The National Social Security Fund (NSSF) has quietly paid out billions of shillings to Kenya-based Ugandan businessman Isabirye Mugoya to get off the Nsimbe estates land.
The Observer has learnt that the fund paid Shs 21.6bn for 423.6 acres of the land at Nsimbe sometime last month. The deal gives NSSF the remaining 51 per cent stake in the estate.
Contacted for comment yesterday, the NSSF managing director, Richard Byarugaba, defended the payout in a statement, saying it “allows the fund to redeem its initial investment and acquire a valuable asset in a prime location.”
“It allows the fund to recover initial investment of Shs 8.2bn in Nsimbe holdings that had been written off,” said a statement from NSSF.
The payout ends one of the fiercest battles NSSF has engaged in, but also shows how mismanagement and corruption can stall public projects. And it has come at a cost to savers, with billions of money spent in legal battles to pay off lawyers and the time lost as the project lay idle.
The Fund, which says the figure was computed by the chief government valuer, initially owned 49 per cent of the land. This means the fund now fully owns the estate.
COSTLY DEAL
In Nairobi last week, Mugoya bragged to friends that he had been paid, reason he is no longer interested in the controversial Nsimbe estates deal. He said government had “approached him and paid him sometime last month to walk away.”
In September 2016, the Commercial court said in a consent judgment that NSSF buys the 51 per cent from Mugoya. The Nsimbe project was to cost $225m (about Shs 902 billion at current exchange rate) for the 5,000 housing units in 2005. Construction of the units was to be undertaken by Nsimbe Holdings, a joint venture between Mugoya Estates and Premier Development, a subsidiary of the National Social Security Fund.
The deal was later cancelled by the Constitutional court and legal battles took centre stage. The current NSSF leadership has always said Nsimbe estate had been idle because of the court battles that bogged it down.
Richard Byarugaba, NSSF managing director, had always told reporters that their priority was to unlock the value “by either buying out the other partner [Mugoya] or [him] buying us out.”
According to the NSSF financial statement for 2016, the Nsimbe investment was written off in 2010 but the fund had gone to court to recover the money it had spent on the investment.
In 2004, the fund had spent up to Shs 8.2bn in the joint venture. The payout means the fund can now develop the estate.
START OF THE CASE
The controversial deal started in 2004, when Mugoya was given 51 per cent shareholding for his contribution of 843 acres (worth Shs 8.5bn) of land along Masaka road.
In 2005, the then inspector general of government (IGG), Faith Mwondha, sent a report to President Museveni, advising him to rescind the joint venture between NSSF and Mugoya Construction for the development of the 5,000 housing units at the Nsimbe estate.
In her report, Mwondha said the project was marred with corruption and mismanagement, including the loss of Shs 1.4 billion through the over-valuation of the land in question.
She noted that there was a clandestine plan by the then NSSF managing director, Leonard Mpuuma, and board chairperson to improperly lend $5m from NSSF to the joint venture.
On November 5, 2007, the Constitutional court ruled that the multi-billion Nsimbe deal was illegal because NSSF entered into the joint venture without clearance from the attorney general, the government legal adviser.
But the legal battles continued. Mugoya was to be charged together with former Gender, Labour and Social Development minister Zoe Bakoko Bakoru, former NSSF board chairman Onegi Obel, and former NSSF managing director Mpuuma.
Only Obel and Mpuuma were charged. Bakoru fled and sought asylum in the US, while Mugoya’s company collapsed as his lawyers fought in court to have him exonerated.
MUGOYA THRIVES IN KENYA
Meanwhile, in Kenya, Mugoya is thriving with the real estate business. He acquired citizenship there and a number of estates have been named after him – including Nairobi’s Mugoya Estate and Mugoya Housing Scheme in Nyali, Mombasa.
Before Mugoya Construction in Kenya was placed under receivership, it spread its wings to three East African countries and won many major construction contracts tendered by governments in the region.
But as the company’s reputation grew, so did the number of controversies it was getting embroiled in.
amwesigwa@observer.ug