LONDON – The International Chamber of Commerce Court of Arbitration sitting in London has ruled in the long-running fight between Ugandan businessman Patrick Bitature, taking it to the ultimate limit with an order that Bitature pays the outstanding loan of US $ 35 million (UGX 134 billion) with costs or risk losing his real estate empire in Kampala.
Vantage Capital, based in South Africa and one of the continent’s largest mezzanine debt providers, took the matter before the London court after its efforts to auction Bitature’s assets in Kampala hit a dead end.
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The properties are owned by Bitature’s Simba Telecom Limited but were mortgaged under his real estate holding company, Simba Properties Investment Company Limited.
The dispute goes back to 2014 when Vantage Capital lent Bitature $10 million to invest in the 14-unit Moyo Close Apartments and the Skyz Hotel in Naguru which were both still under construction. It was the first investment the South African lender was making in Uganda.
“Vantage brings an important and exciting new model of financing to the East African region. Simba Group is pleased to have found a strong mezzanine financing partner who provides medium-term growth capital but does not want to take our hard-earned equity,” Patrick Bitature, the founder and chairman of Simba Group said at the time.
Warren van der Merwe, the chief operating officer of the Mezzanine capital provider, gushed: “Simba has managed to build an impressive and successful group of businesses, through a combination of entrepreneurial flair and highly professional management. “Theirs is the kind of story that underpins our Pan African investment strategy of supporting mid-market family-owned businesses that are seeking to raise growth capital without having to dilute their shareholding. This is the kind of Group we would like to back in future transactions.”
But the honeymoon did not last long. Sources familiar with the transaction, but who spoke on condition of anonymity in order to speak freely, said that almost a decade later, Bitature and his Simba Group of companies have not paid back a single dollar to the South African lender.
“After receiving the money, instead of paying back the loan they hired lawyers to say that the South Africans were not authorised to lend in Uganda and could not, therefore, claim to recover the loan,” a source familiar with the matter said. “So, the matter has been pending in court over the years, bouncing from one courtroom to another.”
In the latest Arbitration ruling dated 31st July 2023 made in London and signed by Prof. Fidelis Oditah KC, SAN as sole Arbitrator, Bitature and his partners are ordered to pay US$ 35, 800,943 (around 134 billion) loan balance as of 16th February 2023 on addition to legal fees of US$ 115,591 about UGX 435 million and other related costs of US$ 241,727 (UGX 900 million) including stamp duty paid in respect to transfer of shares with compound interest of 13 percent per anum.
On 16 June 2021, Justice Boniface Wamala of the Commercial Division of the High Court of Uganda ruled that the arbitration agreement between Simba and Vantage was valid and sent the two parties to arbitration.
Two days later, Vantage sought to transfer shares in Simba Properties Investment Company Limited, Simba Properties Limited, Linda Properties Limited, and Elgon Terrace Hotel Limited, all owned by Bitature, into its name as provided for by their financing agreement.
However, officials at the Uganda Registration Services Bureau refused to transfer the properties on the basis that there was still a legal dispute between the two parties which was still under arbitration. When Vantage applied for judicial review to challenge this position, Justice Musa Ssekaana of the High Court dismissed the application on the basis that the Vantage partnership was not registered as a company in Uganda and could, therefore, not sue or be sued. He, however, noted that URSB should have gone ahead with the share transfer.
Bitature is one of the leading indigenous businessmen and sits on several boards, including Umeme, the power distributor, and Bollore Transport and Logistics Uganda. Industry watchers say the dispute could undermine international confidence in Uganda’s corporate governance sector and make it harder for private sector players to get flexible financing from private equity and venture capital funds.
It is understood; Mr. Bitature has entered talks with the Ugandan government to sell his thermal Electromax power plant in Tororo District in a bid to bail himself out of the huge debt owed to Vantage Capital.
However, the bailout was a failure.
During a meeting with President Yoweri Museveni, Bitature floated the idea of the government acquiring the power plant, which is owned by Simba Group and operated by independent power producer Electro-Maxx Limited.
The 50-MW plant was built in 2012 under a build, own, and operate model to address low electricity generation and increasing demand in the country.
($1 = 3,730.0000 Ugandan shillings)
