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Munyonyo Resort caught in snag over govt ownership
Delegates attend the NAM summit at Munyonyo. The government collaborated with Munyonyo Commonwealth Resort Ltd to establish a conference facility for NAM and G77+ China summits. Photo | Abubaker Lubowa
What you need to know:
- There are delays in share certification, financial oversight gaps, and concerns about underpayment by a private investor, highlighting uncertainties in government control and monitoring.
The government audit room is currently buzzing with inquiries surrounding the lack of evidence of government’s control over its stake in Munyonyo Commonwealth Resort Ltd (MCWRL), an investment that incurred a cost of more than Shs15 billion 17 years ago.
The state records of the takeover of a 25 percent stake in MCWRL, according to details in the 2022/2023 Financial Year auditor general report, shows that the process of acquiring certification of shares is not yet completed by the Uganda Development Corporation (UDC), the country’s investment entity.
Auditor General (AG) John Muwanga noted in an assessment thus: “I observed that on December 6, 2021, the Executive Director forwarded the transfer of share stock forms executed by the Ministry of Finance, Planning and Economic Development to the Uganda Registration Service Bureau for action.” This, he further noted, indicated that the process was yet to be completed.
The Uganda Development Corporation Limited Liability Company was established by government in 2016 as the state’s investment arm after the Uganda Development Corporation Act was passed. One of the companies in which UDC was required to purchase the government’s interest is MCWRL, according to Schedule 2 of the UDC Act.
The government-owned shares of MCWRL were held by the Ministry of Finance, Planning, and Economic Development until 2022, when UDC acquired ownership in accordance with the UDC Act, 2016.
When questioned about why M/S Meera Investments Ltd (MIL)’s partnership with government lacked share certificates, Mr Sudhir Ruparelia, the owner of the business, neither responded to this publication’s texts nor returned our calls.
Mr Steven Douglas Baryevuga, a communications specialist with the Uganda Registration Services Bureau (URSB), said although the bureau could not comment, the convention centre had multiple shareholders under a private equity agreement. This, the URSB official added, necessitates the submission of beneficial ownership data, which could potentially have been delayed for submission.
Curious delay?
Based on available data, it appears that the government is either indifferent or insufficiently committed to monitoring MCWRL’s investment. The UDC revealed last year that MCWRL’s financial statements had not been audited by the government for the preceding four years.
On October 19 last year, UDC’s Executive Director, Dr Patrick Birungi, informed the committee on Trade, Tourism, and Industry that MCWRL lacks audited financial statements for the years 2019 to 2022. This, he further divulged, is due to the delayed appointment of government representatives to the Board.
“There haven’t been audited financial statements since 2019 to 2022 and the main reason being that apart from Covid-19, which was more challenging, the quorum for both the Board and Annual General Meeting required that there is a government representative and at that time, most of the government officials were not in those positions that they held and therefore they weren’t in those meetings and therefore, we couldn’t to get those audited accounts,” Dr Birungi said while in Parliament at the time.
As a result, the Committee was forced to halt its investigation into MCWRL’s unaudited financial statements.
Dr Birungi had requested an extension of time so that external auditors could finish the ongoing financial audits, which is expected to be completed this quarter.
“The financial statements for the period 2019 to 2022 are currently being audited following the appointment of auditors on July 19, 2023…If the Committee can give us two months [to get the audited financial statements] then we can have a better engagement,” he pleaded, adding that audits are being done by external auditors-UHY Thakkar & Associates.
Convention centre
The government decided to share funding contributions by collaborating with Munyonyo Common Wealth Resort Ltd, MIL’s establishment, where the state also has a stake, to set up a conference or a convention facility for the Non-Aligned Movement (NAM) and G77+ China summits for more than 1,000 seats.
The construction required $47.15 million (Shs179 billion) as of April 27, 2022, AG Muwanga said. This figure could have fluctuated since the cost of construction in the country saw a 3.6 percent increase, according to data from the national statistical body which was reported in 2023.
The conference facility was put into ownership on September 2, 2022, when Speke Resort Convention Centre Ltd (SRCCL), a limited liability company owned by a private investor and UDC on behalf of the government, was incorporated with each shareholder owning a 50 percent stake.
Mr Muwanga, however, noted in his government examination that the audited records reveal that the private investor had underpaid its Shs5.69 billion capital contribution.
The Auditor General had previously clarified that “the lack of share certificates as evidence of stock ownership denies UDC the right to participate or inquire in business activities of [MCWRL].”
The latest audit report highlights a potential threat to the state’s finances due to MIL’s insufficient contribution towards constructing the conference hall. The limited finances could have adverse effects, considering that the recently held NAM Summit in Munyonyo brought together 3,000 delegates from 120 global member states.
Final touches
Sunday Monitor has established that the construction of the conventional centre was finished in the week of January 14 to 20, after more than a year of work. Although the hall where delegates convened was finished per se (at least in construction), civil engineers were still completing the structure’s exterior while presidents, observers, and other dignitaries enjoyed its ambiance.
The Auditor General’s office was even concerned that failure to pay the amount could have a negative effect on the estimated cost of construction and necessitate additional funding from the government.
UDC and the private investors intend to conduct serious business out of the conventional centre going forward, as they have already established a marketing plan with the public-private enterprise’s board to host both local and international conferences.
Response
In response to inquiries about the issue, UDC’s executive director, Dr Patrick Birungi, on Wednesday said, no entity—private or public—has underpaid for its capitalisation for the facility.
Dr Birungi also clarified that Shs5.69 billion alluded to by the AG is a discrepancy between the actual bill of quantities for the construction of the facility and the real contributions made by both government and MIL.
“Part of the contribution from the private investors was land, and it came in as a value. There is no shortfall of contribution between the two entities, and, as of now, we have standing agreements. The audit [of the AG] was taken when the convention centre’s establishment was in the construction phase. Now we are all set to get the share certificate since we already have a governance board,” he said.
“When you are doing business, you first agree, then you sign agreements, then you contribute, and then you execute the project. Remember we were tied on one year to finish construction of that conventional centre. The concentration, therefore, was on key agreements that are already in place,” he added.
