Why NSSF retained UTL employees’ Ush14b savings

Uganda’s Court of Appeal on August 8th overturned a High Court decision directing the National Social Security Fund (NSSF) to reimburse Uganda Telecom (UTL) Ush14bn that was saved from the telco’s former workforce.

This recent judgment implies that NSSF is under no legal obligation to refund the telecom’s portion of the contributions directly to UTL.

This means that the 10% social security contribution now belongs to the 900 plus employees.

Justice Cheborion Barishaki during the court session on August 8,  declared that: “UTL’s application in the High Court was wrongly instituted as an application for judicial review yet instead it challenged the correctness of the Fund’s decision to collect statutory contributions from certain UTL employees.”

Richard Byarugaba, the Managing Director at NSSF, said National Social Security Fund welcomes the Court of Appeal’s judgment because it upholds its position that once contributions are remitted to the Fund, they belong to the employee for whom they have been paid.

NSSF building - photo by Ekyooto Uganda
NSSF building in Mbarara city – photo by Ekyooto Uganda

“Regarding this particular case, we are confident that as an employer, UTL erred in seeking a refund of the employer contribution based on an alleged exemption that was never subjected to interpretation by the Courts of law,” he stated.

How it all started

A few years back, in 2015, UTL communicated in writing to NSSF demanding to be refunded the 10% employer contributions claiming that the payment had been made in error for their employees who initially worked under Uganda Posts and Telecommunications Corporation (UPTC).

UTL said that these members of their workforce for whom they erratically contributed 10% were members of Uganda Communication Employees Contributory Pension Scheme (UCECPS).

How the legal battles begun

A trade union known as The Uganda Communications Employees Union, (UCEU) sued the two entities including NSSF and UTL in the Industrial Court challenging any refund of the contributions.

The labour union UCEU then managed to secure a temporary injunction hindering any payment.

In a twist of events, Uganda Telecom swung into action before the case in the industrial court could be determined.

UTL applied for judicial review in the High Court, seeking an order to compel NSSF to refund the Ush14 billion.

Following NSSF’s displeasure, the Fund and filed an appeal in the Court of Appeal on grounds that the contributions belonged to a section of former workers of UTL, and not to the employer.

The High Court did not distinguish between the two categories of UTL employees that were affected, namely, the former UPTC employees whose services were transferred to Uganda Telecom with terms of service remaining unchanged, and UTL’s recruits who periodically contribute to UCECPS.

The genesis of Uganda Telecom’s misfortunes

In 1988 Uganda Telecom Limited (UTL) was established.

UTL is one of the longest-running telecom operators in Uganda. Libyan Post, Telecommunication and Information Technology Holding Company (LPTIC)  via its subsidiary LAP-Green holds 69% majority shareholding in UTL whilst the Ugandan Government holds a minority 31% shareholding in the company.

The telecom company has been struggling financially without funding since former Libyan President Muammar Gadhafi was killed in 2011.

In 2017, LPTIC withdrew financing from UTL arguing that the Ugandan government had failed to convert the debt it owes to UTL into LPTIC equity.

The Libyans also argued that the government failed to accept to erase the liabilities for actuarial amounts of pensions which exceeded the statutory contributions of 10% for the company’s former workers during the time of privatization.

Agreeing on these two issues then, the majority shareholders would have enabled shareholders to raise about US$48million through the sale of towers and funding from the LPTIC to revamp UTL.

The telecom firm is currently under full management of the Government of Uganda.

According to Wikipedia, it is an information and communication technology network company in Uganda owned by the government of Uganda and currently under receivership due to large debts of about Ush700 billion ($200 million) and mismanagement.

 UTL was put under receivership after the Libyan company that owned about 69 percent shares left in 2017.

Following the Ugandan Parliament’s passage of the Communications Act in 1997, the Ugandan parastatal Uganda Posts and Telecommunications Company Limited (UPTCL) was divided into four entities:

  • Uganda Communications Commission – the communications industry regulator
  • Uganda Post Limited – also known as Posta Uganda
  • PostBank Uganda – a government-owned financial institution
  • Uganda Telecom – an information technology and communication network company

In June 2000, UTL was privatised when the government divested 51 per cent of its shares to Ucom, a consortium formed by Detecon of Germany, Telecel International of Switzerland, and Orascom Telecom Holding of Egypt. The Ugandan government retained 49 per cent ownership in UTL

UTL is a total communications provider with a broad range of services in Uganda, including:

  • Fixed voice (copper, CDMA, fixed GSM)
  • Mobile voice and data
  • Dedicated circuits for data and internet (xDSL, FTTx, leased lines)
  • Broadband services (3G, WiMAX, xDSL, FTTx, CDMA, Wi-Fi)
  • Data centre services (hosting/housing/backup/failover)

In February 2009, UTL launched an unstructured supplementary service data-based mobile wallet service called “M-SENTE”, using software purchased from Redknee Solutions Inc., a Canadian information technology company.

In September 2009, UTL became the first Ugandan provider to introduce the solar powered hand-held mobile phone, locally called “Kasana”.

 In July 2011, UTL estimated their market share of the Ugandan telecommunication industry at about 10 per cent.

Seizure and release of assets  

In March 2011, the Ugandan government seized Lap Green’s 69 percent shareholding in UTL as part of sanctions against the regime of Muammar Gaddafi.

 After the end of the Libyan civil war in May 2012, the shareholding was returned to Lap Green, ending a period of considerable uncertainty for the carrier.

Since then, UTL has undergone a major restructuring to revive its fortunes.

UTL’s ownership over the years

As of October 2018, UTL was a joint venture between Teleology Holdings GIB Limited, a private company based in Nigeria, which owned 67 per cent of the company, and the Ugandan government, which owned the remaining 33 per cent.

The telecom’s leadership structure has been as follows;

Stephen Kaboyo has been the chairman of the board of directors since early 2014.

The managing director was Mark Shoebridge, who was appointed temporarily on May 21, 2015, as he was leaving the company from his role as chief fixed services officer to lead operations in Vodacom Nigeria.

He was re-appointed effective February 8, 2016 upon his return to Uganda to drive the turnaround of the struggling operator.

The chief finance officer is James Wilde, replacing John Sendikaddiwa who resigned suddenly in October 2016. The chief legal counsel is David Nambale.

The acting chief commercial officer is Ameer Kamal Arif. The chief human resources and administration officer is Emmanuel Jones Kasule, who also joined the team in 2016.

The telecom has undergone a couple of parliamentary investigations throughout its existence.

In November 2016, the parliament of Uganda set up a select committee to investigate alleged mismanagement at Uganda Telecom, including the allegation that Ush1.5 billion is missing from petty cash through theft from long-term staff in the finance department over many years.

Many of the finance department staff involved have been dismissed, been terminated, or have resigned since this fraud was uncovered in 2016 through audits conducted by the new management.

The committee’s report was expected within two months.

UTL’s insolvency and receivership story

In February 2017, UCom, the government of Libya-owned subsidiary unilaterally pulled out of the struggling company, forcing the Uganda government to assume total sole control.

 In April the same year, the Ugandan government placed the telco under receivership.

In December 2017, Uganda announced plans to sell a majority stake in the troubled company.

Nearly a dozen investors from Europe, China, South Africa and the USA expressed interest in acquiring a stake in UTL.

In July 2018, The East African regional newspaper reported that of the investors who submitted purchase bids, Mauritius Telecom emerged as the only capable, credible, legitimate bidder, with a bid of $45 million upfront, and another $100 million over the next 36 months, for a 69-31 majority shareholding. Discussions were held to close the acquisition. The Uganda Financial Intelligence Authority (FIA), successfully vetted the potential investor.

In a cabinet meeting convened on Monday 1 October 2018 and chaired by President Yoweri Museveni, Taleology Holdings GIB Limited of Nigeria, was selected to operate UTL for the next 20 years.

The deal includes UTL’s total assets, valued at USh148 billion ($39.5 million), tax waivers, an extended frequency and Uganda’s national backbone optic fibre infrastructure.

In exchange, Taleology will make a nonrefundable U$7.1 million (USh27 billion), at signature of the paperwork and another US$63.9 million (USh240 billion) no later than 60 days from that date, otherwise they forfeit the concession.

 When, in February 2019, Taleology failed to remit the required funding to effect the acquisition, the company went back on the market and a new buyer is being sought.

On 2 January 2020, Justice Lydia Mugambe of the Civil Division of the High Court of Uganda, appointed Ruth Sebatindira as the Administrator of Uganda Telecom Limited, under a court-appointed receivership since April 2017.

Sebatindira took over the administration of UTL from Bemanya Twebaze on January 6, 2020. 

Business Times Uganda

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