INVESTIGATION

South African Construction firm Mutoni on the spot for failure to finish Matugga pharmaceutical plant

President Museveni during the launch of the construction of the Dei Natural Products International Ltd plant in Matugga on June 3, 2020

President Museveni during the launch of the construction of the Dei Natural Products International Ltd plant in Matugga on June 3, 2020 (PHOTO/UG Standard)

South African contractor Mutoni Construction (U) Ltd, which was contracted to build a pharmaceutical plant at Matugga on Bombo Road near Kampala, has been accused of failing to finish the work and instead resorted to using sinister motives to demand payment of close to Shs4b.

The pharmaceutical plant is owned by Dei Natural Products International Ltd (Dei), which is part of the Dei Group, and was commissioned by President Museveni together with Kenya Deputy President William Ruto on June 3,  2020.

The President was in the company of Dr. Yonas Tegega Woldemariam, the World Health Organisation (WHO) country representative, and an adviser at the Food and Drug Administration (FDA), Prof. Sarfaraz Niaz, among others.

The Minister of Health, Dr. Jane Ruth Aceng, was also present during the commissioning.

The plant seeks to manufacture vaccines, among other pharmaceutical products.

Dr. Monica Musenero, the Minister of Science, Technology and Innovation, who is also a senior presidential adviser, said the facility is a private initiative that will manufacture modern vaccines.

But Dei says Mutoni Construction (U) Ltd has failed to finish the construction of the production plant as per the contractual terms and is now using police to intimidate them and tarnish their reputation.

On October 14, 2021, Mutoni Construction (U) Ltd wrote to the Police’s Criminal Investigations Directorate (CID), claiming that Dei and its director, Mr. Mathias Magoola, contracted them to construct the multi-billion pharmaceutical company but hadn’t paid them their agreed sum of Shs4 billion.

But Mr. Magoola, through his lawyers, Joska Advocates, told this website on Sunday that it is shocking that Mutoni failed to complete the payment and yet is demanding payment.

“Mutoni should stop engaging in imperialist tendencies by crying over being a South African investor, because it was not given a contractor because it was a South African investor, but because it undertook to construct and handover the building to Dei within agreed timelines and standards,” Dei states.

“By failing to execute the contractor in a just and transparent manner, Mutoni cannot expect to receive free money simply because it is a company of the so-called South African investors. One wonders if in South Africa, contractors get free money or whether, in the case of disputes, they drag in political heads to resolve the disputes, “he adds.

President Museveni during the launch of the construction of the Dei Natural Products International Ltd plant in Matugga on June 3, 2020 (IMAGE: Courtesy | theKR Media)
President Museveni during the launch of the construction of the Dei Natural Products International Ltd plant in Matugga on June 3, 2020 (IMAGE: Courtesy | theKR Media)

About the contract:

Dei states that on September 27, 2019, they contracted Mutoni for the construction of phase 1 of the Pharmaceutical Production Building at Matugga at a cost of UGX 9.6 billion, including both labour and supply of construction materials.

By the terms of the contract, Mutoni was to complete the construction of the building within four months. This meant Mutoni had to hand over the building by February 20, 2020.

But Dei says Mutoni was unable to beat the deadline and requested an extension.

“Mutoni did not honour its promises to finish the construction on time and the delays were affecting Dei’s pharmaceutical production commencement plans, which had financial implications and Dei, continued to suffer losses because of these delays. Storage charges for the pharmaceutical equipment continued to accrue and the pharmaceutical production could not commence and start generating revenues as had been projected, “Dei’s statement of defence reads in part.

Still, Dei says it was patient with Mutoni and continued making demands to speed up the project, but Mutoni’s promises were always empty and not complied with.

“However, Mutoni was unable to supply the materials and, in order to avoid delays, it was mutually agreed by both Dei and Mutoni that the supply of materials be removed from Mutoni and Mutoni only remained with the labour contract. Anyone familiar with construction knows that materials are the most important component, with labour accounting for only about 20%.Yet Dei has so far paid Mutoni over Shs6 billion, “Dei’s defence reads in part.”

According to Magoola, Mutoni later demanded an advance payment of Shs500 million, vowing to complete the project without the necessity of other funds or certification.

“On this undertaking, Dei agreed to the payment and the parties agreed in principle that it was not necessary to appoint a successor project manager,” Magoola states.

The company adds that Shs500 million was paid, but Mutoni did not do any work and, indeed, did not complete the construction as promised.

Dei says, to their shock, Mutoni came up with three “manipulated and false claims of over Shs 4 billion,” which they have since presented to police.

“Mutoni’s inflated and false claim was naturally rejected by Dei, and Dei suggested that an independent entity be engaged to evaluate the project for mutual settlement be engaged, but Mutoni, aware of its schemes, rejected the proposal and even threatened sinister schemes to tarnish the image of the project,” Dei says.

Dei says that Mutoni has since rejected court arbitration and instead resorted to sinister schemes, including involving police and the President, to have them paid for no work done.

“That contract did not involve the President of Uganda or the Vice President of Kenya, who Mutoni is unfairly bringing into the conflict in order to malign Dei. Mutoni as contractor should know, that it is normal the world over for disputes to arise in contracts and that is why dispute resolution mechanisms are embedded in contracts, and contractors ought to follow these mechanisms and not run to political heads or institutions who have nothing to do with the contracts in the first place. Mutoni needs to respect the commercial justice mechanisms in this country, and having gone to arbitration, Mutoni should have pursued the arbitration and to respect the process and the decision thereof, rather than resort to maligning Dei in the press,” Dei’s defence reads in part.

According to the Uganda government, the project will make Uganda self-sufficient in all her health care needs by making essential drugs that are currently being imported into the country.

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