Africa: How Uganda Airlines died and the failed efforts to Privatize it

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Sometime in 1999, veteran journalist Charles Onyango-Obbo in his “Ear-to-the ground” column in The Monitor newspaper described Uganda Airlines as a “flying coffin”.
At the time there was public outcry over the airlines as it had been mismanaged.

During the privatisation of public enterprises, the Uganda Airline Corporation was not spared. Unfortunately, the privatisation process of the airlines was “fraudulently conducted”.

In August 1999, Parliament of Uganda instituted a special committee to investigate the privatisation exercise in the country. The committee was tasked with looking at specific enterprises that had caused public outcry because of how they were privatised, specifically the Uganda Commercial Bank, Transocean, Uganda Airlines and Entebbe Handling Services (ENHAS).

On November 2, 1999, under the motion ‘The final report of the select committee on the privatisation process’ chaired by Mr Aisu Omongole, the report was tabled to the Parliament.

Parliament heard that on November 23, 1993, the Civil Aviation Authority (CAA) had invited inquiries in a public notice. Services listed included aircraft, cargo and passenger handling which were being provided by Uganda Airlines Corporation.

The investigations discovered that while Uganda Airlines Corporation was to be privatised, there was almost nothing to sell apart from three old planes, including a C-130 owned by the Uganda Air Cargo Corporation, both started by former president Idi Amin in the 1970s.
“Most often, members well-placed in the both in this regime [NRM] and other regimes were using this plane. They would use it for their private errands without paying for the plane,” the report said about the C-130 aircraft.

Investigations also discovered that during the privatisation exercise there were disagreements between Uganda Airlines and the directors of Global Airlinks and Efforte, which resulted in the termination of the contract of the Uganda Airlines Corporation board.
After which, the minister of Works, Transport and Communication appointed the managing director of Caleb International to lead Uganda Airlines. Caleb International and Efforte companies were owned by then Maj Gen Caleb Akandwanaho, aka Salim Saleh, President Museveni’s younger brother, while Global Airlinks was owned by minister Sam Kutesa.

“The committee noted that contrary to the PERD [Public Enterprises Reform and Divestiture Act] statute, the minister of Works, Transport and Communication and CAA went ahead and privatised Uganda Airlines Ground Handling asset. The then minister was Kirunda Kivejinja. This was a deliberate breach of the law for which the minister of Works, Housing, Transport and Communications should be answerable. The minister in charge of privatisation [Manzi Tumubweine] was fully aware of this illegality but made no attempt to halt it,” the report reads.

Minister sells Uganda Airlines routes
While Uganda Airlines was on ‘drip’ as government was spending approximately Shs33 million per day to keep it in the air, minister Kirunda Kivejinja sold all the Uganda Airlines routes, the 6th Parliament heard.

“The committee was disturbed to learn that the minister of Works, Transport and Communication arrogated himself the responsibility of privatising Uganda Airlines routes without consulting the PU [Privatisation Unit], neither did he consult the CAA whose legal mandate is to designate these routes. The committee noted that without routes, ground handling operations or in-fright catering service, Uganda Airlines has been left as a shell and in unattractive to buyers,” the report reads.

The committee wondered how Efforte, a company owned by Gen Salim Saleh, took control of in-flight catering services at Entebbe airport, and later in partnership with Global Airlinks owned by Mr Kutesa took over Uganda Airlines Ground Handling operations.

MPs react to the report
MP for Chwa County in Kitgum District, Livingston Okello Okello, was the first to take to the floor.

“Mr Speaker, I am not a soldier, but I think some of us are too shocked to carry out any debate now, having heard what is contained in this report. I think we need to recover from the shock of the report before we can start debate tomorrow,” Mr Okello Okello said.
In response Speaker Francis Ayume told the House, “Honourable members, before you say aye or no, we have a lot of work, it isn’t the only report. There are other important reports and Bills which are in the pipeline. I am prepared to give a breather of five minutes.”

When the House resumed, Dr Steven Malinga, MP for Butebo County in Pallisa District, said: “Mr Speaker, when you look at this report, we cannot help but wonder where this country is going.”

“We are ruining our country, corruption is eating us away and I do not know when we are going to wake up and deal with it. I was in exile and I do not want to go into exile once again. People get so frustrated when they read reports like this and if there is a change, people run to our homes and start killings us and burning down our houses,” he added.
The following day, November 3, 1999, Eddie Kwizera, MP for Bufumbira East in Kisoro District, was the first to take the floor.

“Here we are, talking about selling Uganda Airlines Corporation, but there is no Uganda Airlines Corporation to the best of my knowledge. We do not have any aircraft and we do not have routes. So what are you going to sell? Why not leave it to crash because you cannot sell the name! If someone wants the name, maybe he can have it. But it is very disappointing that we are going to sell something that is not there.”

Why Uganda airlines was sold
That very afternoon, minister of Finance, Planning and Economic Development in-charge of Privatisation, Manzi Tumubweine, addressed MPs.

“Honourable members will recall the various meetings we held on the divestiture of the Uganda Airlines Corporation. The suggestion to improve the draft agreement for divestiture of 49 per cent of Uganda Airlines to South Africa Airways was very useful,” he explained.

“In the meantime, government is finding it extremely difficult to procure funds for payment of IATA [International Air Transport Association] bills. Today, we still have the August bills which are actually $773,000.

“IATA has on several occasions extended due dates for payments of these bills and has had to use money for July to deposit with the clearing house to clear those bills. This condition is likely to continue and may result in the airline being suspended from IATA. The result of such a decision would impinge on the performance of the airline, and probably the airline may even collapse.”

Reacting to the minister’s statement, MP Richard Kaijuka of Sheema North in Bushenyi District, said: “What would be the most cost effective option if tomorrow you [government] just liquidated and you did not pay those debts? Liquidate or pursue your ongoing discussion; which is optimal? Have you looked at that option, and could you make a comment on that?”

The minister responded: “There are three options and the first option is to sell to South African Airways. That option means that the government or the system will have to pay approximately Shs16.4 billion in terms of liabilities. The second option is to liquidate. In that option, we shall still need liabilities worth about Shs18 billion. The third option is to re-organise Uganda Airlines, have a new airline altogether and start afresh. The third option would cost us $38.5 million. This was proposed by the Uganda Airlines management.”

The merger that never was
Uganda Airlines and South African Airways merger was meant to redeem Uganda’s national air carrier, but it was never to happen.

On December 16, 1999, minister Tumubweine updated Parliament on the progress on selling of the airlines to South African Airways.

“Mr Speaker, on Wednesday, December 8, 1999, Hon Kweronda Ruhemba, the Minister in charge of Economic Monitoring, promised this House that I would be coming up with a statement to brief members on the status of the divestiture of the Uganda Airlines when negotiations with the South African Airlines are finalised. I am now able to give you this statement.

“The earlier scheduled signing of the sale and purchase agreements for Uganda Airlines Corporation was postponed to allow for consultation with the relevant stakeholders. The main issues for consultation were in respect of the merger, the use of SA code, the proposed governance structure, specifically the chairman of the Uganda Airlines Limited and interim management before the close of the transaction. The sale and purchase agreement was signed in September 2000 in which Uganda airlines sold 49 per cent to South African Airways.”

Unfortunately, South African Airways pulled out of the deal. One of the reasons they gave was the “merger with other entities” closure.

It read: “In view of the small passenger market, Uganda Airlines Limited will merge with South African Airways, Alliance Air and any other airlines in the region to enable them obtain the critical mass to establish a strong, viable and competitive regional Airline. This is a reserved matter where government will be required to give written approval. However, it has been agreed that debts of Alliance Air will not be transferred to the merged entity.”
With South African Airways quitting the merger, it was the equivalent of switching off a generator during a medical operation. Uganda had no option but to sell the three planes – a C-I30, a Boeing 737 and Fokker Friendship – to pay debts. And that is how Amin’s brainchild died.

By Faustin Mugabe
Source: monitor.co.ug

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