Former deputy governor Bank of Uganda Prof Ezra Suruma says he feels vindicated now that cabinet is considering the revival of Uganda Commercial Bank (UCB).
Suruma, the current Makerere University chancellor was one of the few government officials that had tried to resist the World Bank/International Monetary Fund (IMF) call for the privatization of UCB. He was the deputy governor Bank of Uganda at that time, but decided to move to UCB as its chairman and managing director as part of the efforts to save it from being privatized.
In a recent interview, Suruma who later became Finance minister says the government was pressurized by IMF/World Bank to privatize UCB and other parastatals as a condition for aid.
“…In other cases even when we didn’t agree, we were pressured and this is what happened particularly with Uganda Commercial Bank which I personally led and I opposed its privatisation and I was fired because of my opposing its privatisation after a very long struggle.” Suruma said.
The IMF/World Bank according to Suruma, then advised that UCB should be privatized because it was unprofitable and not liquid. But Suruma says his experience from United States was that the banking sector was a special industry whose operation was jealously guarded by both federal and state laws. He says UCB, which at the time of its privatization was holding almost half of the banking deposits of Uganda, should have equally been guarded jealously.
UCB, according to Suruma was holding over Shs 400bn in deposits at the time when it was sold. He says he had ensured the turnaround of UCB but the World Bank and IMF insisted that it should be privatized.
“I did a lot of restructuring, I did a lot of work, I took a lot of risks and turned it around. And I said now there is no reason to privatise it because it was a very important bank. It almost had half the deposits of people of Uganda…I did not want it privatised, and I thought it should remain in our hands. But the World Bank said now it will fetch a better price which means they were not honest in the first place, they just wanted it and they took it literally by force.” Suruma said.
Suruma says World Bank/IMF diagnostics studies only targeted indigenous banks like Uganda Commercial Bank, Uganda Development Bank and Cooperative Bank. Parliament in 2001 after heated debate, resolved that UCB should not be privatized. President Museveni however wrote to Bank of Uganda governor, Emmanuel Tumusiime-Mutebile insisting that it should be sold even when it had improved in liquidity.
“I have received resolutions passed by parliament today regarding the privatisation of Uganda Commercial Bank. The resolution does not change my long-held view that UCB should be sold as soon as possible, as per our Privatisation Plan for the whole parastatal sector,” reads part of the September 30 letter to Bank of Uganda.
Bank of Uganda proceeded with opening of the bids leading to the sale of majority of UCB’s shares to the South African Bank Stanbic bank at $19.6 million (about Shs 71bn). Cabinet has been discussing the possibility of reviving a bank similar to UCB to influence interest rates and promote development banking.
There is feeling that Stanbic bank now the largest bank determines interest rates on the market. Suruma welcomes the idea saying the government shouldn’t have been cautious in the first place.
“There are some areas where privatisation was justified in my opinion, there areas where probably it could have been limited. Because we, as Ugandan people want to have a stake and there are many areas where because of the cost of capital, we cannot enter the industry and government can go in our behave. And maybe after some point it can sell shares to Ugandans then you can a stake. You can even share stake and profits of the company. What is happening is we are realising that stake of Ugandans could be greater, that we should have cheaper capital to enable us enter enterprises and I think that struggle must continue.” Suruma said.
But the World Bank continues to cite the privatization of UCB as one of the success stories in Africa. In 2007, a study “Bank Privatization in Sub-Saharan Africa: The Case of Uganda Commercial Bank” concluded that the privatization of UCB was successful because the bank become solvent and more efficient since the privatization.
It said that the sale of UCB improved the access to banking for some parts of the population.