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Corruption in Uganda: Minister Sam Kutesa and Company May Yet Survive Their Latest Scandal

America’s Department of Justice (DOJ) statement of November 2017, naming Foreign Minister Sam Kutesa as a recipient of a bribe in exchange for oil concessions and other contracts may or may not constitute a change of policy among Uganda’s development partners. The United States has known about and tolerated the most glaring instances of corruption for much of the thirty-year life-span of the National Resistance Movement government. Any foreign policy decisions in which morality trumped the power and profit motives do not easily come to mind.

For Mr Kutesa personally, the acquisition of the airport ground-handling business by his company ENHAS in the late 1990s was an early indicator of how lucrative his status as the President’s brother-in-law and permanent member of cabinet was going to be. The latest scandal relating to the allocation of oil concessions is instructive in the mechanics of under-development.

Where there was potential for national progress, what the Kutesas were interested in was a miserable half million dollars, some unnamed ‘gifts’ including some for the President of Uganda, an e-money transfer platform and an e-ticketing platform for their transport sector business, the business itself hijacked from the public sector. Most of these they could have acquired without divesting themselves of their last shreds of dignity.

A dubious history

Sam Kutesa’s cost to the Ugandan economy first became widely known in February 1999 when he became the second minister to be censured by Parliament (after Jim Muhwezi), for influence-peddling, by a resounding vote of 152-94. In a conflict of interest as a public official, he had acquired the state-owned ground-handling service of Entebbe International Airport for his company ENHAS. The divestiture of this significant income stream may have caused the collapse of Uganda Airlines. He is now rumoured to have sold his interest in ENHAS to a firm in the United Arab Emirates.[i]

Ten years later, correspondence between the American Embassy in Kampala and the State Department published by Wikileaks states in part, “Government corruption is a daily theme in Uganda media [….] Many Ugandans believe President Museveni will never hold top NRM officials – like Security Minister Amama Mbabazi, Foreign Minister Sam Kutesa, and Trade Minister Kahinda Otafiire – accountable for corruption [….]” (2010 January 5, From: Uganda Kampala To: Department of Justice […] Secretary of State).

Following the Commonwealth Heads of Government Meeting in 2008, a cable from the American Embassy in Kampala to the USA read in part, “The U.K. is considering visa restrictions for senior Ugandan officials guilty of misusing $27 million allocated to the November 2007 Commonwealth Heads of Government Meeting (CHOGM) in Kampala. The British say their primary target is Foreign Minister Sam Kutesa” (2010 January 13, 14:02 From: Uganda Kampala To: Central Intelligence Agency […] Secretary of State | United Kingdom London […] Source: Wikileaks).

Mr Kutesa together with ministers John Nasasira and Mwesigwa Rukutana was tried in Uganda for contributing to the loss. They were acquitted in 2012 for lack of evidence. He went on to serve as President of the United Nations General Assembly beginning in 2014.

None of the above red flags discouraged development partners (USA, UK and Ireland) from supporting the régime including by providing military training and equipping the police force which are now adept at quelling all public displays of disaffection with corrupt government.  Why then has the United States chosen to embarrass the régime by naming Sam Kutesa in connection with a bribe? The answer may be that it’s just business.

The alleged bribe was from a Chinese entity primarily for oil concessions but also for other large infrastructural works. American companies are also interested in Ugandan oil concessions and potentially other business. Ambassador Lanier reported in October 2009 that American Supermajor “Exxon/Mobile is considering a visit to Uganda later this year. […] We wish to support transparent management and prudent investment of oil wealth in the years ahead.”

The United States then sent a technical assistance team under the Energy, Governance, and Capacity Initiative (EGCI) in 2010 presumably to oversee, if not to influence, the allocation of oil concessions. During discussions about corruption in the new oil sector, the Ambassador mentions that Kutesa was ‘noticeably quiet.’ (2010 January 28, Telegram (cable) From: Uganda Kampala To: Central Intelligence Agency | […] Secretary of State | United States Africa Command. Source: Wikileaks).

Mr Kutesa’s first apparent oil-related transgression was allegedly to corrupt the process of awarding oil contracts. In a cable intercepted by Wikileaks the American Embassy Kampala claims that both Tullow Oil which won a contract and the Italian firm ENI, which didn’t, offered bribes. (From: Uganda Kampala To: Central Intelligence Agency […] Secretary of State | United States Africa Command).

Allegations of influence-peddling in the oil sector by Mr Kutesa re-surfaced in October 2011. The Americans commented that the mention of his and Mr Amama Mbabazi’s names in the scandal was ‘inevitable’. (Email-2011-10-19 07:38:18 From: gary@ocnus.net To: responses@stratfor.com. Source: Wikileaks).

This type of influence-peddling or rent-seeking is highly corrosive of the economy. Assets including non-tangible assets that could be leveraged for the public good are sold for a pittance for the benefit of a self-centred elite. A major example would be the entire government exercise to sell off parastatals with its objectives of reducing government expenditure, making parastatals more efficient and transforming them in to cash earners, and has proven disappointing.

The Dairy Corporation was sold for a nominal dollar and the State remained a minority shareholder. Whether the minority shares have ever earned significant dividends is information that remains to be published. It is unlikely because the Auditor General’s Report of 2016 shows the Government does not necessarily collect money owed to the state by foreign investors.

For example, the Chinese Tibet Hima Mining Company was handed Kilembe Mines (after the necessary senior officials were bribed) but thereafter paid neither their initial concession fees for the tender nor invested in re-habilitating and re-establishing the mines. They earned money by simply selling electricity generated by the Kilembe Mines facility to Kasese Town.  Any Ugandan could have done that.

If the documents are genuine, in her increasingly importunate correspondence with Patrick Ho Mrs Kutesa offers to facilitate Ho’s acquisition of a Ugandan bank and in fact acts as a go-between for the Central Bank and Patrick Ho. (The East African, 22 November 2017).

Foreign banking carries strategic implications. Edith Kutesa is wholly unqualified to engage the Central Bank in discussions about admitting a foreign bank. She has certainly not been elected or employed to influence the disposal of public assets with foreigners on the country’s behalf.

Going on past experience, apart from the purchase price of the Bank, there would have been no other advantages to Uganda, for example reciprocal Ugandan banking and trade rights in Hong Kong and China.

So now we know the answer to the tired old question: What is Africa’s problem? In soliciting the payment from Ho, Kutesa pointed out his family relationship to President Museveni. He claimed that the money was for a campaign contribution for the President. Africa’s problem is its avaricious, short-sighted and shame-resistant leaders (and their wives).

But from the point of view of the United States, Kutesa’s cardinal sin was to promise oil concessions and access to business to a Chinese entity. Figures for 2015 show a net outflow of capital from Africa amounting to US$41 billion a year. Unpaid concession fees, unpaid taxes, legal tax holidays, favours such as those Patrick Ho was presumably seeking, illegitimate debt and so on are included in this. With China in the game, more of the net outflows will begin to find their way to Hong Kong and Shanghai instead of London, Paris and New York. Not good business.

Penalties and Reparations for Bribery

Public sector bribe-takers may or may not face penalties depending on where they come from. The DOJ found that Brazil’s Odebrecht paid US$785 million in bribes in twelve countries. The money funded presidential campaigns in South America as well as bribes to Presidents, the wife of a President, a Vice President, ministers, other public officials and allegedly an Opposition leader. Most of those countries have taken some action.

Ecuador tried and convicted its former Vice President. The Dominican Republic wants compensation from the company for the economic loss caused to them. Angola and Mozambique are notable for no reported action taken either against the company or individual bribe-takers.

Odebracht itself paid penalties of US$3.5 million and the CEO and 70 other employees received jail terms of up to sixteen years (Source: BBC, 15 December 2017).

In the case of Sam Kutesa, there has been an official denial of wrongdoing by the Uganda Government without even as much as an investigation by the police, the Inspectorate of Government or the Directorate of Public Prosecutions the heads of which are political appointees.

Apart from naming and shaming, it is not known what option the United States will take from its foreign policy playbook. When contacted the American Embassy in Kampala said it would not be making a statement but referred to the DOJ’s statement. Choices include a stern warning, extraordinary rendition followed by enhanced interrogation techniques leading to a confession and conviction, régime change or anything in-between.

If no action is taken in the case of Sam Kutesa and Co. Ugandans cannot help but conclude that it is not the alleged bribe per se that is at issue but how much of the nation’s resources they are able to funnel in the right directions.

Notes.

[i] This paragraph updates the article as it appeared in the Observer (Uganda).

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Mary Serumaga is a Ugandan law graduate who has worked in public sector reform and spent several years in advocacy, and as a volunteer care worker for asylum-seekers. Her essays have been published in Transition (Hutchins Press), The Elephant, Pambazuka News, Foreign Policy Journal, Africa is a Country, the Observer (Uganda) and King’s Review. The Committee for the Abolition of Illegitimate Debt website carries her articles on debt.

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