Is Bank of Uganda turning into self-detonating bomb?

A minor incident of gusting winds is turning into a Category 1 storm at the Central Bank. Early this year, Bank of Uganda received a new board of directors, basically all members except Ibrahim Kabanda, former chairman UCB were returned. Shortly before the board took office, Bank of Uganda through the Governor, made wide ranging appointments, reshuffles and sent the top banking official Justine Bagyenda on leave pending retirement. Bagyenda declined to do so, stating her retirement date was July 2018. Not only did she refuse to hand over her office, she also continued to report and as of this week, was still in office.
In 2012, Bank of Uganda retired a number of officials at age 55 before miraculously raising the age again to 60, a move that kept individuals like Bagyenda on the job for five extra years. The President then re-upped the terms of the Governor and his Deputy for a further five years.
Whatever HR move this was, this particular attempt to reshuffle the second most powerful individual in the Central Bank hasn’t lived to its billing. Bagyenda as Executive Director of the Central Bank is in charge of licensing and regulating 26 commercial banks and four MDIs. Banks supervision disciplines, transfers, reprimands and can ultimately revoke a bank licence. No person can be appointed a director in a licensed institution without her imprimatur.
In the events leading to the closure of Crane Bank last year and eventual sale to Dfcu Bank for an “undisclosed” amount, Bagyenda’s department was front and centre. At the time, they successfully sidestepped questions about BoU’s own propriety in the entire saga. BoU reviews audit reports and approves the books of account for each of the banks every year.
How could BoU miraculously miss a deteriorating credit situation, which was accelerated by a group of loans whose owners simply refused to pay? In any case, when the economy began to sour in 2012, the bigger banks have engaged in the luxury practice of “buying” and “selling” loans to each other prolonging their stay in the system at the expense of issuing new credit because this practice allows them to prepay themselves significant interest before selling off the loan again.
In 2018, something snapped. Officially a whistleblower, but unofficially, the Directors of the Bank, wrote to the IGG complaining of the Governor’s highhandedness in exiling the less connected without formal involvement of the board. The board of BoU, unlike other countries like Kenya, Tanzania is chaired by the Governor assisted by his deputy. The chair of the HR committee has been an external director for years. This board is also an alumni club for a select group of current and former officials from the Ministry of Finance. The board is home to three former and current Secretary to the Treasury - James Kahoza, Emmanuel Mutebile and Keith Muhakanizi. Muhakanizi could easily be waiting in the wings when he retires at age 60, and Mutebile serves his final term.
The Mutebile of old feels heavily slighted first by his renegade Executive Director Bagyenda and now the IGG Irene Mulyagonja. In light with continuing practice, he has interpreted constitutional prerogatives enjoyed by Bank of Uganda in exercise of its functions as a carte blanche to act unilaterally. He sent the IGG a verbiage of cases which a simple one letter page could have captured. A forest fire began to rage on social media with a lot of financial dirt being thrown around.
This game is particularly tricky because to Mutebile’s disadvantage, it is being waged within just three or four zip codes in the country. Three years ago, Mutebile wrote a particularly nasty memo transferring a number of powers to himself, including issuing appointments, transfers, etc. That was seen as a slap in the face of his deputy Louis Kasekende.
In that war, Bagyenda was behind Mutebile and rumoured to be Kasekende’s successor. This time, it is Bagyenda handbag swinging, punching her boss and clinging to office.
Mr Ssemogerere is an Attorney-at-Law and an Advocate. [email protected]