Nearly nine years after Bank of Uganda (BoU) issued a guarantee linked to a Shs140.487 billion loan to Haba Group Ltd, the central bank is yet to recover the money or take the company to court, leaving legislators questioning how the public funds will be protected.
The revelation has put BoU under fresh scrutiny, with the Parliamentary Committee on Commissions, Statutory Authorities and State Enterprises (Cosase) demanding a detailed account of how the guarantee was issued, what due diligence was conducted and why recovery efforts have stalled for almost a decade.
Appearing before the committee on Monday, BoU officials admitted that the central bank had not directly engaged Haba Group over recovery of the money and had not filed a case against the company.
BoU head of legal Dorothy Masifa Ochola told MPs that the guarantee that enabled Haba to borrow from commercial banks was issued following instructions from the Ministry of Finance.
She said BoU had since been engaging the ministry and its external lawyers, Max Advocates, on possible ways of resolving the matter, including pursuing court action.
“Court resolution is one of the options we have been looking at,” Ochola said.
Her explanation, however, angered MPs, who questioned why the central bank had spent years corresponding with the Ministry of Finance and consulting lawyers instead of taking concrete steps to recover the money.
The committee also established that BoU did not obtain security from Haba before issuing the guarantee.
Ochola further struggled to provide details about the company’s current directors and shareholders, saying she would need to conduct a fresh search to establish the information.
She told MPs that members of the Bassajjabalaba family were associated with Haba Group but could not recall the names of all its directors.
The revelation raised further concern among legislators, who questioned how BoU could fail to establish the ownership and current status of a company at the centre of a Shs140 billion public financial exposure.
MPs demand accountability
Cosase chairperson Muwada Nkunyingi said BoU could not continue shifting responsibility to the Ministry of Finance when the central bank had issued the guarantee and was expected to take measures to protect public funds.
The committee also questioned what MPs described as conflicting explanations from BoU officials over who ultimately benefited from the money and who is responsible for its repayment.
Ochola initially told the committee that the loan had been advanced to government and that government was responsible for repayment because the guarantee had been issued on its instructions.
MPs, however, pointed to documents before the committee showing that the letters of comfort were issued in connection with Haba’s borrowing from commercial banks.
BoU Governor Michael Atingi-Ego said he was aware of the Shs140.487 billion matter but asked the committee to allow the central bank to provide a detailed written response.
He said previous Cosase committees had examined the matter and that BoU had continued writing to the Ministry of Finance seeking settlement of the outstanding amount.
According to Atingi-Ego, the Ministry of Finance instructed BoU to provide letters of comfort to commercial banks to enable them to lend to Haba.
The explanation did not satisfy the committee, which insisted that the 12th Parliament must establish what happened to the money and what action has been taken to recover it.
Bassajjabalaba compensation
The Shs140.487 billion exposure is linked to the controversial compensation of businessman Hassan Bassajjabalaba and companies associated with him after government cancelled leases they had obtained to manage several Kampala markets and Constitutional Square.
Government paid about Shs142 billion in compensation, with the money drawn from BoU and backed by guarantees to commercial banks.
The compensation was later challenged in the Constitutional Court, which ordered Bassajjabalaba and his associates to refund the money.
The Supreme Court subsequently quashed that decision, ruling that the Constitutional Court had acted outside its mandate by determining a dispute involving contested facts and commercial transactions rather than a pure question of constitutional interpretation.
The unresolved financial exposure has now returned to the spotlight after it was flagged in the Auditor General’s report for the 2024/25 financial year.
BoU sent back for answers
MPs also criticised BoU for appearing before the committee without the relevant documentation despite having been informed in advance that the financial transactions would be scrutinised.
Atingi-Ego asked for more time to retrieve information from previous reports and engagements before submitting a comprehensive response.
Cosase consequently postponed the engagement and directed BoU to return with detailed documentation on the guarantee.
The committee wants the central bank to provide records showing the circumstances under which the guarantee was issued, the due diligence conducted before its approval, any security obtained, recovery efforts undertaken and correspondence exchanged with the Ministry of Finance.
Cosase also resolved to summon representatives of Haba Group, including Bassajjabalaba, to explain the company’s position and help establish its current ownership and status.
For now, MPs are left asking why a Shs140.487 billion public financial exposure has remained unresolved for nearly nine years, with BoU yet to commence direct recovery proceedings against the company at the centre of the guarantee.
