Dubious venture into unrealised Muhanga affordable housing project attracts probe

By The Inspirer

The Government has lost millions of francs on ‘dubious’ investment that Muhanga District made in a public limited company that would implement a project to construct 200 affordable houses in this District of Southern Province, a situation that annoyed Members of the Parliament’s Public Accounts Committee (PAC).

Members of PAC expressed dissatisfaction with this venture during public hearings on Friday, September 25, 2021.

Officials from Muhanga District were virtually appearing before PAC to respond to public asset mismanagement cases exposed by a compliance audit report on expenditure for the year ended June 30, 2020, which the Auditor General carried out on the district.

The audit report found that the Government [Muhanga District] lost funds amounting to over Rwf73.7 million on the investment it made in this company called Société d’Investissement de Muhanga (SIM S.A.).

This loss, it indicated, comprises Rwf46 million the district spent on the purchase of shares in the company, and an overpayment of Rwf27.7 million on purchased land from the same company, adding that the loss  may increase upon further investigation.

The Auditor General’s report said that according to the company registration certificate dated 13 January 2009, it was established and registered having Yvonne Mutakwasuku and Jacqueline Mukamusana as its mandatories.

Yet, Mutakwasuku was the Mayor of the district by then, and key decision-maker in SIM S.A. This role in both the district and SIM S.A created a conflict of interest in dealings between the district and SIM S.A, the report found.

And, according to the audit report, the company failed to construct the 200 affordable houses in the District’s Muyira Cell, Shyogwe Sector.

A review of payments made in 2010 by the district indicated that it paid Rwf46 million as a call for shares subscribed to SIM S.A, the audit report showed.

It seems the money the district spent on buying shares in the company might even be higher than the reported amount.

The Executive Secretary of Muhanga District, Ignace Kanyangira told PAC that the district invested Rwf60 million in purchasing 600 shares in the company – one share priced at Rwf100,000 – pointing out that this was approved by the district advisory council.

Excess payment on land

The report indicated that the review of payments made with the land title obtained by Muhanga District revealed that the district purchased 36,660 square metres (m²) of the land owned by SIM S.A. The price of a m² was Rwf3,330 as resolved by the district executive committee, which means, the district would pay Rwf122 million.

However, it noted the district paid over Rwf149.8 million, which is implies an overpayment of Rwf27.7 million relatively to the expected spending on the land.

Jacqueline Kayitare, Muhanga District Mayor said that the district did not offer land to the company as claimed in the Auditor General’s report, rather, it approved the site on which the houses would be built, explaining that the company expropriated the residents on that site to pave the way for the execution of the project.

Later, she said, the district bought [a piece of the] land from the company, on which it built houses for the survivors of the 1994 genocide against Tutsi. The problem, she said, is the overpayment that was made on such land purchase.

The district officials challenged the claim in the Auditor General’s report that there were no decisions buy the district advisory council approving the investment into the company, and the identification of the site for the construction of the houses and the needed expropriation. It said those decisions of its advisory council are now available.

PAC Chairperson, Valens Muhakwa asked the district leaders why they did not provide to the Auditor General the advisory council’s decisions related to the venture.

The district leaders replied that they could not get them (from files) by the time of the audit, but that there are available now.

Investigation into the problem

The comment that the District management gave in the Auditor General’s report is that it was investigating all issues related to SIM S.A.

PAC wanted to know the update on this problem.

Muhanga District Mayor, Kayitare said “it is obvious that the way the district engaged in this investment company disregarded legislation, though the aim was to encourage investors to venture into large projects for which the district had not enough means to implement.”

“We also agree that the way the District leader joined the company and was one of its shareholders and founders … implies there were some legal considerations that were disregarded,” she said.

She said the District employed an auditor in this regard, to carry out an auditor of the company and the district asset in it.

Some of the findings of the audit include that a plot of land – worth Rwf15 million – belonging to the district, was part of the land the district bought from SIM S.A for over Rwf149 million.

She told PAC that the district reported the issue to the Rwanda Investigation Bureau (RIB) for probe into possible illegal acts in the ill-fated project.

“We submitted the audit report to RIB so that it helps us in the process to recover the district asset because we realised it was not in good custody under the company,” she said.