Inside the Uganda Airlines confidential report to President Museveni

In January this year, the Uganda Airlines management wrote a confidential report to the head of state, detailing the different challenges the company was facing.

The report details the good bad and ugly of what the airlines has been facing since inception including corruption.

The issues are said to have orchestrated the immediate laying off of several of the staff board by the Works and Transport Minister Gen Edward Katumba Wamala.

Here is the report

Purpose of the Report

Since its inception, Uganda Airlines has been targeted for attack in the mainstream and social media platforms by various people with ulterior motives, with a view to dent its image and reputation in the eyes of the public and Government.

This report aims to give the facts surrounding the genesis of some of these attacks in the media and also to give the correct status on the issues facing the company today, from the perspective of the CEO’s office.

Governance problems at Uganda Airlines

It has been reported that there is an issue with the competence of the Board as currently constituted with none of the Board members having an aviation background.

Whereas this is true (that none of the board members have an aviation background), management has taken the Board through a comprehensive induction program to ensure they are properly oriented into the specialties of the airline industry so that they can appreciate the issues facing the company and the experience and skills required to oversee a successful airline. I believe that the board is in a much better place in terms of industry knowledge than when we started at the beginning of the project.

Normally even if Boards do not have individual expertise in the industry, they can perform well if they are seasoned professionals with good knowledge of corporate governance principles in particular the separation of roles between the Board and management. In accordance with corporate governance principles, the Board should limit itself to structures, strategy and policy levels, and not interferes in day to day management issues.

However, the main problem, has been the tendency by some Board members, to push for the promotion of self-interest instead of concentrating on safeguarding the interest of Uganda Airlines at all times. This unhealthy practice has led them into trying to interfere in management areas especially in the areas of procurement and staff recruitment in the airline.

In procurement specifically, management has witnessed cases where Board members have met with some members of the management team with a view to find ways of invoice loading and other money-making schemes from the airline that employs them. This attempted collusion between some board members and some managers has tended to divide the management team and has brought inefficiency in the management structures of the company. Managers working with such backing have tended to slow down key airline projects as they attempt to push their agendas while at the same time feeling protected by some people on the Board and at ministries. These schemes have only been prevented by the strong stand of the Accounting Officer to ensure company interests come first.

Procurement managers have been particularly problematic because they have also worked with people in government ministries to find ways of making money from the airline. Fortunately, as accounting officer I have been able to stop the majority of such schemes since each major procurement requires the Accounting Officer’s signature to go ahead. As CEO, I have on several occasions sanctioned these staff members to desist from such practices but they have always rushed back to complain to their protectors either at Board or in the ministries where they have been reassured that the current CEO being a foreigner is going to be changed and they should not cooperate with him but wait for a new Ugandan CEO who will do their bidding to come.

Indeed, the current CEO took office on 1st September 2019 and was on a 6-month interim contract until February 2020. However, issues of the work permit (issued during the Taskforce period and which expired on 28th February 2019 were not addressed for a period of one and a half years until 14th September 2020 when a new permit was finally issued. The Board gave the CEO a 1-year contract up to 28th February 2021, while they continue the process of recruiting a new CEO of their choice.

It is also common knowledge that whenever the date for the expiry of the CEO contract approaches, there are many articles sponsored in the media to paint a gloomy picture of the airline so as to influence opinions with a view to ensure that the CEO’s contract is not extended further as he is seen as an obstacle to their plans.

Some Board members have come to inform me that I am viewed as being too rigid and inflexible on this issue of corruption and people are finding it hard to work with me. They advised that I must try to understand how business is done in Uganda because these practices are normal in this country, otherwise I will find myself alone. They have gone so far as to suggest that our ethical approach management may be one of the reasons why we are experiencing delays in the release of company project funds from the ministries within government. We are viewed not to have met people’s expectations to give some monies back to relevant officials who facilitate the transfer of project funds to government departments as is the practice in other organizations.

This expectation was reinforced recently when ministry internal auditors and auditors from the Auditor General came to the airline to perform their audit reviews. I was advised by my staff in finance that the first group asked to be paid US$50,000 in order to give a good report on the airline, to which I said no. The second group also wanted to be paid an amount in the region of UGX100-150M also to give a good report and I advised my staff to let them know that such practices have no place at Uganda Airlines because we work on the principles of full accountability. These incidents have highlighted the mammoth task ahead of management to protect the company from these destructive practices.

The truth of the matter is that since accepting the mandate to set up this airline first as Technical Adviser and after as CEO, we have pushed to ensure proper structures are put in place to protect company interests and to ensure the airline is run professionally to the required international standards. Whereas the majority of staff including pilots and engineers are fully behind the programs we have set, there are certain people within and outside the airline who have constantly been working to either ensure the project is derailed and fails, or that their private personal agendas are satisfied.

As we continue to stand on the principles of good governance and ethical behavior many enemies have been made in the process, especially for the CEO who is seen as the gatekeeper and an obstacle to the various nefarious agendas.

Outstanding payments to Media Houses and other suppliers

In June 2019 the company contracted the services of Abbavater as its Publicity and Promotions Agency to design and perform sales and marketing activities across the network, under the supervision of our Commercial Department.

This Agency was introduced to the airline by the airline’s former Commercial Director and we first dealt with this agency during the CR900 aircraft receiving ceremony on 23 rd April 2019. When the company was contracted to do this work, management was not aware that some of the managers within the airline, including the Commercial Director whose duty it was to manage this service, had intimate connections with this company.

This only came to light after the Agency’s services to the airline were found to be below par to a point where management had to recommend to the Board to terminate their contract. Further probing also revealed allegations that this Agency had either bribed their way into the company or attempted to bribe some managers at the airline in order to get the contract. Apart from the poor performance on marketing activities, the company had issues of over-invoicing, non-payment of subcontracted media houses and other suppliers for services arranged even without permission from the airline Accounting Officer at the time.

The Agency sub-contracted suppliers under authority from the then Commercial Director but despite submitting claims to the airline and being paid for the costs o sub -contracted parties, they did not pay the concerned suppliers. The Agency was collecting monies from Uganda Airlines for the sub-contracted suppliers, but instead of passing the payments to the suppliers, they kept the monies for themselves and never paid.

It is only after several months of such practices that suppliers started coming to the airline to report this deficiency. Management then took steps to ensure that supplier complaints are addressed by the Agency. The Agency, however, did not act on these complaints. Because of the lack of response by the agency, several suppliers opened up court cases against the agency and enjoined Uganda Airlines to the law suits.

We are now in the process of ensuring settlement of all the suppliers ( using our Attorneys K & K Advocates) through the court process as advised by Solicitor General and the matter is expected to be closed by end of September 2020. All suppliers are cooperating in this process except the agency which is not giving the reconciled suppler figures.

In addition, despite the agency’s legal team participating in the ongoing settlement mechanisms through the court process, Abbavater wrote an ultimatum to the airline at the beginning of September demanding payment within 3 days threatening to start adverse publicity on the airline if we did not comply. Three days later they started writing all sorts of stories on the airline on a twitter handle (called #exposeugandaairlines) with the aim of tarnishing its image.

Needless to say that this Agency became another enemy of the project after the airline terminated its contract, which was an avenue which they and some managers were alleged to be using to get money out of the airline. Several threats have been made against the CEO personally for having facilitated the closure of this loop. It is unfortunate that the same senior managers who were charged with protecting the airline from fraudulent practices turned out to be involved in such schemes with these outside parties.

For this Abbavater contract, the former Commercial Director at one point authorized the over invoicing of an amount of USD232,000 for this Agency (invoice raised and approved for USD 404,000 when actual costs were USD 172,000). These were some of the reasons why the individual was not confirmed to the position after the probationary period of 6 months.

Corruption and Influence Peddling on Recruitment

This issue has been written about in the media and the situation on recruitment is as follows:

The Board of Uganda Airlines is involved in all major recruitments of personnel at the airline. They approve the recruitment processes (including any adverts for positions before publishing in the newspapers and online) and the recruitment panels through the Human Resources Committee of the Board as per the Board Charter. The approved panels then conduct the interviews. Often each panel contains at least one Board member in addition to members of management.

All job applications from prospective candidates must be received either through the Uganda Airlines careers website, www.careers.ugandarlines.com or by post (with the envelope and stamps kept on file). The system automatically closes entries when the deadline for applications is reached. This system was set up to avoid the problem of corruption and influence peddling as it is not possible to sneak in names of people not logged by the systems above. The short lists are then done independently on the system.

From our perspective, there is little risk of corruption and influence peddling at this level of application and shortlisting of candidates. Indeed these structures are what has protected the company and the managers from possible influence during the various recruitments stages done so far.

However, influence peddling may be a risk at interview level depending on the integrity of individual panel members, but at a structural application and shortlisting level, thesesafe-guards were put in place to help mitigate it.

Internally our areas of concern on the recruitment angle are two -fold. (i) the involvement of the Board at all levels of recruitment which has tended to make the recruitment processes slow and laborious to meet the needs of a commercial entity like an airline. In well run companies, the involvement of the Board in recruitment stops at appointing the CEO and Executive Management while recruitment for the rest of the positions is performed by the management team. (ii) the tendency to limit the search for candidates to Uganda only when the airline requires expertise internationally. The airline requires competent staff knowledgeable in airline operations regardless of country of origin. There are certain skills that are not available in Uganda and should be sought elsewhere. We have witnessed cases where individuals have received an adverse vetting report simply because they are not from the country.

Some things went wrong at the beginning when management Structures were weak

When the airline was starting its operations in July/August 2019, there were many contracts that had to be put in place in order to allow the airline to get off the ground.

At that time, the previous Taskforce was transitioning into an interim management team and many substantive positions had not yet been filled. In certain areas like procurement, the airline had officials seconded from the ministries to assist the airline in the contracting

processes in accordance with PPDA guidelines. These officials did not understand aviation and in particular the supply chain for key products needed for the day to day operations of the airline. Mistakes were therefore made in procuring key products like Boarding Passes which were needed urgently to be supplied to all outstations.

The current CEO was consultant to the management team at the time and when such transactions came to light, he pointed out the anomalies in the supplier prices and quantities and wondered why the usual airline industry suppliers had not been contacted for such services. This led to several hard negotiations which resulted in the contract being reviewed both in terms of pricing and quantities. The lack of expertise in the industry together with the use of standard government procurement processes not suited to the special circumstances of the airline industry led to this difficult situation.

Procurement processes have since been strengthened and adapted to airline industry needs with the accreditation obtained from PPDA.

Airline Funding from Government

The status of provision of funds committed as Capitalisation for the airline is as follows.

  Description   Arrears- UGX  
     
  Arrears FY in Quarter 3 2019/2020 part paid   4,700,000,000  
  Arrears FY in Quarter 4 2019/2020 not paid   28,125,000,000  
  UCAA Charges/Incentives FY 2019/20 not paid   10,950,547,566  
  UCAA Charges/Incentives FY 2020/21 not paid   85,630,000,000  
  Airbus A330 Spares- USD 4 million part paid   165,720,000  
  Airbus Payment – Aircraft 1 part paid   2,865,534,782  
  Operational Funds – USD 5 million part paid   900,000,000  
  Total Arrears from 2019 to date   133,336,802,348  
         
  Budget for 2021/2022      
  UCAA Charges/Incentives FY 2021/22   85,630,000,000  
  Funds Required in 2021/2022   218,966,802,348  
         
  Allocated Funds in 2021/2022 Budget   117,626,000,000  
  BUDGET ALLOCATION SHORTFALL   101,004,000,000  

The Airline requires UGX 218.966 billion in quarter one, which includes arrears from the last two financial years.

I trust that this report has given clarity to His Excellency on the issues being faced at the airline. It is important to note that the majority of the staff at Uganda Airlines greatly value the opportunity given to them to serve the nation in various capacities, and in particular to be part of such an important project for the country. We are all grateful to His Excellency for his leadership and unflinching support to the airline from its conception.

entebbepost@gmail.com

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