The Sukulu Phosphates ‘Bribery’ Scandal: How Edwards Katto and City Lawyer influenced the deal

IGG, Justice Mulyagonja's report was suspiciously shelved

KAMPALA, Uganda. What became of the IGGs investigations? On Tuesday we unearthed in our Investigative pages, a Global report involving the fraudulent awarding of the Sukulu Phosphates project to a Chinese based firm, Guangzhou. Today we continue with part II of further revelations on the same regarding who was behind this shoddy deal.

IGG Report Faults Guangzhou

Justice Irene Mulyagonja, the Inspector General of Government (IGG) wrote to President Museveni on the 20th July 2016 to alert him of the flaws discovered in the award of an exploration license to Hui Neng which are detailed in a report.

Mulyagonja observed that the DGSM Commissioner Edwards Katto and another more junior government official “should show cause as to why they should not face disciplinary action for knowingly facilitating the apparent fraudulent processing” of Hui Neng’s exploration license application.

The report details a number of comprehensive failings in the licensing process including: DGSM officials, allegedly at the request of the Commissioner, refused to accept Frontier’s application for an exploration licence for the Sukulu site.

Guangzhou, under its subsidiary Hui Neng, failed to get their application approved by the relevant government official, which is, according to the Tororo District CAO, required by law. The Minister of Energy failed to respond to written requests by Frontier for an administrative review of the decision.

The IGG concludes that “the application in question is likely to have contained falsified dates and times to facilitate its clearance at the DGSM.” Museveni met with Guangzhou representatives on the 1st August 2016 and on August 8th summoned the IGG to State House. Reports indicate that the angry President criticized the IGG for the Sukulu report.

In a letter dated January 2017 to Global Witness, Edwards Katto revealed that the IGG had retracted the report following further investigations by the Ministry of Energy and Mineral Development. This appears to be a clear illustration of how political influence undermines laws and regulations. It also raises serious concerns about whether corruption was at play.

It appears that Guangzhou may have courted the government via Fang Min, a famous Kampala based Chinese fixer, and that the company invited the DGSM Commissioner Edward Katto’s daughter to Guangzhou (China) in December 2014.

It is also notable that ABMAK, a law firm run by Henry Kaliisa, son of the former Permanent Secretary (PS) to the Energy Ministry, Kabagambe Kaliisa that was previously acting on behalf of Nilefos, began acting on behalf of Guangzhou in October 2013 after the company had received its exploration license.

Nilefos raised the family relationship between Henry Kaliisa and his father in its court submissions as a possible conflict of interest. Kabagambe said he had “never made any decision in favour of any clients of ABMAK Associates” and that any claims of conflict of interest were therefore false. Denis Kusaasira of ABMAK told Global Witness that there was no conflict of interest as the PS does not take part in decision making under the Mining Act.

Many of locals revealed to The Global Witness that they felt intimidated by local officials and obliged to sign or risk losing their compensation. All of them said they thought that the agreement was for 21 years not 99, and that they felt cheated by the company.

A number of landowners also complained they had not received the correct compensation for their crops. Global Witness analysed a sample of 80 of the 123 Surface Rights Agreements we got hold of and found that while the landowners did appear to receive fair to generous rates for the land itself, the compensation for crops was indeed much lower than the official 2013 District compensation rates, leaving landowners significantly poorer overall.

Lawyer Denis Kusaasira has defended the compensation paid in several newspaper articles. In a letter dated January 2017 to Global Witness, he asserted that the landowners should have understood their surface rights agreements as they have a certificate of translation signed by area local authorities, which clearly indicate that the agreements were read over and explained to each landowner in a language they understand.

The global report calls for rekindling of the IGG’s recommendations calling for revoking of Guangzhou’s licence until a thorough public investigation into how Guangzhou came to get is license has been conducted and published.

Measures should be put in place to ensure that communities provide Free Prior Informed Consent for future mining projects, that companies undertake proper sensitisation and consultation process, and that communities receive fair and adequate compensation for their land, homes and crops. They should also be offered the option of resettlement.

Challenges to the Guangzhou’s claim

After the Guangzhou group was awarded the license, Nilefos and a third company, Frontier Exploration Ltd. which had also attempted to apply for a license at the same time as Guangzhou, both claimed that they were unfairly treated. They raised complaints of illegality andirregularities in the way that Guangzhou had received its license.

Nilefos has alleged that the decision to issue the license to Guangzhou was made months before Nilefos’ license expired. The High Court ruled in March 2016 that the government was to pay damages to the company.

Frontier sought remedy first through administrative review and then took its evidence to the IGG. They also took an action against the government in the High Court. These legal challenges, which have bought valuable evidence into the public domain, could see the government face compensation claims amounting to millions of dollars.

In April 2015, residents submitted a petition to the Speaker of Parliament raising their concerns about the process and content of the agreements. They noted that the fact that they were dealt with individually by middlemen, rather than as a group, fundamentally undermined their ability to negotiate collectively. At the time of writing they were yet to receive a formal response and their situation grows more desperate by the day.

Dennis Kusaasire, the sharp ABMAK Associates Lawyer

One of the most remarkable things about the Sukulu case is the role of Denis Kusaasira, Managing Partner at ABMAK Associates, formerly known as Kusaasira & Co. Advocates, the law firm run by the son of the former Permanent Secretary to the Energy Ministry, Henry Kabagambe Kaliisa.

Kampala-based, foreign educated Kusaasira is an advisor to the Ugandan Chamber of Mines and Petroleum and has been involved in some of the largest deals in the country. He took it upon himself to sign every single Surface Rights Agreement that Global Witness has seen which appear to have systematically under-compensated residents when compared with official district rates. Kusaasira’s other business activities are covered in more detail in this report.

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Patrick Jaramogi is a trained Crime, Financial and Fraud investigative journalist. He is a senior writer and Editor at the Investigator. He can be reached via email: [email protected] or watsup +256772426211​​​