Firm behind Uganda 'digital' car plates linked to Russian military

Two of the company’s founding shareholders, Ivan Shkarban and Aleksey Kagarlytsky served in the Russian Armed Forces. This, in itself, is not unusual in a country where military service is mandatory for all male citizens aged 18 to 30, the latter raised in July from 27 years. There are a few exceptions to the conscription.

READ: Gen Otafiire raises red flag over digital number plates

However, prior to setting up Global Security, the two officials were affiliated with several companies that operate in the security and military industries in Russia, and together established a company that specialised in the production of weapons, according to corporate filings. 

Publicly available information shows that JSGSC has won a number of contracts in the security and defence sectors although the real number could be higher, since a large part of Russia’s defence budget, as with many countries, is kept secret. 

Global Security has previously produced bullet-proof shields and developed exoskeletons that soldiers use to transport heavy loads in combat zones, our investigations show. 

One of JSGSC’s subsidiaries, Global Security Engineering, developed and supplied military equipment for Russian military units in Syria and also filed patent applications for an exoskeleton model it developed. Exoskeletons help humans carry heavy weights. 

In July 2015 Global Security was awarded a government contract worth about $370,0000 to supply plastic elements for the construction of anti-shock shields to a federal prison in the Bryansk region. The contract was completed in November 2016.

In 2018, media reports indicated that Global Security was involved in a partnership to supply water from Russia’s Kamchatka Peninsula to China’s southern provinces. 

The company reportedly has a branch office in Lusaka, Zambia, but we could not find evidence of any contracts won or executed in the southern African country.

Questions remain
In July 2021, the Ugandan government entered into a public-private partnership agreement with the Russian company to implement an Intelligent Transport Monitoring System (ITMS). The ITMS was meant to improve security by detecting, identifying and recognising all vehicles and motorcycles operating in the country that were to be fitted with trackable number plates.

Five months later, in December 2021, the company registered a Ugandan subsidiary, Virtus Global Security, in which JSGSC holds 99 percent shares, with Mr Shkarban holding one percent. Other documents examined at the Uganda Registration Services Bureau list Mr Shkarban as beneficial owner of the new company with 100 percent shareholding.

The company was awarded the contract without an open competitive tendering process. Under the terms of the contract, the Russian company was to invest in setting up the ITMS and recover its money from fines and penalties from traffic offenders.

Two years later, the system is yet to be launched and questions about the company, including many raised in Parliament, remain unanswered.

The House leadership for unexplained reasons has also put brakes on inquiries by the Infrastructure Committee into the offer of the deal to the Russians and the firm’s inability to supply even a single ‘digital’ number plate by July 1, when the ITMS was to kick off.

A team of government officials that visited Moscow earlier in the year to see a demonstration of the ITMS system found that it did not exist as described in the contract with the Russian firm.

ICYMI: Russian firm on the spot over vehicle tracking deal 

The system shown to the officials, sources told this newspaper, was an Automatic Number Plate Recognition (ANPR) system used in many countries, and which could be built in Uganda on top of existing law enforcement infrastructure.

The new system proposed by JSGSC requires a tracking device to be installed in each number plate on a vehicle and motorcycle, at a proposed additional or new cost of between Shs50,000 and Shs735,000, but the government officials were not able to see such a system in operation.

A post-tour report prepared by the government team shows that Ugandan officials on the fact-finding mission to Moscow were not even able to see a sample of the new ‘digital’ number plates after being informed they were being manufactured in the neighbouring Poland due to sanctions on Russia arising from the conflict in Ukraine.

We were unable to find evidence that government officials subsequently visited Poland to inspect the proposed new number plates.

In May 2023, two parliamentary committees, on Defence and Internal Affairs, and that of Physical Infrastructure, released a joint report following an investigation into the contract. They faulted the government for the manner in which the Russian firm had been single sourced outside public procurement laws.

“The committee, therefore, recommends that the government contracts service providers in accordance with the law,” the Members of Parliament noted in the report.

MPs also rejected a proposal to tack $6 (Shs22,206) on every third-party motor vehicle insurance policy purchase to subsidise the cost of installing the new number plates on motorcycles.

In the report, the lawmakers noted that they had not been given findings of a pilot study under which the system had been tested on a handful of cars and locations in the country, and recommended to the Works ministry to implement the project according to the findings of the pilot.

Our investigations could not find any of the eight private motor vehicles, four buses, three matatus and five motorcycles that are reported to have been installed with the new digital number plates in the pilot study.

Money pains
The new system was supposed to have been rolled out on July 1, but was suspended indefinitely because of what the Works ministry said were delays on the part of the Russian firm.

A review of the project’s financial model shows that the Russian firm is supposed to invest $257 million (Shs951b) in setting up the project. The amount is meant to cover the cost of roadside Closed-Circuit Television (CCTV) cameras, speed radars, smart registration plates, electronic tracking devices and back-end operations.

ALSO READ: Car owners to pay Shs735,000 for digital number plates

The company, in turn, would recoup the investment over a 10-year period from traffic fines and sale of digital number plates, with the project expected to bring in $974 million (Shs3.6 trillion) over that period.

However, fresh questions have emerged over how much money the Russian company has actually invested in the project. MPs on the Physical Infrastructure committee who toured last week found empty tents that had been set up in a few privately-owned used car dealerships (bonded warehouses) around the city as the project’s activity sites.

The tour had been triggered by a petition from Kampala City Traders Association (Kacita) protesting over the proposed cost of the new number plates for newly imported vehicles, of about Shs735,000. 

Security minister Jim Muhwezi, a retired two-star military general and the country’s former domestic spymaster, said the Shs735,000 would be the highest and only for first car registrations.

The ‘digital’ plates to replace the current ones, he noted, would cost car owners Shs150,000 while motorcycle owners would pay Shs50,000. The minister, however, did not explain why individuals who already paid for the current registration number plates will have to pay afresh.

Maj Gen Muhwezi outlined the benefits of the scheme to include real-time location of a vehicle or motorcycle, making them harder to steal but easy to recover if stolen, locating motorists who use their vehicles for travel to commit crime and an alert system whenever an individual’s car or motorcycle number plate is being tampered with.

However, appearing before MPs on the Infrastructure Committee on Tuesday this week, Internal Affairs Minister Kahinda Otafiire, also a retired two-star military general, and the Commissioner General of Uganda Revenue Authority, Mr John Musinguzi, both said the proposed charges were too high.

“The cost is prohibitive,” Mr Musinguzi said.  “I think it is important that the negotiators go for the most optimal because there is a benefit they want to achieve, but also a cost that would be draining money from taxpayers which could be spent on other areas, other than this technology.”
 Maj Gen Otafiire, on his part, told the legislators that he did not support the proposed cost increase.

“I am unhappy about the cost, but unfortunately, I am not the one who determines the cost. I have heard about the cost in the press, nobody has brought it to my attention to address; so, my role in that aspect is limited,” he said.

READ: Before digital number plates become a white elephant

The minister also told MPs that he had reservations about terminating the contracts of local manufacturers of the current number plates in favour of imported ones from Poland.

The contracting of the business to a Russian firm also runs counter to the government’s own much touted Buy Uganda, Build Uganda (BUBU) policy to spur import substitution.

Minister Otafiire told Parliament that he had written to President Museveni to express his reservations and offer a win-win option, but his letter remained unanswered, making it difficult to know if it was hidden from the head of state’s eyes or he had elected not to respond to him.

“I wrote that the Russian company [could] work with the current manufacturers of number plates in Uganda and explore the possibility of putting their chips on the number plates in Uganda, and I intimated to him that it would be a bit insensitive for us to shut down a local manufacturer in favour of importation of number plates when we can do it here. I never received a reply,” he said.

He added: “I highly doubt if the President ever saw my letter, I suspect he hasn’t seen the letter because the President that I know would have written to me or called me for a conversation. I will bring it to his attention, now that you have mentioned it, when I see him.”

In a tweet on Wednesday, a day after the revelations, Dr Kenneth Omona, the principal private secretary to the President, without disclosing whether Mr Museveni received the minister’s referenced correspondence, noted that: “I wish to allay Hon Otafiire’s fears. The President’s response may take some time [for him] to have a better appreciation, he may also choose to respond another way, other than writing, such as meeting the concerned persons, which may be the case here.”

Stopping probe
This tweet followed by revelations that the leadership of Parliament had abruptly frozen the Infrastructure Committee’s inquiries, raised more questions about the project whose initiator minister Otafiire said he did not know despite being the political supervisor of Uganda Police Force some of whose officers are reportedly involved.

ALSO READ: Car tracking deal runs into trouble 

After terminating their contracts to pave the way for the Russians, the government was forced to ask the two local producers, Arnold Brooklyn and GM Tumpeco, to temporarily continue producing the plates until the now delayed new system rolls out in October or later.

Under its contract, the Russian firm is supposed to set up a manufacturing plant in the country, but construction is yet to start, apparently because land promised to the company has not yet been provided. The $257m (Shs951.1b) that the company is meant to invest does not include the cost of land acquisition.

Sources interviewed for this article also raised questions about the Russian company’s ability to provide the investment envisaged in its contract with the government. 

The company was a defendant in several lawsuits over unpaid rent on its Moscow office, and appeared as a defendant in two bankruptcy cases.

In its joint investigation cited earlier, Parliament found that bankruptcy proceedings that had been initiated against the Russian company by creditors in Moscow had been resolved.
 However, the relatively small sums of money involved, compared to the size of investment required into the Uganda project, have raised eyebrows.

One creditor, Stok-Trading LLC, had sued JSGSC for an unpaid debt of $16,260 (Shs60m), MPs heard. Other creditors who sued the company included Tuesday GS sro Slovak Republic, $82,655 (Shs305m), JSC ZVI $500,000 (Shs1.85b), Orken Alems Limited Liability Partnership $115,175 (Shs426m), and JSC Royal Silk Factory, $270,000 (Shs999m).

The company also owed Russia’s Pension Fund $600 (Shs2.2m) in remitted funds. These disputes all appear to have been cleared. 

However, company filings show that the Uganda project would be significantly bigger than any the company has ever undertaken. Latest filings show that the company employs only 12 people and had revenues of just $500,000 (Shs1.8.5b)in 2021.

The company turned a net loss of $53,000 (Shs196m) that year. In fact, the company lost money from 2017 and 2021, records show, except in 2018 when it made a profit of $321,000 (Shs1.18 billion).

Company owners named
Global Security was incorporated in Moscow on July 24, 2013, under the ownership of four low-profile Russian individuals: Maxim Muravyev (33.3 percent); Ivan Shkarban (24.5 percent); Aleksey Kagarlytsky (24.5 percent) and Oleg Pichugin (17.7 percent). As a joint-stock company, Global Security is not required to update its ownership records so it isn’t clear if any shareholders have left or been admitted into the company.

Muravyev, 48, was previously involved in a real estate management company and OOO Gidrotekhnostroy, a Moscow-based company that makes paints and varnish. He is also the majority owner of Gidrotekhnostroy-Montazh, a small construction company based in the Russian capital. 

Shkarban, 48, the company’s director general since inception, served in the Russian Armed Forces’ 16th Separate Special Purpose Brigade based in Tambov Region until 2011. He later worked at ZAO Corporation, a Moscow-based producer of armoured vehicles, and in 2012 at ZAO Krofurd Protection, which also produces armoured vehicles. Between August and December 2013 he worked at ZAO NPO High-Tech Systems and Technologies, a Russian company that developed and produced missiles for the Russian Ministry of Defence.

Since March 2022, Shkarban has been the President of the East African Continental Council (ANO Vaks), a Moscow-based non-profit organisation that works to develop “cultural and business relations” between Russia and Africa.                                                                                         

Kagarlytsky, 48, graduated from the Moscow Higher Combined Arms Command School and served in the General Staff of the Russian Armed Forces until 2008. Company filings by ZAO Grifon, a Moscow-based manufacturer of arms and ammunition, show that Kagarlytsky worked as its general director between October 2010 and September 2011. He also worked with Shkarban at ZAO Corporation Protection and at ZAO NPO High-Tech Systems and Technologies. 

Between August and September 2021 the official was also believed to have been involved with Koncern Automatica, a subsidiary of Rostec, the prominent Russian state defence conglomerate.

Pichugin, 59, worked in the Ministry of Foreign Affairs of the USSR until its dissolution in 1992, and continued in the same ministry of the Russian Federation until November 1994.