The Minister of Finance Planning and Economic Development (MFPED) Matia Kasaija recently told one of the leading media houses in the country that government would soon act on the recommendations of a report by parliament’s Committee on Commissions State Authorities and State Enterprises (COSASE). He also said he had asked top officials of BoU to identify areas of improvement in regard to the COSASE report on the controversial closure of banks. He also said he wanted BoU officials to suggest ways to boost the bank’s operations.
However, in his assurance to Ugandans, Minister Kasaija seemed to shy away from the real problem in BoU. The real problem in BoU is the continued stay of the top two officials in that institution. They should have left yesterday. Problems in BoU will only be solved when the Governor, Emmanuel Tumusiime-Mutebile and his deputy Dr. Louis Kasekende leave that institution whose image has been tarnished by the persistent scandals, and as such need no renewal. Unfortunately, Tumusiime-Mutebile and Kasekende cannot be at the forefront of restoring the good image of BoU. New faces are needed to at the top of BoU do that work. And every Ugandan is advocating for that change.
The above is just one of several reasons why President Yoweri Museveni must act swiftly to let the two gentlemen go, much as Tumusiime-Mutebile has a few months left to retire. In fact, the two should be preparing their hand over reports. Remember that during the COSASE probe that spanned from late October 2018 to late February 2019, it was discovered that most officials who retired from BoU left without writing any reports or if they did, they were unsatisfactory. Take the case of former executive director bank supervision, Justine Bagyenda who left without handing in some important documents to do with bank supervision and bank closure. Tumussiime-Mutebile and Kasekende must be blamed for the laxity that made BoU officials to handle official duties as if they were handling their own personal business.
Borrowing from President Recep Tayyip Erdogan
President Museveni must borrow a leaf from his Turkish counterpart Recep Tayyip Erdogan who just five days ago fired central bank governor Murat Cetinkaya and replaced him with Murat Uysal, the bank’s deputy governor. Cetinkaya had been serving as the governor since April 2016.
No official reason was given for the sacking, but markets have speculated over recent weeks that Erdogan sacked Cetinkaya because of his reluctance to cut interest rates that President thinks will boost Turkey’s economic growth.
Sources in Turkey say the differences between the government and the governor over the conduct of monetary policy had deepened in the past few months to the extent that Erdogan and Turkish finance minister demanded Cetinkaya’s resignation much as Cetinkaya reminded them of the bank’s independence and declined to resign. Erdogan would not wait longer. He sacked the governor on Saturday and the rest is history.
Maintaining macroeconomic stability is not enough, integrity and accountability important at BoU
Interestingly and on the contrary Tumusiime-Mutebile and Kasekende take pride in stabilising the country’s monetary policy where inflation levels have been kept to a single digit, from almost 29.0 percent in December 2011. BoU has over the years reduced the Central Bank Rate (CBR) from 23 per cent in January 2012 to 10 per cent in June 2019, though commercial banks have not followed that in giving credit to the private sector due to other factors.
However, for maintaining Uganda’s relative macroeconomic stability supported by a relatively high degree of exchange rate flexibility and central bank independence that operates under an inflation targeting framework, Tumusiime-Mutebile and Kasekende think that they have achieved it all and therefore, other issues of integrity and accountability don’t matter to them. That is why they failed to supervise their juniors to the extent that Tumusiime-Mutebile admitted during the COSASE probe that his juniors got involved in some processes that led to the closure and liquidation of some commercial banks behind his back, stating further that he never saw some documents related to the closure of the now defunct banks. He would later turn around to say he signed some of the documents, something that surprised MPs on COSASE.
Confidential report blames Tumusiime-Mutebile for illegal staff changes
A confidential report of the presidential tripartite committee, authored in February this year, blames Tumusiime-Mutebile for personally recruiting five senior staff without subjecting them to any interviews as required by the Bank of Uganda Act, which he is supposed to adhere to. Worse still, most of the staff head picked by the governor did not meet the qualifications and experience required for the jobs. For instance, Dr. Twinemanzi Tumubweine (Executive Director Bank Supervision) does not have any experience in commercial banking. BoU’ board members where Tumusiime-Mutebile is chairman disowned him on most of staff changes at BoU, saying he never consulted them and that it was illegal. Such a decision by the governor only shows that he not interested in having a stable financial sector. So Museveni letting him to go early is better for Ugandans.
Sacking is good example
The findings above are a result of the investigation of BoU staff allegations that Tumusiime-Mutebile recruited and promoted some staff on February 7, 2018 without following the bank’s procedures as well as the Constitution of Uganda. The staff who said two cliques exist within the bank, one supporting Tumusiime-Mutebile and the other supporting Kasekende, were proved right by the committee. The revelation of cliques means that the relationship between Tumusiime-Mutebile and Kasekende is wanting. Museveni should fire the dual like he did to many of his aides and ministers , after it was established that the duo were antagonizing each other while performing public duties of keeping national security. Their antagonism was seen as compromising national security.
Tumusiime-Mutebile and Kasekende don’t care about local banking industry
Additionally, Tumusiime-Mutebile and Kasekende do not care about Uganda’s banking industry yet they are supposed to help the industry grow to great heights. During the COSASE probe, it was found beyond reasonable doubt that Crane Bank Limited (CBL) and National Bank of Commerce (NBC), despite having a few weaknesses of liquidity flows, were not supposed to be closed as they had raised some or most of the required capital. For example, BoU officials themselves said CBL required Shs150 billion to remain afloat. And owners were looking for extra cash before BoU officials rushed to close it on October 20, 2016. BoU meanwhile has failed to account for Shs478 billion of taxpayers’ money it claims it injected in CBL as liquidity support before selling it to its competitor DRFCU Bank at only Shs200 billion, paid in installments. For NBC it had all the liquidity required at the time it was closed.
Ugandans stand to lose money because of Tumusiime-Mutebile and Kasekende mess of BoU
Ugandans are likely to lose the scarce resources to the above two commercial banks and others like Global Trust Bank Uganda, should owners sue for compensation and succeed. Indeed during the COSASE probe, most of the shareholders of the seven affected banks demanded compensation in hundreds of billions of Ugandan shillings, on account of loss of business.
BoU’s investment in Dfcu bank is conflict of interest that should not have happened
Tumusiime-Mutebile and Kasekende okayed its BoU staff under Bank of Uganda Defined Benefits Scheme to invest over 1 percent in Dfcu bank despite the institution being the regulator of the same bank. In that scenario, BoU acts as the regulator and the regulated, hence creating conflict of interest. With such an arrangement, it does no surprise anyone as to why BoU rushed to sell Crane Bank Limited and Global Trust Bank Limited to Dfcu bank. Tumusiime-Mutebile and Kasekende knew they would benefit from the transaction via Uganda Defined Benefits Scheme as a shareholder. Does it surprise anyone some of the transaction negotiations for the two banks were done over phone? One would argue that the sale of two banks was unfair as it might have denied other buyers a chance to buy acquire them moreover at a higher price, thus giving government more revenue.
Those and many other scandals like the recent currency consignment scandal should give Museveni a strong ground to sack Tumusiime-Mutebile and Kasekende without fear. It is what the public is waiting for as stated by Minister Kasaija that government is to act soon of COSASE report that calls for the reorganization of BoU.