Government has revealed that the Shs202.13bn required to bailout Roko Construction Company will be borrowed from Trade Development Bank.
State Minister for Finance-General Duties made the revelation while appearing before Parliament’s Finance Committee to defend the motion by Government seeking Parliament’s approval to buy shares in Roko.
“We proposed that government injects USD42Million an equivalent of Shs152Bn in the company through acquisition of 150,000 preference shares at the nominal value of Shs1m per share; the share premium of 57.13Bn. The share premium is being paid for over 5years. The share premium consists of financing cost and exchange rate costs associated with payment of preference shares over five years from Trade Development Bank,” Musasizi said.
The Minister informed Parliament that Government’s plan to acquire shares in Roko started in October 2019 when President Museveni directed the Ministry of Finance to start negotiations on grounds that Uganda doesn’t have a construction company which subjected government to the use of private companies that are merely foreign owned or wholly foreign owned or domicile.
“Government currently spends approximately Shs950Bn per annum on projects on roads and power sectors that are implemented by foreign companies,” said Musasizi.
He further defended the need to bailout Roko Construction Company revealing that the company has faced severe liquidity challenges that has affected its ability to execute its projects and has adversely affected payments to its suppliers.
“The Company owes Shs46.8Bn to suppliers and subcontractors who would also collapse or left to near death if the company was to be wound up. The Company owes Shs154.7Bn in terms of loans and Shs130.9Bn in bank guarantees which would cause further banking sector instability if in the midst of the constraints, the banking sector is faced with results of the pandemic,” explained the Minister.
According to the Ministry of Finance, Roko Construction Company has signed projects worth Shs1.647Trn, of which projects worth Shs696.6Bn are Government projects, and of these, projects worth Shs292Bn have stalled as a result of the company’s indebtedness.
The Ministry further explained that the Uganda National Association of Building and Civil Contractors estimates that Government would incur an additional Shs120Bn in getting new contractors if the company was to wind up.
The Ministry also revealed plans to effect changes in Roko Construction’s top management with the two representatives from Government to head the audit committee while the other person will be the internal auditor.
If the acquisition of shares is approved by Parliament, Roko Construction Company will not be allowed to acquire loans or dispose off assets without Government’s approval.
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