Bank of Uganda (BoU) has picked interest in the high-profile debt war between Simba Group, owned by businessman Patrick Bitature, and Vantage Capital, a South-African based money lender.
The central bank took interest in the matter after lawyers acting on behalf of Vantage took out an advert announcing plans to auction three prime properties belonging to the businessman within 30 days.
The Executive Director in-charge of Supervision at Bank of Uganda, Dr Tumubweine Twinemanzi, wrote to Vantage’s lawyers of Kirunda and Wasige Advocates, following the publication of the auction notice. The letter was written on May 18.
“The potential market valuation of the listed properties for sale and their commonality in ownership, together with our own market intelligence, makes it highly probable that the affected debtor is a systemic borrower within the financial sector,” Mr Twinemanzi wrote.
Twinemanzi asked for clarification about the background to the auction notice, as well as “any further but related information, which in your view, Bank of Uganda as a financial sector regulator, should be made aware”.
In December 2014, Bitature’s Simba Properties Investment Company (SPIC) acquired a $10 million loan from Vantage of which he has “not paid back one cent” despite the loan term ending in 2019. The loan has since skyrocketed to $34 million after accrued and compounded interest, and penalties kicked in.
In a public statement from Patrick Bitature last month, he admitted that he legally borrowed the money from Vantage Mezzanine contrary to what his lawyer Fred Muwema had said, that Vantage was a ghost company.
Bitature said he is willing to repay back the loan but found difficulties arising from delays in Uganda’s oil and gas sector which undermined his companies’ ability to repay the loan in time.
A response from Vantage’s lawyers to the Central Bank read; “We believe you would agree that borrowers such as Simba, and more recently Ham Enterprises, who trade in the procurement and avoidance of debt obligations, present a major risk to Uganda’s financial sector. The publicity around such defaults seems to suggest the entrenchment of a culture (and ease) of evasion of loan obligations.”
The reference to Ham Enterprises refers to an on-going legal battle between the company owned by businessman Hamis Kiggundu and Diamond Trust Bank, which has operations in Uganda and Kenya.
Ham claimed that a loan he received from the Kenyan branch of the bank through the Ugandan operation flouted local banking rules and should not be recovered. About Shs120 billion is at stake and the matter remains pending before the courts.