A report on the inquiry into the mandatory inspection of motor vehicles in Uganda by the parliamentary committee on physical infrastructure exposed the rot in the contract that the Ministry of Works and transport (MOWT) awarded Societe Generale De Surveillance (SGS), S.A., a South African company to inspect vehicles in Uganda.
The Member of Parliament (Rubanda West) Eng. Denis Sabiti, played a significant role to ensure that SGS won the multi-billion contract and it did not matter to him whether he followed the procurement or not. Eng. Sabiti worked with MOWT before he switched to elective politics.
“The re-introduction of mandatory vehicle inspection through a private provider, whilst intended to aid the stemming of road carnage ended up being rift with a host of public concerns namely; exorbitant pricing, inadequate coverage, unrealistic deadlines and general skepticism over the overall intention of the intervention,” the report notes.
Procurement of SGS:
The Committee notes the procurement of SGS as a service provider for mandatory vehicle inspection took about eight years spanning the period 2007- 2015.
The procurement process was initially cancelled because of the use of the wrong bidding documents prior to 2009 and was later marred by allegations of breaches of ethics with regard to leaking competitor information and undue interference.
Terms and conditions of the contract with SGS
The evaluation of the contract that was signed on March 15, 2015 between the government of Uganda and SGS revealed breaches by both SGS and MOWT with regard to commencement date, payment of concession fees and its procedure, absence of a master test centric and inept contract supervision.
Review of the performance of the contract
A review of the performance of SGS since signing the contract in 2015, among others, reveals the failure to adhere to the contractual commencement date for vehicle inspection, inadequate national coverage, non-adherence to the timelines for payment of concession fees.
Absence of crash data system responsible for more accidents in Uganda
The report says that the absence of a crash data system has impeded the analysis of causes accidents in Uganda. “While the various reports by Uganda Police on the causes of road accidents cite vehicle conditions as accounting for 2.2 per cent of traffic accidents, the report says that the absence of a crash data system renders such police accident reports unreliable because of their reliance on subjective rather than scientific methods. “The actual contribution of vehicle conditions may actually account for far more traffic accidents than reported,” it says.
It says the subjectivity often leads the police to incriminate motorists for offences such as reckless driving in a bid to apportion responsibility for traffic accidents. “It is because of this that there have been various incidents of motorists attempting to flee traffic accident scenes to avert arrest. A crash data system would scientifically establish the actual cause of traffic accidents and aid the exoneration of such motorists,” it says.
Call to terminate the contract
Based on the findings and observations, the Committee recommends for the immediate termination of the implementation of the contract for Mandatory Inspection much as a minority report says the exercise should be suspended for a period of not less than 3 months to enable a review and renegotiation by the MOWT.
The committee in its report wants the a review and renegotiation to cover a number of aspects such as;
Significantly slashing the cost of inspection to make it affordable and equitable. This will enable motorists present their vehicles for inspection more regularly, in the end improving vehicle conditions and reducing road carnage.
An examination of the inspection charges reveals inherent disparities whereby larger more commercially viable vehicles are subjected to lesser charges than smaller less commercially viable ones. Buses for instance that fall under passenger vehicles of more than 60 passengers are charged Shs944 for inspection, while boda bodas that fall under motorcycles are charged Shs4, 752.
While such pricing makes economic sense to the service provider because the high prevalence of boda bodas will ensure colossal collections from charges, it entrenches inequity, which calls to sharp question the equity dimension of the pricing modalities of the mandatory vehicle inspection project.
The report says that the variance in inspection charges between a motorcycle and a heavy omnibus is about 58 times. That implies that to inspect a motor cycle, a cyclist has to pay 5800 per cent of the cost of inspecting a bus. “This exorbitant pricing especially in the case of motorcycles is aimed at fleecing the common man,” it says.
The committee notes that since the level of effort and sophistication required to inspect a big vehicle such as a bus is a lot higher than that of a smaller vehicle and yet inspecting a bus costs Shs944, it is imperative that the cost of inspecting all the other smaller vehicles shouldn’t exceed the cost of inspecting a bus.
The committee notes that such prohibitive charges for vehicle inspection will be a deterrent to routine and regular vehicle inspection. This will defeat the very essence of making vehicle inspection a habit in a bid to improve the condition of vehicles.
Gov’t in dilemma over contract
According to the report, should government decide to terminate SGS’s contract, taxpayers will pay heavily.
The costs of termination as per clause 7.8.5 of the conditions of contract states: “In the event that the contract is terminated by the Government of Uganda or the MoWT for any cause, except as provided in this contract, before the expiry of the five year term or any extension or renewal of such term, the MOWT shall pay to the provider at law or in equity in respect of the termination of this contract 75 per cent of the value of total investment made by the provider or 100 per cent of the expected income of provider from the services, whichever is greater, being the cost of demobilization.”
Evidence shows that the rates for the MOWT ceiling and the cost quotations from SGS were unusually the same which points to the possibility of unethical practices in the procurement process. For instance, MOWT’s ceiling rates were quoted at Shs28,000, Shs56,000, Shs62,000, 56,000 and Shs75,000 for motor cycle inspection, car and dual purpose vehicle, Passenger vehicle of more than seven passengers and not exceeding 20 passengers, Goods vehicle of less than 3.5 tons and goods vehicle of 3.5 tons and less than 10 tons respectively. SGS quoted the same figures.
Another company Environmental System Products Holdings Inc (ESP) had quoted less figures for the first three categories, even as some of the quotations for other categories were higher than what SGS offered. This was after April15, 2010, when the financial evaluation gave SGS and ESP 90.40 per cent and72.79 per cent respectively, confirming the two firms as top competitors.
The report says that while it may be considered prudent business to insulate private owners of capital from possible loss in doing business with government using such contractual clauses, there has emerged a habit among public officials of saddling the country with risk of exorbitant costs even when some of the clauses of such contracts are potentially bogus.
In this particular case, available information shows that SGS within a spell of barely seven months had purportedly invested Shs51.2 billion, a figure that may be hard to verify considering inherent lapses in contract supervision. “The end result is that in the event of termination, the already over-burdened taxpayer will have to meet a cost which may be potentiality inflated,” the report says.
The failure of SGS to commence inspection within 18 months constituted a breach of Clause 7.1 of the Contract.
In spite if this breach, there was no evidence that the supervising entity the MOWT initiated any attempts at reprimanding SGS for this breach. It was not until Thursday December 1, 2016 that a one Benon M. Kajuna wrote retrospectively, on behalf of the Permanent Secretary, extending the commencement date of motor vehicle inspection from September 17, 2016 to November 28, 2016.
“It is noteworthy that SGS had commenced inspection two days earlier on November 28 2017. This letter can therefore be construed at best as a late attempt to insulate SGS from a severe breach of contract relating to commencement of inspection,” the report reads.
The report says that the same letter asked SGS to collect its performance security and yet barely 10 percent of the required structures for inspection was ready, thereby predisposing the taxpayer to loss. “At this point, the MOWT should have evoked Clause 7.7 of the contract, which grants the MOWT unilateral powers to terminate the contract due to breaches of one of the conditions of the contract. But this was not done and it points to complicity in breaching the contract,” it says.
Considering that the contract was signed on March 17, 2015, the exercise should have commenced by the September 17, 2016. At seven fixed inspection sites namely; Kawanda, Namanve, Nabbingo, Namulanda, Mbale, Gulu and Mbarara along with the three mobile testing equipment. However, the Committee ascertained that inspection began after 20 months moreover at only one site- Kawanda.
Gratification trips to South Africa
Contrary to Section 93 (1) and the fifth schedule of the PPDA Act, which bars employees from any business arrangement that might prevent the effective operation of fair competition or accept business gifts from current or potential government suppliers, SGS compromised a number of officers of the Ministry of Works and Transport with juicy offers. For suspect reasons, a benevolent treatment was accorded to one Mr. Ronald Amanyire, an understudy of Eng. Dennis Sabiiti at the Ministry of Works and Transport, who was granted an all-expenses paid trip to South Africa by Workshop Electronics, a South African SGS supplier of mobile testing stations, from November 7-10, 2016.
Other officials SGS gratified with trips to South Africa
The report notes that following Mr Amanyire’s all-expenses paid trip to South Africa, another team comprising Immaculate Nyamaizi (Inspector of Vehicles) and Anthony Muwonge (Inspector of Vehicles), led by Eng. Lukoma Fredrick Basalirwa (AS. Commissioner Mechanical Services/Chief Mechanical Engineer) visited Workshop Electronics for pre-shipment verification and inspection of the mobile motor vehicle inspection equipment. The team submitted its report to the Chief Mechanical Engineer on January 3, 2017.
As expected, the Lukoma Team gave a positive report on the mobile motor vehicle inspection equipment that SGS had procured from Workshop Electronics.
The all-expenses paid trip to South Africa for Mr Amanyire as well as the generous contract for Eng. Sabiiti Dennis should be treated as gratifications for their role in helping SGS secure the mandatory motor vehicle inspection contract in Uganda. Section 7.5.3 of the contract provides that the contract is automatically terminated if the provider gives offers, promises of any loan, fee, reward, or advantage of any kind to any employee of the Supervising Entity, provided that there is reliable and invincible information about such offers or promises.
Eng. Sabiti aids SGS’s vehicle inspection monopoly
The Committee established that Eng. Denis Sabiti, then Assistant Commissioner Safety and Inspection, MOWT, originated and forwarded the contract to the Office of the Attorney General for clearance without even the input from the Ministry of Works and Transport thereby denying the ministry the opportunity to negotiate fairer terms with the SGS. The report says Eng. Sabiti contravened the law as it is the Attorney General to do that as required by Article 119 (4) (b) of the 1995 Constitution. Sabiti’s action would give SGS the monopoly of inspecting vehicles in Uganda.
Eng. Sabiti joins SGS
On March 17, 2015 Eng. Sabiiti witnessed the signing of the Contract between the MOWT and SGS. In May 2015, Eng. Sabiiti resigned as Commissioner. On July 17, 2O17 he joined SGS as a consultant earning US $3, OOO (about Shs11.4 million) per month where he was retained as the only personnel. In May 2016, Sabiiti resigned from SGS in order to be sworn in as a Member of the 10th Parliament.
SGS involvement in possible tax evasion through fraudulent land transactions
According to the report, after winning the contract, SGS incorporated a number of companies for purpose of holding land and business operations but under the management of Christophe Dubois. A number of plots of land were acquired and vested in these companies. However, SGS evaded paying Stamp Duties on the transfers of Land Title Deeds into these Companies’ ownership as exemplified by the cases in Kawanda and Nabbingo.
Section 54 of the Registration of Titles Act (RTA) is to the effect that only registered instruments are effectual to pass any interest in any land among others. Once an Instrument is registered upon payment of fees or taxes, it is given a unique number known as Instrument Number. However, this was not the case with SGS land transactions, the report says.
According to the report, Kawanda Station stands on two plots of land- Plot 580 on Block 107 Kyadondo measuring 0.037 Hectare and Plot 577 on Block 107 Kyadondo measuring 1.581 Hectare. However the ownership of both Title Deeds were transferred from Industrial Steel Masters to UGMVIS on 31st March 2016 at the same time of 10:11 am using the same Instrument Number WAK00079414. It is important to note that each Instrument Number legalizes and validates a particular transaction.
Practically, the report says, two transactions cannot be conducted in one second nor can one Instrument Number validate two transactions. Since in the case of Kawanda land, the instruments were to validate transfer of ownership, which attracts a Stamp Duty payable to the Government. By using the same instrument to effect two transaction, SGS succeeded in evading payment of Stamp Duty to the Government on one of the transactions for which they should be held culpable.
Likewise, Nabbingo Station stands on two plots of land namely: Plot 705 on Block 331 Busiro measuring 0.404 Hectare and Plot 706 on Block 331 Busiro measuring O.406 Hectare. Similarly the transfers of ownership on both plots of land to UGMVIS Property Holdings Ltd were effected on 3lst March 2OL6 at the ,z-\/ 2L same time of 11: 32 am using the same Instrument Number WAK0OO79434.
Again here two transactions are effected within one second i.e. 1 1: 32 arn which is practically impossible except under fraudulent circumstances with an ulterior motive aforethought. Again Stamp Duty was evaded.
“Both cases of Kawanda and Nabbingo land transactions are covered with fraud that culminated into tax evasion and loss of revenue to the Government. Tax evasion, is a serious offense over which SGS should be sanctioned, officials investigated further and whoever is found culpable be punished accordingly,” the report says.
According to the report, the other land transactions involving SGS are equally suspect. For instance it is not clear why the same plot of land on which Namanve Station sits has two different title deeds which are held concurrently by SGS’ two different subsidiary companies namely: UGMVIS Property Holdings Company Limited and SGS Automotive Uganda Limited. Plot 1299 on Block 242 Kyadondo measuring 4.4410 Hectares with a 99 year lease effective from 1st July 2016 under Instrument WAK00093205 is under the ownership of UGMVIS Property Holdings Co. Ltd of P. O. Box 63 Kampala after transferring ownership from MMAKS Nominees Limited OF P O BOX 7166 Kampala on 10th April 2017 at 1: 18 am using Instrument Number WAK00 L22294.
However, the same Namanve Plot 1299 on Block 242 Kyadondo measuring 4.4410 Hectares with a 99 year lease effective July1, 2016 is also under the ownership of SGS Automotive Uganda Limited P O BOX 63 Kampala but this time ownership changed from Sumaria Properties Uganda Limited of P O BOX 7166 KAMPALA on Feb 20, 2017 at 12:48 pm using Instrument wAK00116057.
Strangely both holding companies have the same address and so do the ones leasing. All these point to one conclusion that SGS is a fraudulent organization that should not be entrusted with a monopoly of providing a sensitive service like mandatory motor vehicle inspection and managing the national motor vehicle databank. Such functions are so sensitive that leaving them in the hands of an organization like SGS with questionable reputation exposes the country to a serious security risk.
The report says SGS should be interrogated further on breaches of tax evasion and involvement in fraudulent activities. Serious sanctions should be preferred.
The Contract on Mandatory motor vehicle inspection should be rescinded on criminal and unethical grounds committed by the group, it adds.
Dismal number of vehicles inspected
As at August 23, 9 months after commencement of inspection, SGS only had three operational inspection sites and had tested only 31,327 vehicles of the estimated 1 million vehicles in the country. Of the tests so far carried out, 24,6L8 (79 per cent) vehicles have passed while 6,709 (21 per cent) have failed. The report says the dismal number of vehicles inspected is partially due to the limited reach of SGS and the exorbitant cost of inspection.