Gems Cambridge Education founder Sunny Varkey is liquidating his school investments in Kenya, leaving behind a trail of debt.  Kenyan tycoon Peter Burugu has taken over the management of Regis School in Runda.

According to sources in Kenya, Mr Varkey’s Gems Group may have sold the majority shareholding in their sole remaining asset in Kenya the Regis School in Runda to local businessman Ernest Mureithi for just $1 (Sh124).   

Court papers and sources at Regis School have indicated that Gems Cambridge transferred 70 per cent of the institution’s shares to Dr Mureithi through his Ernestem Holdings.

NCBA Bank is demanding repayment of a Sh1.6 billion loan. Dr Mureithi, who has been Gems Cambridge’s regional director since 2016, denied the claim, insisting that he is just a CEO looking out for Gems Cambridge’s interests in Kenya.

He further denied that Mr Burugu’s Runda Gardens Development Ltd has taken over the management of Regis School, Gems Cambridge, he added, has already found buyers to take full ownership and control of the school.

On the dispute with NCBA, Dr Mureithi said negotiations are ongoing to settle out of court. 

Mr Varkey, an Indian national based in Dubai, opened his school’s first East African campus on Magadi Road in Karen, Nairobi,11 years ago. Despite attracting hundreds of learners who have collectively paid billions of shillings over the past decade, Gems Cambridge has irked some firms it entered into contracts with as the deals have been broken, leaving debts of over Sh2 billion.

The latest entrant is Runda Gardens Development Ltd, a firm owned by Mr Burugu and his family, which built Regis School’s facilities and is now at risk of losing close to Sh1 billion incurred in construction costs. A government valuer who calculated the amount of stamp duty due placed the value of the property at Sh795 million in 2019.

Mr Burugu’s real estate firm further obtained a Sh17.6 million loan to pay Regis School workers in October and November last year. That debt remains unpaid.

When Gems Cambridge started operations in Kenya, it signed a deal with real estate firm Goodison Sixty One School Ltd to set up the Karen school. Gems Cambridge wanted the Karen development to be a near replica of Wellington International School in Dubai, but with slight modifications.

Under the agreement, Goodison was to lease the building to Gems Cambridge Education’s local subsidiaries to recover construction costs. Goodison spent Sh3 billion for the project, which was expected to be recovered from Gems Cambridge.

Goodison Sixty One subcontracted experienced architectural firm Symbion Kenya Ltd to design the school and help put it up.

The Dubai group started to complain about the quality of the Karen facilities shortly after Gems Cambridge International School opened for its first term. Goodison pushed the blame to Symbion Kenya, and a legal battle ensued. Arbitrator Paul Ngotho in February 2016 ordered Goodison to pay the Sh131 million claimed by Symbion.

This meant that Goodison was expected to pay and recover the cost from Gems Cambridge. Attempts to challenge the arbitration award in court were dismissed by Justices Fred Ochieng and Francis Tuiyott. As Justice Tuiyott was closing the door on Goodison’s appeal, Gems Cambridge was being introduced to Mr Burugu.

After meeting with the Dubai investors, Mr Burugu struck a deal similar to the Goodison one; build a world-class facility and lease it back to Gems Cambridge to set up Regis School, Runda.

Gems Group had also entered into negotiations for the purchase of Hillcrest School from Fanisi Capital, which had bought it from the family of former politician Kenneth Matiba.

The Dubai investors eventually paid Sh2.6 billion for Hillcrest in 2019. Shortly after, they closed the Karen school and moved students to Hillcrest.

To finance the purchase, Gems borrowed Sh1.3 billion from NCBA Bank. In January 2022 Gems sold Hillcrest to a rival, Braeburn, for an undisclosed amount. By the time of the Hillcrest acquisition, a deal had also been struck with Mr Burugu who built a facility in Runda.

Gems signed a 30-year lease with Mr Burugu, but details of the costs remain a secret. When Nation contacted Mr Burugu, he refused to reveal the value of the deal but confirmed that a contract was signed in August 2019. 

A Lands ministry valuer assessed the stamp duty due from the leasing deal at Sh31.8 million, which was to be paid by the Gems group within 30 days. The Gems group was targeting a January 2021 opening date.

But the stamp duty remained unpaid over a year later, accumulating penalties of Sh3.2 million.

In November 2021 Mr Burugu’s firm was furnished with a copy of a lease agreement purporting to grant Gems Cambridge and its Regis School an exemption on stamp duty. It was then that Mr Burugu’s firm discovered that Gems Holdings Africa had transferred 70 per cent of its shareholding in Regis School for a consideration of $1.

Somehow, the Gems group had managed to alter the lease contract without involving Runda Gardens Development Ltd and held verbal non-recorded conversations with the collector of stamp duty that resulted in the tax waiver.

The contract was dated August 27, 2019. But the altered document which led to a stamp duty waiver was dated November 8, 2019. Under Kenyan law, stamp duty assessment can only be challenged by filing a case at the High Court after paying the amount demanded by the collector.

Runda Gardens Development Ltd demanded that Gems Group adhere to the original lease deal of August 27, 2019, and pay the Sh31.8 million stamp duty to avoid legal trouble. When Regis School failed to adhere to the lease, Mr Burugu’s firm termed the contract as frustrated hence null and void.

Runda Gardens Development Ltd opted to let Regis School continue operating under a regular tenancy deal with quarterly payments. By December 2022 Regis School was still behind on rent payments and was now delaying workers’ salaries. Runda Gardens Development Ltd was owed Sh19.55 million at the time.

The landlord had also lent Regis School Sh17.6 million to pay salaries in the months of October and November 2022. Regis School promised to repay the loan by end of November. Three days before Christmas, Regis School. through Dr Mureithi, sought to borrow more money to pay December salaries.

In the December letter, Dr Mureithi allowed Runda Gardens Development Ltd to use Gems equipment and property as security, meaning an auction could be done if the debts were unpaid at the end of January 2023.

The school revealed that it is searching for a new buyer.

But as the search continues, parents, students and workers at the school remain in limbo over their future with Regis School.

A new dispute is brewing, as Dr Mureithi collected over Sh10 million from a section of parents in school fees for the first term of 2023 despite Mr Burugu’s temporary management takeover.

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The Ugandan business community revealed that the South Africa Trade Investment and Tourism summit, scheduled at the Gallagher Convention Center, Midrand, South Africa, from 27th to 28th February 2023 under theme “Boosting Trade and Investment Relations between South Africa and Uganda”, will provide a platform for the business community and government agencies to identify existing and emerging business and investment opportunities of mutual benefit.

Over 300 delegates comprising business leaders, government agencies, and investors from the two countries will be in attendance. They will explore opportunities in sectors of Agriculture, tourism, oil and gas, healthcare, and transport and logistics, amongst other sectors.

The purpose is to bring buyers and sellers from both countries along with investors in the value chain of the key export products from Uganda, together.  Uganda has a target of US$6bn in non-oil exports between 2023 and 2028, to stave off growing unemployment, restore sustained growth in key sectors of the economy post covid19 and increase value addition in agriculture along with more manufacturing in the country.

Uganda is focused on increasing exports of beef, dairy, coffee, sugar, cement, steel products, poultry, bananas and banana flour, fruits, and vegetables, and tourism. South Africa consumes Uganda’s coffee, vanilla, chocolate, and other products.

The trade summit will begin on 27th February, with the plenary session followed by a panel discussion by technical experts on the bottlenecks and mechanisms for unlocking trade and investment potential between Uganda and South Africa.

Roundtable meetings with industry experts will follow, focusing on the opportunities of mutual benefit in the Energy, Oil, and Gas sectors, boosting African trade in value-added products, and unlocking mutually beneficial business opportunities in infrastructure.

On 28th February, the business community will be provided with a networking platform to identify potential projects and partners for investment and collaboration. This session will be graced by His Excellencies, Yoweri Kaguta Museveni and his host Cyril Ramaphosa.

Speaking at the briefing event, Robert Mukiza, the Director General at the Uganda Investment Authority said: “Uganda enjoys excellent bilateral relations with South Africa, and this is premised on the long-standing bond between our two countries long before South Africa gained independence. The summit is one way we leverage the existing cordial relations to showcase and identify potential areas for collaboration so that we scale up trade between our two countries.”

The Chairman of, Presidential Advisory Committee on Exports and Industrial Development, Mr. Odrek Rwabwogo further emphasized Uganda’s need to grow export revenue, especially in Africa. He requested the Uganda business community to travel to South Africa to conclude deals and attract investors in order to achieve a growth in export revenue by USD 6BN over the next 5 years.

 “Markets only make sense if the firms have a deep working relationship and knowledge of what to sell and how. Each of us must carry sample products, brochures, have books of accounts from the last five years, be honest with our strengths and weaknesses, and know how to communicate with our brothers in South Africa and this should be for every market. We go to avoid talk shops and go for deals and equity investors in our firms,” he said.

Enid Edroma, General Manager, of Corporate Affairs at MTN Uganda thanked the government for the favourable policies and regulations that have enabled the telecom company and other businesses to succeed.

She, however, requested the government to harmonize its policies, especially in the telecom sector, with the country’s aspiration for digitalization.

She said the government needs to forfeit taxes on smartphones like it is in Rwanda to drive the prices of smartphones downwards and thus stir their uptake leading to a reduction in operational costs and so the cost of internet.

South Africa is one of Uganda’s fastest-growing sources of Foreign Direct Investment and is leading in telecommunication, banking, energy and many others. Uganda, on the other hand, exports pharmaceuticals products, coffee, Vanilla, Flowers, and vegetables.

The South Africa – Uganda, Trade Investment and Tourism summit is part of the government’s intentional initiatives to increase its export quota in the regional and international markets.

The summit was coordinated in Uganda by the Presidential Advisory Committee on Exports and Industrial Development, Private Sector Foundation Uganda, and Government agencies in partnership with MTN Uganda, Stanbic Bank, UNDP and Uganda Airlines.

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The government of Uganda has been urged to prioritize agriculture, tourism, mining and prudent debt management if it is to recover from the effects of a three-year global slowdown.

Speaking at the 2023 Stanbic Global Financial Markets Forum in Kampala on Tuesday, economic experts said the government is still handling the four sectors, especially tourism and agriculture, in a rudimentary way.

Dr. Fred Muhumuza, an economist at Makerere University, criticized government approach on modernization of agriculture, saying it is opting for costlier means.

He said while the sector has for long been considered the backbone of the economy and Uganda a food basket for the region, the country actually does not have enough food for itself.

According to Muhumuza, if the government is to use irrigation for areas vulnerable to drought, then a lot of resources have to be applied. He however, says that the cheaper and more sustainable solution should be the introduction of resistant seeds.

He also said the Parish Development Model’s challenge is the limitation of the government budget and conceptualization.

“The conceptualization of the PDM is the seven pillars and all of them are meant to work together, if fund one and not the other, you are going to have a problem,” he said.

Joseline Kateeba, the Managing Director of Crest Foam Uganda, said agriculture is not just for increased availability of food for people to eat, but that it increases the spending power of farming communities which account for the majority of Ugandans.

Dr Micheal Atingi-Ego, the Bank of Uganda Deputy Governor, said they are studying the possible implementation of central bank digital currencies.

In turn, this will lead to high purchasing power for industrial products and boost industrialisation.

Jibran Qureishi, the Head of Research at the Standard Bank Group, urged the government to make it a priority to clear what it owes the Bank of Uganda as demanded by the International Monetary Fund because it will give a wrong image internationally on Uganda’s financial market.

Qureishi hailed Uganda for its cautious borrowing compared to other countries in the region, though this does not mean that it is in a very safe position. He says for example, that Uganda has ensured a lower ratio of commercial loans as part of total debt compared to others like Kenya, Zambia, Angola or even Ghana which announced it was defaulting on debt repayment starting this year. He says if countries like Uganda are to borrow, more of the credit should go towards productive sectors like agriculture.

Qureishi said much as Uganda’s debt level is just around 50 percent of GDP while other countries have already recorded higher figures, it is the ratio of the commercial loans to the total burden which should be worrying.

Currently, such loans account for eight percent of the debt stock, having grown from nil 10 years ago, while Kenya’s has grown from six percent to more than 30 percent.

He warned that the government is acquiring too much expensive debt especially in the form of government treasuries.

Muhumuza urged the government to focus on developing other minerals in Uganda other than oil and gas.

“I am going to suffer to remove my sister Irene Batebe and her bosses from oil and gas so we can talk about other minerals. 2025 is a good target for gold. The refineries for gold came around 2014,” he said.

Anne Juuko, CEO at Stanbic Bank Uganda said: “The most important risk that we must all address ourselves to is the existential risk of climate change. We are one of the few institutions in this country with a fully-fledged sustainability department.”

“In the Old World Order, we knew two things to be certain: death and taxes. In the New World Order, we can add risk. There is always going to be one form of risk or the other manifesting in your business. That is where we come in as your risk management partners,” she added.

Ms Pauline Irene Batebe, the Permanent Secretary in the ministry of Energy, said: “As part of the New World Order there is an aspect that hasn’t been discussed exhaustively and that is the energy transition.”

“As the Ministry of Energy and Mineral Development, we want to emphasize that the energy transition should be tailor-made on a case-by-case basis for countries. As a country such as Uganda where we are predominantly using biomass for our energy requirements, it is on us to push ourselves to transit very fast,” she added.

Dr Micheal Atingi-Ego, the Bank of Uganda Deputy Governor, said they are studying the possible implementation of central bank digital currencies.

“BoU is open to financial innovations, especially those that reduce the cost of transactions,” he said.

He also urged financial institutions to cooperate and fight cybercrime.

“We all know what the pandemic did for digitization. This is good for business growth and operations but also presents risks of cybersecurity,” he said.

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