Queries raised on $1.7m Uganda ‘presidential handshake’

Monday January 9 2017

Drilling for oil in western Uganda. Ugandan officials who helped win disputes with oil companies have been awarded $1.7 million. PHOTO | FILE

Drilling for oil in western Uganda. Ugandan officials who helped win disputes with oil companies have been awarded $1.7 million. PHOTO | FILE 

By Julius Barigaba

A storm is raging over the payment of $1.7 million in bonuses to 42 government officials who helped Uganda win disputes with oil companies over capital gains taxes on the resale of oil blocks.

The payments, since christened the “presidential handshake,” because they were authorised by President Yoweri Museveni last May without parliamentary approval, have caused outrage because they amount to a double payment for civil servants who are employed by taxpayers to perform their duties anyway.

Lawyers and officials who handled the cases in Uganda and London were paid $10 million for the services that led to the government recouping $700 million in revenue.

The money included legal fees, air tickets, allowances and per diem for the Ugandan officials to travel to London for the hearings.

Civil society and legislators who spoke to The EastAfrican said the payments were unacceptable.

“This is illegal, inappropriate and unacceptable. For URA Commissioner-General Doris Akol to say this was premised on a philosophy shows that there is no legal basis, because it is the Public Finance Management Act that determines appropriation of public payments,” said Gerald Karuhanga, the MP for Ntungamo Municipality.

It emerged last week that President Museveni approved the payment to officials of the Uganda Revenue Authority, the Attorney-General’s Office, the Ministries of Justice, Finance, and Energy and Mineral Development, during a meeting with Ms Akol on May 17, 2016.  

Documents presented by legislators show that Ms Akol supported the recommended reward, citing the philosophy behind it as a “presidential handshake.”

The list of beneficiaries is yet to be disclosed, but the bonus is reported to have ranged between $12,500 and $74,000.

“On the face of it, the payment looks irregular morally and legally, because from what I know, parliament never appropriated that money,” one legislator said.

URA spokesperson Sarah Birungi Banage defended the bonuses saying they were approved by the highest office in the land on the advice of the Attorney-General.

“It is standard international best practice for employees to receive bonus payments or honoraria for exemplary performance in both the public and the private sector. Equally, under the Ugandan Constitution, the president has the prerogative to reward exemplary performance.  This has been exhibited in the fields of health, academia and sports to mention a few,” Ms Banage said.

Lack of transparency

Civil society activists, however, said the bonuses contravened the Public Finance Management Act of 2015, which is supposed to improve transparency in the management of public resources and curb arbitrary use of funds.

“What these public servants did was in the course of their duty. They are already being facilitated to execute their roles and responsibilities under their respective mandates, so paying them for doing their job makes the whole matter mischievous, and that is our point of contention,” said Julius Kapwepwe, director of programmes at the Uganda Debt Network.

“There certainly was a conflict of interest in senior government officials — the Attorney General, commissioner general of URA and others — who demanded this reward. If someone else had asked on their behalf, that would be fine,” government spokesman Ofwono Opondo said.

The cases were first heard before Ugandan courts — the tax appeals tribunal, the high court and the court of appeal — and later went to the high court of London, the court of appeal of the United Kingdom and two international tribunals, as the country sought to recover what it was owed in capital gains tax when Heritage Oil and Gas sold its assets to the Ugandan subsidiary of Irish firm Tullow Oil six years ago.

In August 2010, UK oil exploration firm Heritage Oil and Gas sold half of its interest in Uganda’s oil fields in the Albertine region for $1.5 billion to Tullow Uganda, prompting a URA demand note for $404 million in capital gains tax, which Heritage challenged first in the local courts where it lost, and later went for arbitration in London.

Meanwhile, as the cases went on, the government demanded that Tullow, which had bought Heritage interests, settle the disputed capital gains tax from what it was meant to pay Heritage, or risk non-renewal of its exploration license.

In April 2011, Tullow opted to pay $121 million as a one-third down payment of the disputed figure, and the balance of $283 million to be paid upon conclusion of the tax dispute — if it went Uganda’s way. 

Uganda also demanded a further $30 million from a payment transaction between Heritage and Tullow over breach of a production and sharing agreement, but this went Tullow’s way in 2013.

A farm-down transaction was made in February 2012 when Tullow sold two-thirds of its stake to Total EP and China National Offshore Oil Corporation for $2.9 billion, and a capital gains tax dispute ensued between the taxman and the Irish firm over the correct assessment from this transaction, which was settled in 2015, with URA getting $250 million.