Patrick Bitature is a Ugandan businessman, entrepreneur and author (PHOTO/Courtesy)
After 2022’s economic downturn and the rise of a fresh crop of investors, not to mention the ongoing geopolitical turmoil, a number of Ugandan leading businessmen have in 2023 struggled to keep their crown jewels to unsustainable debts.
While high-cost expansion funded by debt has been the biggest reason for most of these failures, another factor, experts say has been diversification into unrelated areas. A study of the reasons for their collapse offers lessons in corporate governance, the biggest being that adding capacity at the right time, ability to sense market dynamics and understanding technology are important for running a successful business. And, while debt is important for growth, it has to be watched carefully lest it become unsustainable.
Below are some of the local businessmen that got mired in financial challenges in 2023.
Patrick Bitature
The growing number of legal disputes surrounding the struggling Ugandan businessman Patrick Bitature — the founder and chairman of Simba Group, has raised concerns about his financial standing, particularly as his companies face liquidity challenges compounded by ongoing legal battles with various entities — including Absa Bank Uganda, and Vantage Capital.
The implications of these legal conflicts not only mark a significant challenge for Bitature personally, but also raise questions about the stability of his business ventures and their ability to navigate the mounting debt obligations. The legal tussles underscore the complexities and uncertainties surrounding Bitature’s financial situation.
The Ugandan tycoon finds himself entangled in a protracted legal battle with Absa Bank Uganda over a substantial loan amounting to UGX50 billion ($13.6 million).
The legal dispute, which intensified in September, comes as the Kampala-based lender sought to recover the outstanding loan based on a prior consent judgment — contested by Bitature’s legal representatives on grounds of economic duress and procedural irregularities.
The dispute with Absa Bank Uganda traces its origins to financing provided for Bitature’s company, Electro-Maxx, in 2018, totaling $18 million, which subsequently faced repayment challenges, leading to the lawsuit.
The absa Bank loan compounds Bitature’s three-year legal battle with South African venture capital firm Vantage Capital over a $10-million loan.
Earlier this year, the International Chamber of Commerce Court of Arbitration in London ruled in favor of Vantage Capital, directing Bitature, his wife, and their companies to pay $65.7 million due to a breach of contract, comprising both the breach itself and compounded interest.
Despite Bitature’s efforts to challenge the judgments and claims of loan nullification due to various reasons, the courts have consistently ruled against him, emphasizing the failure to substantiate his arguments.
Unfolding legal struggles highlight financial uncertainty for Patrick Bitature.
Biyinzika
2023 has proved difficult for Uganda’s most prominent mogul in the poultry business, Mr Samuel Mukasa, the proprietor of Biyinzika Enterprises Ltd with reports confirming that the entrepreneur has lost his multi-million dollar company properties over huge loan with Cairo Bank.
The wealthy poultry mogul who became popular with the brand name Biyinzika has over the past 31 years run the company which primarily deals in hatcheries and sales of chicks across the East African region.
Biyinzika, which also deals in poultry feeds previously controlled about 65% of Uganda’s poultry market share before the COVID-19 pandemic outbreak which saw the company lose most of its market, suppliers and employees.
The poultry company has provided a livelihood to hundreds of people.
The company which is valued at over UGX40 billion has been instrumental in Uganda’s agri-business sector, employing over 10,000 people but now seems to be collapsing over an unpaid loan facility.
Kikubolane understands that in 2014, a venture capital fund known as 8 Miles provided equity to Biyinzika for the poultry business to expand. The company was renamed Biyinzika International. At the time, the company wanted to sharpen its focus on new products for regional markets.
8 Miles eventually took over the management of the business, compelling Mukasa to open Biyinzika Enterprises which is now struggling with loans.
Biyinzika is among the private companies which government, through the Ministry of Finance Planning and Economic Development, was planning to bailout.
According to Court documents as of 5th October, 2023, Biyinzika arrears stood at Shs1,864,395,800 and USD $ 13,745.23.
Due to the economic impact of the COVID-19 pandemic, many indigenous Ugandan companies and businesses are on the verge of losing, or have already lost, tangible assets which they used as collateral for securing bank financing.
These companies are now reportedly seeking bailouts from the government to stabilise their financing structure.
A myriad of factors including inter alia, high commercial bank interest rates, Government’s failure to pay suppliers, political instability in key regional export markets like South Sudan, and the weakening economy have been suggested as causes of the companies’ poor performance.
Biyinizika’s family members have since been quoted by the media asking for a government bailout as they were employing thousands of employees and bringing in foreign exchange from export of poultry to the region.
Finance experts have as well advised struggling companies to raise money from capital markets.
One of the major advantages of undertaking financing by offering shares to the public is that the company will have no obligation to repay shareholders at a future date; as opposed to a bank loan that entails monthly interest repayments and principal to be paid upon maturity. This greatly reduces the constraints on the company’s cash flows.
The equity finance raised can be used to clear pressing debt and offer the company the urgently needed cash flows for business operations.
AYA Investments
The Pearl of Africa Hotel in Kampala City remains under the hammer.
The hotel that belongs to businessman Muhammed Hamid was put up for sale by public auction this year.
Hamid-owned Aya Group of companies launched the landmark hotel in Kampala about six years ago, but the business has since struggled with a litany of court cases over loans owed by the businessman.
The hotel reportedly cost more than $300m to build.
The sale by public auction comes after a Court of Appeal in Kampala directed AYA Investment Uganda to pay UGX 611 billion debt it owes to the Industrial Development Corporation (IDC), a South African firm.
In its ruling, the Court of Appeal directed that the struggling businessman cannot appeal the decision reasoning that courts of law cannot meddle in lawful arbitration processes.
The ruling means that Aya Investment Limited is restricted from appealing to any higher Court in the matter where the commercial endorsed the payment of UGX 611b arbitral award to IDC of South Africa Limited.
The Bruce Collins QC Tribunal of South Africa on September 11, 2021, ordered Aya to pay the amount to IDC as an arbitral award. It comprises a UGX 305b unpaid principal sum that the South African firm passed to the Ugandan businessman 10 years ago according to available documents.
Documents on the court record show that the IDC had applied to the Commercial Court to have the award registered as a decree of the High Court in Uganda. The development was allowed by Justice Stephen Mubiru, locking the Ugandan businessman in the dispute with the South African company.
The latest court ruling inflicted a fresh setback on the Ugandan tycoon after the Court of Appeal dismissed an application in which he sought to block the payment of the arbitral award.
In his ruling, Justice Christopher Gashirabake dismissed the application, reasoning that the Arbitration and Conciliation Act limits the intervention of courts in matters of arbitration.
“Having found that this court has limited jurisdiction to intervene in arbitral awards, which has an effect on the likelihood of the success of the appeal, the preliminary objection is upheld. The application to stay execution is not granted,” Justice Gashirabake ruled.
The judge added: “Where the jurisdiction of the court is questionable, it casts doubt on the possibility of the success of the intended appeal. Lack of jurisdiction is lack of everything”.
According to the judge, section 34 of the Arbitration and Conciliation Act provides that recourse to the Court against an arbitral award can only be by way of an application for setting aside the award.
Gashirabake made the ruling in the presence of a lawyer representing Aya, Gibson Munanura. Also in court were the lawyers representing the respondents Timothy Lugayizi, Hussein Gulamu, Emmanuel Ankunda, and Nzuza Nzuza, senior legal advisor to the South African Company.
Background
Court documents indicate that between 2007 and 2017, Aya and IDC entered into various financial credit agreements to finance the construction of a hotel known as the Pearl of Africa Hotel (now Win 5 Hotels and Spa).
The hotel is located on land comprised of Plots 7A1-9A1 and 10 Lugard Road and M32, Hill Road situated at Nakasero Hill, in Kampala.
According to court documents, the total sum lent on various dates under the six financial credit agreements was $81,765,318 (about shillings 305 billion). However, the loan stood at $118,817,012 (about shillings 444 billion) in accumulated interest, as of September 13, 2017.
The parties also executed various security agreements that were collateral to the financial credit agreements during that period.
Hamis Kiggundu of Ham Enterprises
Another case that dominated headlines in 2023 was the one involving Ham Kiggundu and Diamond Trust Bank.
This matter arose in January when Mr Kiggundu and his companies, Ham Enterprises and Kiggs International U Ltd, sued Diamond Trust Bank Uganda and Diamond Trust Bank (Kenya) for alleged breach of contract in the multibillion loan dispute.
He claims between February, 2011 and September 2016, his two companies, sought various loans from the banks for construction, development and completion of commercial properties.
Kiggundu says he provided several properties in Kyadondo, Kawuku, Victoria Cresent II Kyadondo and Makerere Hill Road as security for the loans. He claims that along the way, while repaying the loans, he realised that the banks had not remitted some of the agreed amounts or purported to remitted the monies, and in turn unlawfully deduced the money from his accounts without his consent.
In their defence, the banks deny the breach of contract and only admit that the businessman and his two companies hold accounts with them. The banks also admit that on various dates, the companies took various loans $6.6m Shs1.5b, Shs1b, $4m and $500,000.
In June 2023, the Supreme Court noted that the $11m (about sh41b) credit facility that was extended to Ham Enterprises Ltd, was legal.
But the lawyers of Muwema and Company Advocates as well as Kimara Advocates and Consultants who represented businessman, Hamis Kiggundu have said they will challenge the recent Supreme Court decision in a case against DTB Kenya and Uganda.
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