KAMPALA – Bank of Uganda Deputy Governor Dr Louis Kasekende is in the eye of a storm after he said the economy was healthy as evidenced by the sound performance of the commercial banks, and dismissed emerging information that Crane Bank was sold to dfcu Bank for a paltry Shs200m.
Speaking at a dinner organised by Uganda Securities Exchange (USE) to mark 20 years in the Ugandan market, on Friday, Dr Kasekende said that the core capital adequacy ratio for the banking system rose from 17.3% in 2016 to 20% last year, an indication that people feel it is now safe to bank their money.
Dr. Kasekende said that the ratio of non-performing loans fell to 5.6% from 10.5% in 2016 which he said is an indication that many firms and people have gradually cleared their debts due to an improved economy.
“In the last six months of 2017, real GDP grew by 6.9 percent, compared to the same period in 2016. Furthermore, growth was widespread across the economy, with agriculture, industry and services all recording buoyant growth in the second half of 2017. The economy undoubtedly suffered a downturn in 2016, recording only sluggish growth, but those problems are clearly now behind us,” he said.
However, the Chairman of the National Planning Authority, Dr Wilbeforce Kisamba Mugerwa sharply disagrees with Dr Kasekende on the economy.
In a letter dated March 27 addressed to the Finance Minister of Finance, Mr Matia Kasaija, Dr. Mugerwa said the country is unlikely to attain middle income status by 2020 because of low economic growth.
Dr. Mugerwa said for the country to attain the status Uganda’s economy needs to grow by 15 per annum not the current 5%.’ and indicated the country had missed many targets under the National Development Plan II.
“The low economic growth performance for the last three years of NDP II implementation implies that the country may not be able to achieve the lower middle income status by 2020,” Mugerwa wrote.
Dr. Kasekende made the comments while trying to justify why the central bank sold Crane Bank for a paltry Shs 200m in January 2017.
“Actually, we sold it for the value of its assets, ignoring the value of its liabilities. The value of its liabilities was way higher than the assets. It was insolvent. BOU carried out the purchase of assets and acquisition of liabilities,” Dr. Kasekende said.
He added: “dfcu acquired most of the liabilities. Though, residual assets and liabilities remain with the liquidator. So the allegations claiming foul play by BOU in the transaction betray the minimum standard of understanding.”
The dfcu bank acquired Crane Bank, the then 4th largest bank on February 27, 2017 at a fee later to be discovered as a paltry Shs 200 billion. However Former Crane Bank shareholders led by majority shareholder Sudhir Ruparelia and family have vowed to drag Bank of Uganda (BoU) to court, claiming their bank was sold to dfcu without considering their interests in accordance with the Financial Institutions Act. The Auditor General is investigating the conduct of BOU officials as controversy of the sale of Crane Bank rages on, in the wake of revelations that the dfcu bank’s mostly European shareholders will soon be smiling to the bank after proposed dividends increased to Shs51bn, up from Shs18.5bn in 2016 after the acquisition of Crane bank.
dfcu is partly owned by the Commonwealth Development Corporation (CDC), a British government-owned company, together with Rabo Development from the Netherlands and NorFinance from Norway, who are shareholders in Arise B.V together with Norfund, a Norwegian government-owned Private Equity firm and FMO, the Dutch Development Bank.
Meanwhile, speaking at the same event, Richard Byarugaba who sits on the USE Board challenged the Exchange to continue innovating so as to compete for business with financial institutions.
“The local market conditions remain challenging, this means that as an Exchange, we need to carefully review our value addition to all stakeholders; investors, issuers, custodians, brokers and all market intermediaries.”
The chairman of the board, Charles Mbire noted that with the demutualisation of the Exchange, it will allow for greater investor participation in the governance of the Exchange.
“Demutualisation paves way for the planned self-listing of the USE through an Initial Public Offer (IPO) that we hope to achieve in the next couple of years,”.
During his key note address the Nairobi Securities Exchange CEO, Geoffrey Odundo noted that the there is need for a lot of collaboration between the government and the Exchanges.
“Governments needs to use Exchanges to raise capital. There is opportunity and liquidity to support the IPOs,” noted Odundo.
