Members of Uganda's Parliament have questioned the National Social Security Fund's (NSSF) Shs185 billion investment in Marriott Hotel Kampala. The concerns were raised during a meeting between NSSF Managing Director Patrick Ayota and the Committee on Commissions, Statutory Authorities and State Enterprises (COSASE). Legislators sought explanations on the Fund's decision to invest $50m for a 30 percent stake in CS Hospitality, the company that owns the hotel.
The investment was made at an exchange rate of about Shs3,700 to the US dollar. Ayota told the committee that although NSSF holds a minority shareholding in CS Hospitality, it negotiated governance safeguards that give the Fund influence over critical decisions. The remaining 70 percent stake is held by a group associated with businessman Ngabirano. NSSF has two representatives on the company's five-member board of directors.
According to Ayota, the Fund's 30 percent stake comes with veto powers over certain strategic decisions, preventing the majority shareholder from independently pushing through some critical resolutions. He cited provisions in the shareholders' agreement and the company's memorandum and articles of association that require higher voting thresholds for particular decisions.
Ayota defended the arrangement, saying it was consistent with corporate governance principles and comparable to Uganda's investment in Kenya Pipeline Company. He explained that although Uganda held a minority shareholding in the Kenyan company, it negotiated provisions requiring the participation of its representatives in important decisions.
However, legislators questioned whether the safeguards were sufficient, particularly given that NSSF does not control the majority of shares or board seats. Elgon North MP Gerald Nangoli observed that under ordinary company law, shareholders holding more than 50 percent of a company's shares generally exercise control through their voting rights.
The committee asked NSSF to provide details of its Serena Hotel investment, including the initial capital committed, returns earned over the years, and its current financial performance. Legislators also questioned how the hotel was valued before NSSF committed its money, who conducted the valuation, and whether the investment was based on the property's replacement cost or projected future earnings.
The information is expected to help legislators assess the commercial viability of NSSF's investments in the hospitality sector and establish whether they are delivering value to members. The committee wants to establish the legal and financial safeguards surrounding the investment, given that the Fund had already committed workers' savings to the project.
Key points
- NSSF invested $50m for a 30 percent stake in CS Hospitality, the company that owns Marriott Hotel Kampala.
- Legislators questioned the valuation and governance safeguards surrounding the investment, citing concerns about the protection of workers' savings.
- The committee asked NSSF to provide details of its Serena Hotel investment to assess the commercial viability of its hospitality sector investments.
