Uganda: How Libyan Firm Duped Govt Over Agoa
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The East African (Nairobi)
23 August 2008
Posted to the web 25 August 2008
Charles Kazooba
Nairobi
Kampala contracted a non-existent Libyan firm to export garments to the US under the US sponsored Africa Growth and Opportunity Act, The East African has learnt.
While the Uganda government purported to have entered into an agreement with LAP Textiles Ltd, a subsidiary of the Libya Africa Investment Portfolio -- LAP Mauritius, to take over the AGOA textiles business, the Public Accounts Committee has been told that the firm did not legally exist at the time a Memorandum of Understanding was signed between the two parties.
The Uganda government claims that on June 25, 2007, it contracted the Libyan firm to produce and supply garments to the US under the AGOA arrangement. Kampala also signed off its stake in a textiles factory to the latter.
According to the MoU between the two parties, LAP was described as a private limited liability company incorporated under the laws of Uganda set up to carry out the business of textile manufacture, spinning and weaving among others.
The agreement shows that the Libyan firm acquired a 60 per cent stake in a textiles facility previously managed by Apparel Tri-Star (Uganda) whose services had been terminated over mismanagement.
The other shares were distributed between the Uganda government (35 per cent) and one Kananathan Veluppillai (five per cent). Mr Veluppillai was the managing director of the defunct Tri-Star.
But an inquiry from the Registrar General through Katuntu and Company Advocates, which the PAC engaged to investigate the deal, has established that the Libyan firm had no legal base in Uganda at the time it was engaged.
"I have searched our records and established that M/s Libya Investment Portfolio-Lap Mauritius does not exist on our company register," Darius Ruta observed in a letter dated March 26, 2008 addressed to Katuntu and Company Advocates, which he signed on behalf of the Registrar General.
Instead, Mr Ruta noted that another firm, M/s Lap Textiles Ltd, was incorporated on February 26, 2008 and issued certificate number 96255.
It remains unclear whether the Lap Textiles Ltd that was incorporated in 2008 under the Company's Act is the same one that signed the MoU with the government in mid 2007. It was also not clear if the commitments made in the MoU are binding on the parties.
"We believe they signed with a company that didn't exist," Nandala Mafabi, a member of Parliament and chairman of the Public Accounts Committee of parliament told The East African. "Ugandans are being taken for a ride. The Libyan company didn't legally exist here."
It is on that basis that the MPs are suspicious of the entire agreement since the said Libyan firm also entered into an agreement with Uganda on June 25, 2007 yet the other firm with a similar identity, Lap Textiles, was registered as a legal entity on February 26, 2008, eight months after an agreement with Kampala was signed.
On August 15 when the MPs put the Finance Ministry to task -- to explain the anomaly, the Under Secretary, Betty Kasimbazi, feigned ignorance.
"It is the Minister of Investment and the Uganda Investment Authority that knew the company," she told the committee even though the agreement was signed by her senior, Finance Minister Dr Ezra Suruma.
"We are not sure whether a Memorandum of Understanding is tantamount to a procurement and therefore a contract," Ms Kasimbazi argued.
The Executive Director of Uganda Investment Authority Dr Maggie Kigozi claims LAP was sourced through the Privatisation Unit.
"It is a registered company," she said, adding that MoUs are only made in a public-private partnership.
PAC has summoned more senior officials in the Finance Ministry and the Uganda Investment Authority to clear the air.
This is not the first time the Uganda government has been duped in such contracts. Since last year, parliament -- through a special committee -- has been investigating the mismanagement of the AGOA textile factory at Bugolobi in the outskirts of Kampala.
The MPs on the committee were informed by various witnesses that the managing company, Apparel Tri-Star (U), was actually not a subsidiary of Apparel Tri-Star of Malaysia as the government believed.
Relevant Links
On November 9, 2007 the Public Accounts Committee wrote to the Minister of Finance seeking clarification whether LAP Textiles Ltd was in Libya or Mauritius and their shareholding. But to date, the ministry's response has not been satisfactory.
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