Ugandan businessman Mohammed Hamid of Aya Investments could have lost UGX 792 billion unfairly to South Africa’s Industrial Development Corporation (IDC) and its sister company, ECIC, due to a UGX 151 billion loan if President Museveni had not halted the process.
The President ordered the auctioning of Aya Investments’ Pearl of Africa Hotel to stop immediately revealing significant allegations of corruption, contractual breaches, and constitutional abuses in the handling of a USD 41 million loan from South Africa’s Industrial Development Corporation (IDC) and its sister company, ECIC. This loan represents less than 18% of the total project value.
The President’s letter before the auction date came in handy to temporarily halt the process after he ordered a meeting with the South African company to mediate over the matter.
Armstrong Limited, the appointed bailiffs, was set to auction the 23-floor hotel on behalf of the lender and law firms M/S MMAKS Advocates and ENSafrica. The current Shs647b debt against Aya Investment ballooned from about Shs316b that was borrowed over the years.
Key Issues and Delays
- Impractical Loan Terms: Aya Investments signed loan agreements in 2007 that required impossible insurance conditions, causing delays of three years.
- Revised Contracts: In 2010, IDC revised the contracts, excluding the insurance provision, but this added another three-year delay.
- Financial Audits: IDC demanded multiple financial audits, further delaying the project by two years.
Financial Impact
- The delays and mismanagement, totalling 15 years, caused a total financial loss of USD 432 million for Aya.
- Aya had to inject USD 151 million of its own equity into the project, far exceeding the initial projection.
Judicial Concerns
IDC engaged in prolonged litigation in Uganda, then proceeded with ex-parte arbitration in South Africa, leading to an illegal award.
- Uganda’s Chief Justice issued an injunction in 2019 to halt litigation, maintaining the status quo in Aya’s suit against IDC. The court injunction is still to date.
Presidential Intervention:-
President Museveni’s intervention aims to protect significant national assets from judicial corruption and ensure the integrity of Uganda’s legal and business environment.
Conclusion
The Aya-IDC saga underscores the need for transparency and judicial reform in Uganda to maintain its reputation as a top investment destination and uphold the rule of law.
