Published by Patra K on

Does anyone miss the privatisation unit?

Hima Cement is one of the various firms that were sold off by government in 1994 under the privatisation unit.

It is difficult if not impossible to find a Ugandan who misses the Privatisation Unit which was disbanded a couple of weeks ago. This is because the unit played a central role in fattening the corruption-beast, that has hollowed up public institutions, and led to the emergence of the so-called Uganda Mafia.  

Tracing the roots of the Uganda Mafia is such a complex undertaking because it is not clear when and where it started. A study by ACFIM titled: Commercialised Politics and State Institutions in Captivity”, published in 2020 traced back the roots of mafia to the privatization process and the flurry of corruption scandals that characterized it. 

It is recalled that in 1993 on the advice of the International Monetary Fund (IMF) and World Bank marketed as Structural Adjustment Programmes (SAPs), government of Uganda embarked on a privatization process originally starting with 34 out of 139 state owned enterprises (SOEs) and later others followed suit. 

With privatization, government was advised to open up the market by divesting state enterprises. What actually happened is that when government of Uganda was advised to open the door, they did not just open it, but they ripped it out. This begs the question: 

· Whose interests did the ripped-out door serve? 

· What were the original objectives of privatization? 

· Were they achieved? If not, why? 

To answer these questions, one ought to understand that there were two main objectives of privatization namely; the economic objectives and fiscal objectives as presented below: 

1. Economic Objectives: 

a) Increase the volume of goods and services.  

b) Raise the overall efficiency of the economy.

c) Generate revenue from the sale of private enterprises.   

d) Improve upon the quality of products.  

e) Stimulate private investment. 

2. Fiscal Objectives:

a) Raising tax revenue from privatized firms.

b) Reducing subsidies to public enterprises (PEs) 

  1. Overcoming asset stripping in public enterprises.
  2. Investing more in social services and infrastructure. 

Whereas privatization was intended to result into fiscal benefits and equity enhancing effects through income distribution, reduction of inequalities in accessing goods and services by limiting opportunities for favoritism and corruption, the reverse was true. 

The process was bedeviled by the very acts of favoritism, corruption, and cronyism that it was intended to do away with, hence sabotaging the success of the structural adjustment program. In the end, the divesture of state enterprises and assets through privatization served to benefit only a small number of political leaders, technocrats, and their cronies (Dumba Sentamu & Mugume 2001).

These beneficiaries were either those who managed the process, taking the liberty to criminally privatize state-owned enterprises and assets in service of private ends, or it was their cronies. 

The study flags Hon. Sam Kuteesa (Minister of Internal Affairs), took over the ground handling services at Entebbe International Airport when Uganda Airlines Corporation was divested. Kuteesa renamed it Entebbe Handling Services (ENHAS) in 1996 to become the largest ground handling company at Entebbe International Airport. 

Kuteesa would go on to become one of the richest politicians Ugandans have ever known. He later changed the name of the company to National Aviation Services Uganda (NASU) before selling it in 2017 to a Kuwait-based foreign investor.  

In the same vein, the well-connected Amos Nzeyi, acquired, on favorable terms, Lake Victoria Bottling Company (now named Crown Beverages) which holds the franchise for Pepsi Cola International.

Questions about where the divesture funds went remain unanswered 25 years after the process was conducted. This study established that the Government of Uganda failed to invest in divested enterprises where they retained interest including Uganda Railways Corporation. 

But there was something more, the emergence of a group of regime politicians and other politically well-connected individuals that suddenly landed into wealth as a result of the manipulations and malpractices that marred the privatization process. And they needed political power to protect this wealth.  

Tangri and Mwenda (2019) posit that rarely have the beneficiaries of the sale of privatized assets as well as the distribution of state contracts and benefits been pro-opposition stalwarts. This is because presidential discretion in Uganda has the potential to deny public resources to business persons who support the political opposition or who have fallen out with the regime.

It is further argued that beyond the syndicated corruption that marred the privatization process, there was the emergence of a group of politicians and middlemen that are not only very well connected to the powers that be but are also very rich had to leverage political and economic power to ensure that the anti-corruption agencies namely the Inspectorate of Government (IG) do not prosecute and/or punish the leaders for the corrupt practices that were exhibited during privatization. 

To achieve this, they needed to command and leverage power to do anything possible using formal and informal means. To this day the office of the Inspector General of Government has remained a toothless bulldog that stands powerless against corruption masterminded by so-called “big fish”. 


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