PATRIOTIC! How Gen. Saleh became Bankrupt, Sold Personal Assets, while trying to Empower Ugandans

PATRIOTIC! How Gen. Saleh became Bankrupt, Sold Personal Assets, while trying to Empower Ugandans

 

By Brian Musaasizi & Namutebi Sumayiya

A saying by German-born influential scientist Albert Einstein that, ‘ Only a life lived for others is a life worthwhile’, clearly divulges the Love and sacrifices by  Gen. Salim Saleh, a revered NRA Bush War commander of the Mobile Brigade, who played a pivotal role in NRA’s capture of State power in 1986 has rendered to Uganda.

In our book review today, we elucidate Gen.Saleh’s noble efforts to revive the coffee co-operative movements and fight poverty in Uganda hinged on empowering his country Uganda, which unpleasantly hit a rock and in the process he blew his personal fortune.

In Gen.Saleh’s book titled ‘How I became bankrupt’ his brother, Uganda’s President Yoweri Museveni, refused to bail him out of his debts arising from a Coffee scheme under Divinity Union Ltd, which concentrated its efforts on studying the coffee industry with a view of developing a viable strategy that would improve the lives of peasant growers.

‘’Coffee being a major source of income for Uganda’s economy grown by the rural population, it was envisaged that partnership with the unions would enable DUL utilise the societies’ network to reach the rural farmers who constitute a substantial portion of the peasants, thereby contributing to the improvement of their standards of living’’, Gen.Saleh notes in his book.

DUL was committed to integrating farmer friendly methods in its operation to improve lives of the peasants and in line with this principled position, they decided to contribute to the rejuvenation of the co-operative movement.

A study was commissioned and its findings presented in the ‘Coffee Strategy’ on the 6th of March 1999. The strategy envisioned the set-up of: Joint venture with Co-operative Unions, Joint venture with private companies, Central Coffee Factory, Agricultural Extension Services, Coffee Rehabilitation Scheme, Agricultural Mechanization and Developing a Model Coffee Farm

It was in this regard that we decided that Bukalabi Rehabilitation Scheme be developed into a pilot project for the rehabilitation of peasant owned coffee plantations.

In an advocacy paper to His Excellency the President, ‘The Co-operative Movement: A Contribution to Modernisation of Agriculture’, Saleh encouraged government to consider revamping the co-operative movement as a complementary effort to poverty eradication. He suggested that partnership with the private sector would launch the co-operative approach to modern marketing and management skills.

Certainly they tried to convince other stakeholders to consider the option which prompted the Vice-President’s office coordinate the restructuring of the Co-operative Movement.

DUL and the stakeholders operationalised the coffee strategy by forming joint ventures with coffee co-operative unions in the country, namely: Sebei Elgon Coffee Union (SECU), Kapchorwa district, Okoro Coffee Growers’ Union, Nebbi district, and Banyankole Kweterana

Gen.Saleh believed that he has been playing an economic role for the National Resistance Movement and understands when my partners disagree with my views since we are of a different type of cadres.

‘’A diagnostic study on the Uganda co-operative movement was therefore commissioned. The study documents the weaknesses that led to the collapse of the major unions and the dormancy of the entire co-operative movement. It also provides measures for the rejuvenation of the movement. A subsequent study to establish whether DUL’s partnership with the unions was justified pointed out thus: “Vices such as mismanagement and corruption are not unique to the co-operatives’’, notes Gen.Saleh.

He notes in his book that these vices have their roots in the norms and values of the society at large and there is no way the co-operatives could have been an island in a grossly mismanaged situation the country has gone through its post- independence period.

‘’Therefore, what the unions required was the capital, effective management and marketing skills.I made effort to acquire knowledge to equip me with the capacity to guide the co-operative movement and applied to the University of Wisconcin, USA, on the 31st of August 1999, for a course on Management of Co-operatives’’, he adds.

In recognition of the commitment to the Rejuvenation of the Co-operative Movement, Banyankore Kweterana Union, Mbarara district, appointed Gen Saleh their representative on December 2, 1999 to negotiate and reschedule their debt with the defunct Co-operative Bank and bfollow-up government’s compensation for their war losses, among other assignments.

DUL would pay off immediate demands by SECU’s creditor; the balance of SECU’s debt remaining would be renegotiated by DUL with SECU’s creditors in order to fit in with the joint venture’s cash flow. DUL would secure the finance required to commence coffee processing and export; and also, SECU was to contribute with usage of its processing facilities by the joint venture.

The Coffee Strategy required Shs 54,000,000,000 to cover the envisioned plan. There was therefore a need to outsource the financial requirements.

‘’I secured funding from Standard Chartered London. They promised to approve a loan to finance the entire coffee project, or a considerable percentage. I sold my shareholding in ENHAS, and In-flight Services Ltd at a loss to facilitate the loan.

Gen. Saleh and team identified a commodity-trading house known as Fenton Commodities Inc.

They promised $15 million for the implementation of the coffee strategy. The Heads of Agreement were signed viz the Denton hall agreement in 1999. They opened DUL International/Fenton accounts and even transferred the required insurance fees. The Fenton opportunity did not materialise yet they had relied on Fenton so much that they ignored indigenous mobilisation of capital.

Dr. Kassa and Gen.Saleh lost $200,000 and $600,000 respectively.

‘’I received the shocking news that the Fenton financing [had] stalled. I had spent generously on all the four areas of interest mentioned in the Tarehe Sita statement from personal coffers, most of which was acquired by way of loans. Since I did not prioritise the implementation of the Tarehe Sita but spent capital on all of them simultaneously, when the hope of Fenton crashed, we were left in a financial quandary. The following were the resultant implications; Funds committed to paying the debts of the unions and establishment of the infrastructure became a big loss; DUL could not meet its financial obligations; Efforts to rejuvenate the co-operative movement were adversely affected; It was hurting not to conclusively execute my ‘will’ as contained in the Tarehe Sita statement which at this point in time was public knowledge’’, Saleh painfully sates.

Gen.Saleh constituted a team (Arif, Sarah and Flower) to ascertain his assets and liabilities and give him a balance sheet. They however, proposed that a professional firm be commissioned to undertake a financial evaluation and audit of DUL.

The report by Impact Associates was a shock of his life when he learnt that he was indebted to the tune of Shs 3 billion arising from acquired loans for the execution of the Tarehe Sita ‘will’.

‘’As a revolutionary, I hate debts and tax evasion. It was therefore embarrassing of myself being ‘raided’ by Special Revenue Protection Services (SRPS), its good intentions not withstanding. The revelation of such levels of indebtedness caused me a lot of panic and my staff went into disarray. Within the same time, there were personal setbacks that compounded the problem and complicated my life. I had applied to the University of Wisconcin in America to undertake practical lessons in Co-operative Economics. I had hoped to be attached to a tutor for guidance in the presentation of my thesis on the basis of a three-year study on Co-operative Economics under the auspices of DUL. I never got a feedback. I was surprised that they were not willing to offer further training to a person of my experience in the subject’’, he adds.

He notes that; ‘’in the year 2001, I met Mzee at Kangole – Karamoja where he had gone to guide the disarmament process of the Karimojong pastoralists. My request to him to help clear some of my debts was turned down.  The explanation that I had committed the loans to co-operative economics, a public good that would foster modernisation of agriculture, didn’t make sense to him. He advised that I sell my assets and pay the debts. Interestingly, most of the assets were already mortgaged.  I recall in one of the attempts by friends to convince him to lend me a hand, he declined and asserted that even if he did, I would again give out the money generously to people and even acquire more debts for them. The only solution therefore was ‘self-liquidation’. I resorted to selling whatever I owned to raise capital to sustain the coffee project’’.

BELOW IS PARTIAL EXERPT FROM GEN SALEH’S BOOK

The demise of my dear mother, Kaaka Esteri Kokundeka, whom I adored, too left me devastated. I decided to undergo surgery on my arm again. The failure of Ugandan doctors to heal the surgical wound on my arm, compelling me to seek medical treatment abroad, was also a painful experience. I had offered my surgical arm as a ‘specimen’ to Ugandan doctors to set an example that correction of such ailments could be sought locally.

However, the findings on our local medical capacity were not encouraging. While in Germany for surgery, I took the opportunity to hawk Ugandan coffee to prospective customers since I had no money for advertising. They indeed expressed interest in the uniqueness of our Ugandan specialty brand. This was very encouraging and I was convinced that coffee growers in Uganda would even earn more handsomely if they were organised into co-operative enterprises and linked to niche markets to sell their coffee as a value-added product.

I lost six months of time in the development of the coffee project due to personal setbacks.

At the peak of it, I was rumoured dead at home (Uganda), while on my way to London, on a working visit to market Uganda’s coffee as a specialty brand. On my return, I was received by a mammoth gathering at Entebbe Airport and I wondered who had instigated the rumours, which caused a lot of panic among the population.

Akiba International

Divinity Union Limited was able to refinance and operationalise the debt-ridden and hitherto non-operational Co-operative Unions (peasant producer groups).

Extension services were offered to producer groups. DUL earned itself a 3rd rating in coffee processing facilities created through partnerships with the Unions.

However, these and other efforts (that included entry into international markets) could not be continued largely due to financial limitations.

I restructured DUL and created ‘Akiba’ as a venture capital fund. I also managed to substantially bring down the debt burden, albeit with limited resources.

“Akiba” is a Kiswahili word that means “reserve”. It was conceived on realising the private economic sectors’ need to obtain ideas and solutions to the questions on ‘how to save companies in financial distress, restructure debts, acquire adequate working and expansion capital, arrange bridge financing and making mutually profitable joint partnerships’.

The company provides investment banking and consultancy services. With an empowerment philosophy that seeks to support initiatives that would leverage the struggle to eradicate poverty, Akiba considers Coffee Export and marketing as one of the urgent economic activities that need strategic entrepreneurial interventions.

Therefore, Akiba’s overall Coffee Strategy is to provide finance for coffee export, develop effective and high-value marketing mechanisms in order to improve export earnings and elevate producer group earnings towards poverty eradication. We have indeed embarked on promotion of value addition for export and marketing Ugandan coffee as generic identity.

Akiba developed a farm-to-cup marketing concept as a way of improving competitiveness of processed Ugandan coffee on the International market hence increasing our foreign exchange returns on coffee.

We therefore have established mechanism under which Ugandan coffee is moved from the farmers, processed into a final product and sold on the shelves in the customer markets.

In view of our contribution to the development of the coffee industry, the Office of the Prime Minister of the Government of Uganda requested Akiba International to provide a concept paper and a value addition export strategy, which Government would use in determining the manner and degree of support for value addition and export promotion of Ugandan coffee.

On the 5th of August 2002, they wrote, “Recently the Government of Uganda decided that it is absolutely necessary to discontinue selling Ugandan coffee in the raw form.

The Prime Minister was instructed to find out how persons dealing with value addition to our coffee can be helped in order to increase returns on export of Uganda coffee.

Among these persons I consulted Lt. General Salim Saleh who had already been identified by Government as one of those involved in value addition to our coffee. It is through this discussion that I learnt of the recent efforts and successes by M/s AKIBA International and their partners, in developing marketing initiatives that will lead to improved competitiveness of processed Ugandan coffee.

The NRM government under the 10-point programme and now the 15- point programme led by H.E the President has already recognised the importance of value addition to Uganda exports.

In order for the Prime Minister to be able to develop a highly informed position on which initiatives to the private sector can be supported by Government for effective marketing mechanisms for our coffee, we need input from those who are already in this effort. The purpose of Government intervention is:

To promote value addition for export.

• To increase export returns from the coffee sector.
• To promote generic marketing to give Uganda’s coffee a competitive presence in the international market.

The purpose of this letter, therefore, is to request you to provide this office with a concept paper and subsequently, a detailed value addition coffee export strategy, which Government will use in determining the manner and degree of support for the value addition and export promotion of Ugandan coffee”.

On the 20th of August 2002, we presented the concept paper to the Prime Minister and organised a consortium of indigenous coffee exporters who subsequently met with government to request for a strategic intervention fund as no private operator would be in position to meet the related costs of value addition.

House of Uganda Coffee (HOUC) Ltd.

I met with Abdul Dedya and Kwame Ruyondo (Abdul is a partner in HOUC based in Denmark) in September 2001 to explore exporting Uganda’s Coffee as a finished product to the Scandinavian region. These efforts led to the establishment of HOUC that commenced in October 2001 as a company, with personal savings of Shs 35 million.

HOUC established partnerships with the following farmer groups:

• Sebei Elgon Cooperative Union (SECU) and
• Okoro Coffee Growers’ Union

Accordingly, Akiba financed and guided House of Uganda Coffee (U) Ltd (HOUC) and its Denmark branch HOUC Aps to procure, process and market high value Uganda coffee in the Scandinavian countries. There was, however, a need for additional financing. I came across a banker from Egypt. He was kind enough to provide a loan of $60,000 from Cairo International Bank for the processing of the value-added coffee.

On the 28th of May 2002, HOUC launched a Ugandan Coffee generic product branded “Mount Elgon Coffee” into the European market in Copenhagen, Denmark.

In January, 2003 HOUC Aps signed a contract with a company that gives Uganda access to the market comprised of 800 supermarkets.

HOUC has so far delivered the finished product to 140 of the supermarkets and this has ranked us 11th among the best sellers in Denmark. Under the contract with Supergross chain of supermarkets, HOUC is required to deliver to the market an average of 7 tons per week. HOUC established only one year ago has built an impressive market position.

If we don’t respect our part of the bargain and deliver the said tonnage every week, our product risks being de-listed.

Subsequent marketing initiatives by Ugandan companies may therefore never be considered in Denmark and other countries of that region.

I hope government appreciates our application and provides an intervention fund for value-addition in the strategic coffee sub-sector.

Convincing my partners

When I restructured DUL and managed to acquire some capital, I was faced with a dilemma of convincing the partners in HOUC and Akiba to carry forward DUL’s responsiveness not only to the financial interests of entrepreneurs but also to the socio-economic interests of the community and the entire nation at large.

I must admit that the joint ventures were in a business sense or view not viable to Divinity Union Ltd., as we were operating with resources acquired by way of loans and the fact that the unions were highly indebted at risk of losing their assets.

Indeed many financial institutions and several stakeholders in the coffee industry did not support DUL’s undertaking with the unions, arguing that the resources should have been invested directly to coffee procurement, processing and export, instead of deliberate acquisition of unnecessary liabilities such as those of operationalising redundant and debt-ridden Unions.

However, for us, DUL was a people-driven enterprise with an objective, among others, to contribute to the improvement of household incomes of the peasants. The joint ventures are indeed a springboard on which efforts of value addition (the farm-to-cup concept) have been built and have served to link the peasants to high-value markets.

I did write several reminders to HOUC partners to streamline their partnership with the unions and allow the farmers to own a considerable stake in HOUC. When I observed that the ground was ripe for an offensive, I called for a meeting of the Board of HOUC to review company activities and share holding.

This I was doing with the subtle plan of convincing them to assign shares to Sebei Elgon Coffee Union (SECU).

The meeting was held at our offices in Munyonyo on February 13, 2003.

I proposed that SECU be offered 49% shares. The Chief Executive Officer, Akiba, was also concerned that SECU would gain control of HOUC with such a shareholding. But it is for these farmers that I have set-up the coffee project, including borrowing and selling my assets to raise start-up capital.

I mentioned earlier in this book that the foundation of my views “bears root in the training I was exposed to in Mozambique.”

We analysed how Europe under-developed Africa. Imagine thirty years later, Africa is still suffering from the same syndrome. We buy value-added products at exorbitant prices from developed countries moreover whose raw materials originate from Africa.

This economic set-up is unfair and must be reversed. It is for this reason that I have sacrificed so much time and financial resources to contribute to value-addition for the coffee industry.

Therefore, my undertaking to develop the coffee project is imbued in an ideological intention rather than a business by an ordinary entrepreneur motivated by profit making.

I am not a shareholder in HOUC but the calling (February 6, 1998 Tarehe Sita Statement) in which I undertook to invent tools for poverty eradication has been catered for.

I understand the world economic order better, and have penetrated the heart of coffee consumption. After long deliberations, the board meeting resolved that SECU be offered 40% of the shares. The transfer was legally registered.

By assigning shares to the peasants we have set-up a structure that ensures their share in the chain of value addition. This is a demonstration that the rewards of capital and labour can be shared equitably. It would also safeguard the socio-economic impact approach that is also the backbone of HOUC marketing.