Why Roko is a worthwhile investment for Govt

Share

Tweet

Share

Share

Email

Comments

KAMPALA — The government of Uganda is planning to bail out Roko Construction Company by buying 150,000 company shares worth 202 billion shillings.

A request was last month tabled before parliament by Finance State Minister Henry Musasizi who stated the government’s case for being part of the management of this company. Roko, which is one of Uganda’s best-known construction companies, has been struggling financially for some time.

Musasizi indicated that the government intended to purchase 150,000 preference shares in Roko Construction Company Limited worth approximately Shs 207.13 billion, which would be paid for more than five years.

Musasizi said the move would help Roko with the necessary liquidity to meet its operational needs and other obligations.

It is public knowledge that Roko has been faced with severe liquidity challenges that have constrained its ability to execute 10 contracted projects, which have in turn affected its (Roko’s) ability to pay various suppliers and the financial sector.

Musasizi premised the government proposal of investing in Roko on an October 2019 directive by President Museveni to Finance minister Matia Kasaija.

In the letter, Museveni directed Kasaija to negotiate the government of Uganda’s acquisition of shares in Roko.

According to Musasizi, Museveni’s directive was premised on the absence of a government-owned company, which subjected the government to the use of private companies nearly wholly foreign-owned and domiciled yet the government currently spends Shs. 950 billion per annum on projects in the roads and power sectors that are implemented by foreign companies.

Museveni also reasoned that since Roko was implementing a significant number of government projects, the purchase would make it a suitable local partner, and it would lower the construction cost for government projects, etc.

In December 2020, the Uganda National Association of Building and Civil Engineering Contractors (UNABEC) wrote to Finance minister Matia Kasaija requesting the government to bail out Roko since it (the bailout) would save more contractors and their jobs.

“As a constituent of the engineering sector, we believe that the failure of Roko will unravel unprecedented reckoning against the advancement of the construction sector in Uganda,” the letter reads in part.

A senior economist speaking anonymously because of the sensitivity of the matter told PML Daily that government’s decision to purchase shares in Roko was timely and important for the construction sector.

“If the government comes in to save Roko from running bankrupt, it restores hope and confidence within other industry players. If Roko was declared bankrupt, then other players would think about moving to other economies. If Uganda cannot save a major player that controls over 60 per cent of government projects, whom then shall they save?”

The economist added that although most people have been pushing the government to rather encourage Roko to float their shares on the Uganda Securities Exchange (USE), no Ugandan would be ready to invest/buy shares from a loss-making company.

“The process for you to be listed is also long. Roko needs urgent financing yet the listing process takes almost a year because they have to prepare things like a prospectus which time Roko doesn’t have. The creditors want their money urgently.”

“Unlike the past when the government has invested in loss-making projects, they have this time deliberately put measures to ensure the company is profitable. They are purchasing preferential shares which means they (the government) shall always be paid first before any other shareholder. Secondly, the government … have recommended having their managing director and some appointments to the board,” he added.

Formed in 1969, Roko construction company limited had over time risen to become one of the leading construction and civil engineering companies in the country.

Roko employs approximately over 2,000 employees with the vast majority being Ugandan staff and a small percentage expatriates.

It is also the leading construction industry and is known to produce an exceptionally high standard of workmanship which is reflected in all the projects they have so far completed.

The firm has previously handled government projects including the Parliament of Uganda, the Inspectorate of government, the Uganda Cancer Institute and the Ministry of Finance, Planning and Economic Development.

The other projects executed by Roko include Workers House, Crested Towers, the Namugongo Shrine, Bank of Uganda, Mapeera House, Acacia Mall, Rwenzori Towers, DFCU Towers, Imperial mall and apartments Entebbe, the Latitude Hotel, Mestil among others.

With a current portfolio value of government and private sector works amounting to UGX 1,064.7 billion, an employer of over 2,000 employees and one of the largest tax payers in construction, Roko Construction Limited is a key player in the construction industry as well as the economy as a whole.

Further justification for Government’s intervention is the fact that the Company has a pipeline of contracts worth UGX 1,204 billion equivalent of works that it is negotiating with prospective clients in the Oil and Gas, Tourism and Government Infrastructure sectors. This pipeline will enable the company to expand further and create many new employment opportunities for Ugandans.

Top economists urge that with the Government liquidity injection in ROKO, a five-year cash flow projection of the company reveals free cash flow increases 12-fold over five years, from UGX 1.02 billion in 2022 to UGX 122.9 billion in 2027.

Despite hard economic times, the company continues to exhibit consistency in the execution of their construction works in line with the International certification standards.

In the last 9 month ROKO has successfully concluded projects such as the Electricity Regulatory Authority Headquarters, the Insurance Regulatory Authority Headquarters, the Busoga Institute of Technology, Mbarara Central Market, Uganda Hotel Tourism and Training Institute (Phase1), Makerere University School of Public Health (Phase1), National Social Security Fund Fit out among others —making it a worthwhile investment for the Government of Uganda.