About me.

Andrew M. Mwenda is the founding Managing Editor of The Independent, Uganda’s premier current affairs newsmagazine. One of Foreign Policy magazine 's top 100 Global Thinkers, TED Speaker and Foreign aid Critic

Wednesday, August 29, 2012

Should governor Mutebile resign?

President should not jump from one arbitrary position to another in service of popular sentiment

Since The Independent broke the story of businessman Hassan Basajabalaba’s Shs 169 billion “compensation” last year, two ministers have resigned and three members of staff at State House have been fired. All this shows how much, albeit slowly, public pressure is impacting on government. As a citizen, I feel satisfied that almost everything I demanded on this matter has been met by the government.

However, there have been persistent calls for the Governor of the central bank, Emmanuel Tumusime-Mutebile, to resign. Perhaps there may be reasons why this call is justified. But none of those calling for his resignation has provided a convincing explanation. Indeed, they seem not to understand the relationship between the government and the central bank. Bank of Uganda is the bank to the government – just like Crane Bank is for Independent Publications Limited (IPL) – the company I work for.

IPL has obligations to its suppliers. It draws cheques to pay these suppliers which Crane Bank honours. If there are no funds on IPL accounts, we apply for an overdraft facility. Crane Bank always approves such requests and almost automatically. This is because after doing business together for years, a relationship of trust between us has evolved. That is how banks all over the world work – on trust.

Crane Bank has names and specimen signatures of persons authorised to sign an application for an overdraft, bank guarantee or cheque. Once the Chief Executive Officer (CEO), the Chief Financial Officer (CFO) and the Legal Secretary (LG) of IPL have signed on an instruction, Crane Bank’s Head of Credit or Managing Director honour the instruction unless they have cause to believe it is forged.

The relationship between the government and the central bank is even closer than an ordinary company has with a commercial bank. The government keeps its income and expenditure accounts in the central bank. However, although the CEO of IPL has no power to hire or fire the Managing Director of Crane Bank, the president of Uganda has power to hire and fire the governor of the central bank. Hence, by design, Crane Bank is more independent of IPL than BoU is to government.

In the case of paying Basajabalaba, the grounds for the governor agreeing to honour the request from the government were stronger than Crane Bank gets to give any of its other trusted clients an overdraft. There was an inter-ministerial committee composed of President’s Office, Kampala City Council, ministry of Local Government, ministry of Lands, ministry of Finance, the ministry of Justice and the Chief Government Valuer. They met and agreed to the existence of a claim against the government by Basajabalaba. Later, the Attorney General, the final authority in any commitment of the government, wrote stating the amount to be paid to Basajabalaba.

Whatever disagreements surfaced in that committee (as Amanya Mushega imputed in his article in Daily Monitor of March 23), they were internal to it, not part of the consumption of the governor. A decision by a committee does not need unanimity to hold. On this basis, President Yoweri Museveni wrote to the minister of Finance asking her to liaise with the governor to pay Basajabalaba. The Attorney General wrote supporting the claim. Money was paid through what the central bank calls “bridge finance” in form of letters of comfort. This is a normal practice. Whenever government does not have cash, BoU gives them bridge finance.

Contrary to popular opinion, the governor does not need to consult the board on every such payment. The government regularly makes many requests for bridge finance. Therefore, there is no technical or legal basis to fire Mutebile or force him to resign. However, we can stretch our imagination and say there is some “prudential basis” for it. This would be based on our informal understanding of the reality of our politics as Ugandans that is not codified in law or government rules of procedure. This informal understanding is actually often rejected by Uganda’s chattering classes whenever I refer to it as a vital ingredient in the management of our affairs.

For example, BoU had a criminal case against Basajabalaba for forging court documents showing he had lost his land titles which were actually being held by the central bank for loans he owed government. He then used these forged documents to get Registrar of Titles to cancel the old title deeds and issue him new ones. Therefore, one can legitimately claim that Mutebile should have been suspicious of any claim by Basajabalaba. This suspicion should have made him call the Permanent Secretary/Secretary to the Treasury or even the President and warn them about potential fraud when dealing with Basajabalaba. By not doing so, he was not being prudent.

There is a weakness in this argument. Mutebile would counter argue saying: “Look, this claim had been approved through an elaborate process involving seven government ministries and departments over a period of nearly a year. The Attorney General is the final authority on the legality of any claim against the government. I talked to the minister of finance and the Attorney General who cleared my suspicion that Basajabalaba could have forged this new claim.” Bingo! You can twist the argument back and forth but Mutebile would sound as reasonable as it gets.

Without a legal basis for firing Mutebile, any such action would cause a suit against government for wrongful dismissal. Every reasonable judge would give him a hefty compensation. Given his international reputation, the amounts he would get can be astronomical. In fact this arbitrary decision-making meant to appease popular opinion was the cause of Basajabalaba’s claim in the first place. Basajabalaba entered contracts with KCC to manage city markets. He got leases for the land and sought to evict vendors. The vendors petitioned the President for protection and Museveni took a politically popular but arbitrarily decision and cancelled Basajabalaba’s leases.

However, although the decision was humane it threatened the fundamental basis of a capitalist economy – respect for legal contracts and property rights. Realising his mistake, Museveni agreed to compensate Basajabalaba for loss of these assets (contracts and land) and the business opportunity in them – a fair thing to do. Thus, going forward let the president not jump from one arbitrary position to another – all in the service of popular sentiment.

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