Inside Story

Details: The scam of Ugx 359B Lubowa Hospital project, taxpayers to suffer harder.

According to an inquiry by this journal, the developer of Lubowa Specialised Hospital was given a 20 percent payment of the project’s total price even before any construction on the site began.

It is not uncommon for a contract to require a party to pay in advance for work that has not yet been completed. Bazzup team looked through all of the required documentation for the Lubowa project and couldn’t find any section that specifically mentions such an arrangement. By the time of publication, attempts to obtain clarity from the Health and Finance ministries had failed.

The sweetener, which amounts to approximately $50 million (Ugx177 billion) out of a total of $249 million (Ugx 879 billion), was advanced in 2018, well before Enrica Pinetti took over the Lubowa project site on June 10, 2019.

Engineers Francis Wakabi and George Otim of the Ministry of Health (MoH) issued at least five certificates totaling $101 million (Ugx 359 billion), according to Bazzup.

The obligatory 18 percent Value Added Tax was not included in any of the payments (VAT). A sixth certificate valued $15 million (Ugx 53 billion) remains in limbo.

Bazzup team further discovered that on December 4, 2018, the Government of Uganda (GoU) and Ms Pinetti’s Finasi business entered into a promissory note purchase arrangement with Barclays Bank Uganda, the African Export-Import Bank, Absa Bank, and the Southern African Trade and Development Bank.

According to the agreement, whenever the MoH engineer issues a certificate, the banks must pay the money as soon as possible. The bankers reportedly imposed a strict condition that the contract be awarded to Finasi only if the Attorney General’s legal opinion affirms that the contract was awarded in accordance with the Republic of Uganda’s public procurement legislation and regulations.

Mr Medard Lubega Ssegona, a lawmaker from Busiro East, believes that this was never the case because Ms Pinetti was handpicked by President Museveni.

Mr. Ssegona, a practicing lawyer, claims that the entire project is steeped in secrecy and illegalities.

He points to the lack of a bidding procedure from the time Finasi was chosen until the time money were transmitted to the company.

“You must issue a request for expressions of interest and review profiles.” The existence of the President’s name, as well as the involvement of that Italian (Ms Pinetti), raises more doubts. How much money is the investor bringing? Everything, including land, is free to her. Mr Ssegona stated, “This was a bad transaction.”

On August 6, 2019, Ugandan government health authorities were denied access to the building site of the International Specialised Hospital of Uganda in Lubowa. The goal of the visit was to fulfill the oversight responsibility of the Ugandan parliament and guarantee that public funds are spent properly. The officials were kept away by security for their own safety and because they had not been given prior notice, according to the contractor. This is concerning because it could be interpreted as an attempt to hinder officials from fulfilling their responsibilities in ensuring the successful implementation of a large contract.


Issuance of Certificates

The GoU must present the budget approval by Parliament before any of the promissory notes can be honored, according to the lending institutions in the agreement.

On December 20, 2018, Mr Wakabi—an engineer on the MoH’s books—issued the first certificate for a “milestone,” according to Bazzup. This follows the signing of a project works investment agreement on May 27, 2015.

The payments were divided into three categories by this certificate. These included a $49 million (Shs173 billion) early payment, which represented a 20% advance on the total contract amount. Financing charges of $9.7 million (Shs34 billion) and other certified works totalling $33 million (Shs117 billion) were also certified for payment. This $86 million certificate was given before any physical work was done (Shs304b).

A second certificate was awarded on January 8, 2020. Surprisingly, it mentioned work that was finished on December 10, 2019. As a result, a payment of $12.4 million (Shs44 billion) was approved.

Mr. Otim issued the third certificate worth $2.1 million on February 10, 2020, noting work completed on September 9, 2019. (Shs7b). On June 9, 2021, a fourth certificate with a value of $4 million (Shs14b) was issued.

On October 17, 2020, the fifth certificate was issued, with a total value of $1.7 million (Shs6 billion). Finasi had received $101 million by this point (Shs359b).

Bazzup team was unable to independently verify whether all of the certificates had been cashed. However, according to the agreement, which we have seen a copy of, whenever a certificate is issued, payments will be sent as quickly as possible. We also haven’t found out if a sixth certificate with a total value of $15 million (Shs53b) was issued on June 23, 2021.

After being referred to Mr Otim by the Ministry of Health’s spokesperson, Mr Emmanuel Ainebyoona, we were unable to contact him.


Notes of Promissory

Mr David Bahati, then-junior Finance minister (Planning and Economic Development in-charge of Planning), presented a proposal to Parliament on February 12, 2019 for the GoU to issue promissory notes.

By March of this year, red flags had begun to appear. In a report, the legislative Committee on National Economy stated the essential parliamentary clearances were not obtained.

Despite this, the committee recommended that the House approve the GoU’s plan to issue promissory notes.
Between April 1, 2019 and January 12, 2021, the GoU issued 26 promissory notes. Their maturity ranges up to 2027, with a three-month interval, according to Sunday Monitor.

Overall, the total value of the notes issued was $259,652,614 in purchase value (Ugx 917b). After interest, the face value increased to $366,711,368 (Ugx 1.2 trillion).

These statistics soared to $10 million (Shs35 billion), well beyond the ‘investor’s estimate in the project’s June 30, 2021 performance budget.

The additional $129.81m represents the ‘Time Value of Money’ or interest cost of payment that the GoU has to incur as a result of repaying the Finasi-ROKO Construction consortium over a six-year period, according to Mr Keith Muhakanizi, then Secretary to the Treasury, who stated in March 2019 that the additional $129.81m represents the ‘Time Value of Money’ or interest cost of payment that the GoU has to incur as a result of repaying the consortium over a six The $129.71 million (Shs458 billion) is expected to represent a 6.49 percent effective interest rate.

The GoU would only issue promissory notes for project activities and works that have been finished and certified by the GoU owner’s engineer, according to Mr Muhakanizi.

He went on to say that it was just providing guarantees (a strong promise, albeit irrevocable promissory notes), and that the money owed to FINASI-ROKO Construction will be paid at a later date.


Is there a land dispute?

Bazzup team also knows that a silent conflict is raging between a group of persons claiming possession of the Lubowa territory on the one hand, and the GoU on the other.

The massive Lubowa Hill block 269 was once a private mailo farm. It was previously located in Wakiso, but the government currently owns a freehold title to the same block 269 in Kampala. It’s important to note that Lubowa is part of the Wakiso District.

Mr Muhakanizi stated in 2019 that the GoU lawfully bought the project land and gave it to the Joint Clinical Research Centre (JCRC), with a portion of it being transferred to the Ministry of Health.


Budgetary allocations for this project

Below is a list of Breakdown allocation for this project.
●   Feasibility study—$1.6m
●   Hospital Super structure—$52,017,364.50
●   Legal consultancy—$2.7m
●   Arrangement fees—$6.4m (among others)
●   Engineering—$599.760
●   Soil Investigations & Preliminary Fencing—$924,630
●   Environment Study and NEMA Licence—$249,900
●   Medical Planning/Space Programme—$874,650
●   Preliminary Design—$999,600
●   Schematic Design—$1,774,290
●   Construction Licence from Makindye Ssabagabo municipality—$124,950
●   Buildings – Detailed Design—$1,499,400
●   Landscape & Infrastructures (Detailed Design)—$1,499,400
●   Project Management—$4,301,000
●   Work Supervision/Health & Safety—$6,084,860

●   Auxiliary Buildings (Staff Hostels and Training School)— $2,272,500.
●   Hotel with Multipurpose Hall—$7,352,500
●   Minor Buildings—$1,450,000
●   Civil Infrastructures, Utilities, Networks and External Areas—$8,150,000
●   Final Test & Commissioning and Handing Over—$2,050,000
●   Medical equipment—$74,416,000
●   Medical Equipment/Furniture/FFE
●   Shipment & On-Site Delivery—$9,000,000
●   Medical Equipment/Furniture/FFE
●   Installation—$13,900,000
●   Medical Equipment Testing & commissioning—$1,400,000
●   Training for Equipment—$1,400,000
●   Medicine and Consumable for the first year—$14,500,000
●   Defect Liability Period—$1,249,500
●   Reporting—$1,234,506

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