life time.

It has taken 25 years to stabilize the economy, we can expect that a properly designed and executed incentive program for our productive sectors will probably take just as long and cost as much to show sustainable results.

This year government has ear marked about sh350b in interest payments, largely to service its treasury bill and bond obligations, which are issued to manage inflation. So the cost of supporting our industries is not one we would be unfamiliar with.

The point is that if Sekalala and company identify an opportunity to produce fish feeds say, because local and regional markets demand them, he should be able to go to government with a well prepared business plan and government formulates a way to meet him part way.

"As it is now when entrepreneurial spirits have an idea, their last port of call is the government. Government technocrats are clueless about what it takes to do business (forget their little village ranches subsidised by office imprest) and worse still a request for concessions is always viewed with a jaundiced eye....

It is a no-brainer. Supporting agro-industry has the greatest potential to raise rural incomes, mobilise savings and jump start another surge in tax revenue growth.

This is all text book economics with numerous case studies in western economies, Asia and even on the continent. So why aren’t these things happening?

One, because as suggested earlier the government technocrat is not wired to create wealth but to allocate already present resources, the diametrically opposite mindset to that of an entrepreneur.

And secondly, our industrial base is still small and disunited – with each businessman suing for his own selfish interest, oftentimes subverting the general good.

Regardless, the writing is on the wall the sustainability of future growth and the very existence of our nascent producers will depend on whether we starting paying more than lip service to the producers of our economy or not.

UGANDA SHILLING GAINS HURTING EXPORTER PROFITS

Exporters are gnashing their teeth in frustration at the gains the Uganda shilling has made against the US dollar in the last two months.

A combination of pre-election jitters, uncertainty in the Euro zone and less than usual export receipts at the beginning of this year conspired to push the Uganda shilling to historic lows against the dollar and other major currencies.

At the beginning of September the shilling touched crossed the sh2,900 on the inter-bank market and the actually touched in sh3,500 at some forex bureau. Since then the shilling has gained dramatically against the dollar to just over sh2,400 in the inter-bank market on Monday and sh2,450 in forex bureau around Kampala.

The double digit appreciation has placated importers, who had protested vehemently against the earlier loss of value by the local currency so much so that they suggested that the central bank fix the rate at more favourable level.

At the time President Yoweri Museveni shooed off the importers, declaring that a weaker shilling is good for exporters and his government was not going to deliberately try to redress the shilling’s slide.

However inflation too was hitting record highs – topping off at 30.4% in October the highest since early 1993, fuelled by higher food prices, campaign related spending and as a result of the shillings depreciation, fuel prices rose with the attendant upward ripple effect on other prices.

In scrambling to rein in inflation, which is too much money chasing too few goods, Bank of Uganda started aggressive efforts to mop up excess cash by stepping up its treasury bill and bond auction and by raising the Central Bank Rate to reduce borrowing and therefore money in circulation.

The newly introduced Central Bank Rate (CBR) is an indicative rate commercial banks use to determine their own lending rates.

As a result of this the yields on treasury bills and bonds have more than doubled since the same time last year. The benchmark 91-Day treasury at last week’s auction averaged 23.39% compared to 8.1% average in December last year.

The attractive yields – the best in the region compared to Kenya’s 17% and Tanzania’s 12.4%, has attracted foreign investors, which new demand for shillings has been the main cause of the local currency’s gains in recent weeks.

“The preferred situation for my exporters is that there be predictable conditions and preferably favourable to us compared to our export markets,” said Uganda Export Promotions Board boss Florence Kata.

“The current appreciation on the shilling only makes sense to exporters on their imported inputs, but the shillings he is getting for his products are less, inflation is high, bank lending rates are through the roof … I know a few who have rolled back their production they are adopting a wait-and-see attitude,” she said.

Other challenges are that Europe has had a longer summer and therefore some of their exports which can still be sourced in southern Europe have not seen the seasonal kick in prices that comes with onset of autumn in October.

On a more individual basis exporters are complaining that they are in the red.

“Look I bought inputs when the dollar was at 2,900 and now I am having to sell at 2500, I am running at a loss,” said a major exporter, who chose anonymity for fear of being misunderstood.

“This country really has to decide what it wants, do we want to support producers, job creaters, tax payers or do we want to subsidise consumers…. We talk one thing and our actions point in the other direction,” the visibly irritated exporter said.

The central bank tasked with maintaining price stability, acknowledged the difficulties the exporters are facing, but argues that not to have taken the action they had taken would have buried those very same exporters.

“We knew that this is the price we would have to pay but letting inflation gain momentum is not an option we can consider,” deputy Bank of Uganda Dr Louis Kasekende said.

He said that the tools the central bank has at its disposal are short term in their action and that we would have to take a harder look at our economy and explore more medium to long term interventions.

While brushing aside talk that the Ugandan economy has been shown up to be more style than substance like Goloola Moses, Kasekende suggested areas our planners should seriously look into.

“To begin with we may need to rethink how much national reserves we should be holding. If we did not have credible reserves we might not have been able to fight off inflation. So maybe we should focus on targeting more than the four month’s worth of imports we are currently operating under,” he said.

In addition he suggested that we may want to review our manufacturing subsidies and realign them with our natural comparative advantages and also boost support to the agriculture sector, seeing how a shock to food security in the region can have a ripple effect through the economy.

“This global financial crisis has forced a rethink of quite a few economic theories we have been operating under. It cannot be business as usual after this,” Kasekende said.

UGANDA MINISTER'S RESIGNATION; AN UNCOMFORTABLE PRECEDENT FOR COLLEAGUES

The Minister of the presidency Kabakumba Masiko tendered in her resignation yesterday in a move that may, salvage the wreckage of her political career, make other ministers shift uneasily in their seats and galvanise the NRM rebel MPs.

A police investigation into the minister’s complicity in the alleged theft of a transmitter from UBC by the Kingdom Broadcasting Services (KBS), which the minister controls, was broken by the New Vision two weeks ago.

Subsequently she has come under pressure from parliament, her party and her fellow cabinet ministers to step down.

It was always a matter of time before the honourable member from Bujenje county, Masindi disrict either jumped or was pushed. Not since the resignation of Kirunda Kivejinja in 1999 has there been such damning physical evidence of wrong doing against a serving minster.

Kivejinja opted to resign rather than suffer parliamentary censure on evidence that he, as transport & communications minister had diverted 2000 liters of fuel from Uganda Railways Corporation to aid his re-election campaign.

"For better or for worse, in politics perception is everything, so much so that facts tend to bend to fit the perception...

Whether she was involved with the actual appropriation of the transmitter is really immaterial in these particular circumstances, a point that was totally lost on the minister when she attempted a rebuttal in parliament.

Indications were that she was willing to fight on, but saner – or maybe self-interested, minds prevailed upon her to step aside. And it maybe the best thing she could have done if she hopes to bounce back into the cabinet at a later date.

"To have tried to fight a censure motion would have been akin to death by a thousand cuts, as MPs of all political shades would have taken pot shots at her under the cover of parliamentary immunity shredding her credibility – or what was left of it, in the process...

But the greater concern will be for other ministers currently facing the threat of censure or future ministers who will inevitably follow.

It seems, given the Kabakumba and Kivejinja’s precedents, that resignation becomes an option when there is physical evidence adduced against you and when there is a real threat of parliamentary censure.

Leaks from within the NRM caucus meeting on Monday suggest that a clear distinction was made between her case and that of Prime Minister Amama Mbabazi and Internal Affairs minister Hilary Onek.

Allegations have been brought against the two ministers and foreign minister Sam Kuteesa alleging they have received bribes from oil companies. The ministers have declined to resign.

Independent investigations have however revealed that the basis of the allegations – bank statements from banks in the UK, cannot be authenticated.

With the demise of Kabakumba the pressure on the minsters to step down may mount uncomfortably in coming weeks, though it is unlikely to trigger a domino effect of resignations.

But the real “winners” of this sordid affair are the NRM “rebel” MPs who are cutting out a niche for themselves as public defenders.

A throw back to the Young Parliamentary Association of the late 1990s, which spearheaded the censure of Kuteesa, and the then primary education minister Jim Muhwezi, the rebels, have forced the party hierarchy to seat up and grudgingly take notice of them.

The group whose most public faces are Theodore Sekikuubo and Meddie Nsereko, while breaking with party ranks have in effect hijacked a project that ideally would be sustained by an opposition party.

"Though cause for much looking-over-the-shoulder by NRM big wigs the rebels may serve a useful purpose in lending credibility to the party as one that is concerned about corruption.

To badly paraphrase former US president Lyndon Johnson, the NRM probably figures it's probably better to have them inside the tent pissing out, than outside the tent pissing in...

Kabakumba’s action is bound to send reverberations through the political establishment least of all because it makes a minister’s resignation a real possibility again.