What does one need to do to be lucky to get bailed out as Bassajjabalaba?
Uganda Govt bails out Basajja with 20bn
ON WHAT GROUNDS DOES GOVERNMENT BAIL BASAJJABALABA WITH TAX PAYERS MONEY ?
By Ssemujju Ibrahim Nganda
One week after we broke the story of the state spending Shs 2.5 billion on Dr. Speciosa Wandira Kazibwe’s PhD, The Weekly Observer can reveal that the government spent another Shs 19.9 billion to bail out businessman Hassan Basajjabalaba.
On President Museveni’s instructions a year ago, Bank of Uganda has paid Basajjabalaba’s debt of Shs 19.9 billion ($11.5 million) owed to Standard Chartered Bank.
The hides and skins exporter had failed to re-pay a $22 million loan from Standard Chartered and Stanbic banks. He was indebted to Standard Chartered Bank to the tune of $14 million (Shs 24 billion) and Stanbic $8 million.
On April 26 last year, Museveni told a rally at Kabwohe in Bushenyi district that he had asked Bank of Uganda to help Basajjabalaba clear his debts.
“I have discussed the issue [of Basajjabalaba] with [Emmanuel] Mutebile, (Governor Bank of Uganda) to have him rescued. There should not be much worry,” The New Vision quoted the President as telling the rally.
The Weekly Observer can now reveal that Bank of Uganda has complied. The request to rescue Basajjabalaba had been made by Mr. Longino Ndyanabo, the LC-V chairman of Bushenyi district, Basajjabalaba’s birthplace.
Museveni’s pledge provoked anger from the public and so the parties involved decided to quietly execute the deal.
Sources at Standard Chartered Bank in Kampala told The Weekly Observer this week that Bank of Uganda had paid up.
Bank of Uganda Governor Emmanuel Tumusiime Mutebile was reportedly out of the country for medical treatment but the acting governor, David Opio Okello, confirmed the payment in a telephone interview.
He said Bank of Uganda had deposited $11.5 million with Standard Chartered, which it will recover once a commercial bank interested in buying Basajjabalaba’s debt emerges.
That means that a commercial bank can buy Basajjabalaba’s debt at, for example 75 percent from Standard Chartered Bank. For a loan of say $11.5 million, the interested bank might be charged $8 million.
Then Standard Chartered would transfer the collateral to the new bank and Basajjabalaba would be obliged to pay it.
Okello admitted that only one commercial bank had expressed interest in the Basajjabalaba debt; that bank has since pulled out.
The $11.5 million Bank of Uganda deposited with Standard Chartered Bank might, therefore, never be recovered. It might end up a “donation” to the tycoon.
Okello further admitted that the payment was arranged after government approached the Central Bank. Earlier reports had indicated that Basajjabalaba secured the loans from the two banks under a Bank of Uganda guarantee negotiated by President Museveni.
His was the largest individual line of credit with the two banks and it caused the sacking of some top managers.
Basajjabalaba is the proprietor of Kampala International University and is completing a multi-million medical school campus in Bushenyi. He also owns Lake View Regency Hotel in Mbarara and two Regency hotels in Kampala at Bakuli and in the city centre.
The businessman won the tender to run Owino and Nakasero markets and is also managing the city abattoir.
Basajjabalaba’s indebtedness came to light in April last year when Stanbic Bank seized his factory in Kampala’s Industrial Area over the $8 million loan.
Uganda Revenue Authority (URA) also blocked him from shipping out containers of hides, citing non-payment of taxes.
News of Basajjabalaba’s alleged house arrest while in Italy came to prominence at the same time, reportedly over $6.5 million he owed a businessman there. He ran to Museveni for assistance.
The young tycoon invested heavily in the re-election campaign of President Museveni in 2001. He is reported to have hired all motorcycles and vehicles in Bushenyi the day former presidential candidate Kizza Besigye visited the district. Besigye found hardly any motorcycles and vehicles to mount a serious procession.
Acting BOU governor Okello said that the lending banks accepted that once an agreed amount is deposited, they would write off the loans.
Standard Chartered Bank Managing Director David Cutting was out of the country and the acting MD Ms Rebecca Kaggwa declined to comment on the issue. Corporate Affairs manager Harriet Musoke was yet to respond to our e-mail by press time.
In pursuit of fairness, The Weekly Observer spent two days trying to get Basajjabalaba to comment on this story before publication, but he and his aides played an endless game of hide-and-seek.
A similar story of the state spending an estimated Shs 2.5 billion on Kazibwe’s PhD programme at Harvard in the U.S. drew countrywide outrage, dominating debates on nearly all FM radio stations.
Whatever justification President Museveni might have, the Basajjabalaba bailout may also raise eyebrows in many quarters that would question the criteria used to rescue one businessman, and not so many other investors who have also gone down because of bad debts or failed investments.
Uganda Govt bails out Basajja with 20bn
President has no power to direct BoU Governor
I was rather surprised to read that the President had directed Central Bank Governor, Tumusiime Mutebile to "bail out" beleaguered tycoon, Hassan Bassajjabalaba. Unless this was a case of misreporting by both The Monitor and The New Vision (28 April), one could raise several questions regarding such intent.
In particular, we could ask why "Hassan B" merits any closer and better attention and treatment than any of the many other businesspeople who have met hard times over the years. To my recollection, this would be the first known instance in which the Central Bank intervenes on behalf of an individual.
There is another disturbing aspect to the case. If it is indeed true that the president has spoken or intends to speak to the Governor of the Bank of Uganda, this is clearly unconstitutional. Article 162(2) of the 1995 Constitution stipulates that: "In performing its functions, the Bank of Uganda shall conform to this Constitution but shall not be subject to the direction or control of any person or authority." The Attorney General should inform Mr Museveni that the president is also included in the phrases "any person" or "any authority". The intention of the provision was to ensure that the operations of the
Bank were free from political or other control to the detriment of its professional and purely economic performance.
Since the president is intent on amending the Constitution to, among many other things, secure a 5th term, clip parliamentary powers and appoint puppets to the judiciary, the amendment of this provision is another that he can add to the list of those provisions that he seeks to change. Until then, he has no powers whatsoever to direct the Governor
of the Bank of Uganda on Mr Basajjabalaba's case.
Bank of Uganda opposed Basajjabalaba bailout
By Ssemujju Ibrahim Nganda
WEEKLY OBSERVER, 18 Nov 2004
Bank of Uganda stands to lose up to 16 percent of its core capital in its controversial attempt to rescue Hassan Basajjabalaba’s business empire.
The central bank had a core capital of Shs 241 billion in 2003/2004 but President Museveni asked it to pay off the businessman’s loan with Standard Chartered Bank.
Basajjabalaba was indebted to Stanchart to the tune of $14 million and to Stanbic Bank by $8 million.
That rescue package was 16 percent of the central bank’s core capital and, according to minutes of a BoU board meeting The Weekly Observer has seen, members were reluctant to sanction the transaction.
“It was further observed that when coffee, the main export and country’s highest foreign exchange earner experienced problems, there was no rescue of any coffee exporters by Bank of Uganda, therefore to rescue Basajjabalaba Hides and Skins (U) LTD would set a bad precedent,” reads minutes of a special board of directors meeting held on April 22, last year.
Bank of Uganda board of directors include: Tumusiime Mutebile (chairman), Chris M. Kassami (secretary to the treasury), Mr. J. Wasswa Balunywa (member), Mr. Blasio Kiiza (member), G. Sebunya Muwanga (member) and Ms J. M. Kihirimbanyi (board secretary).
Despite initial board opposition, the government went ahead with the bailout. The Weekly Observer in its October 28 edition reported that Bank of Uganda had paid Shs 20 billion to the Standard Chartered Bank to clear the businessman’s loans.
Stanchart publicist Harriet Musoke responded to our inquiries with an e-mail that gave nothing away: “Standard Chartered Bank does not discuss our customer’s business in the public domain as this would violate our professional standards. We are bound by the Bankers Code of Conduct not to disclose anything regarding our customers unless the customer asks us to do so.”
Theoretically, Bank of Uganda would recover the money once there is a commercial bank interested in trading Bassajjabalaba’s debt at a 30 percent profit with the original lending banks.
The London-based Equator Bank, the only commercial bank that had offered to trade in Basajjabalaba’s loans, has withdrawn its offer.
According to a BoU proposal, the commercial bank was to advise Basajjabalaba’s company on the recruitment of a general manager, financial controller and external auditors.
The withdrawal of Equator Bank leaves Bank of Uganda with tricky choices: selling the businessman’s properties or losing the money altogether.
In his own proposal, Basajjabalaba had committed himself to selling off his non-performing assets, proceeds of which would be used to settle the loan (see full list on the right).
However, attempting to sell Basajjabalaba’s properties might force other commercial banks that he still owes money to hurriedly sell off any assets he mortgaged to secure the various loans.
Basajjabalaba’s hides and skins business lost Shs 40 billion last year, yet he had borrowed Shs 51 billion from Standard Chartered, Stanbic, Uganda Development Bank (UDB), PTA Bank and East African Development Bank (EADB).
Bank of Uganda, through the Development Finance Credit Scheme, guaranteed only the loans from UDB and EADB.
Basajjabalaba complicated his financial position further when he and two other directors in the hides business borrowed Shs 20 billion from their company to build (or buy) hotels and shopping malls across the country.
As a result, the hides business ceased to operate due to lack of working capital in April last year. It was at that point that Museveni asked Bank of Uganda to rescue the businessman.
Commenting on the initial Weekly Observer story, Information minister Nsaba Buturo defended the bailout as “strategic intervention in a vital sector generating employment”.
Junior finance minister Isaac Musumba also explained that when government intervenes, among other things, it looks at the returns on the company’s investments and the cause of its financial troubles.
A justifiable cause must have been beyond the company’s control and one that could not have been anticipated.
According to an internal memo prepared for Bank of Uganda board of directors, Bassajjabalaba lost Shs 40 billion in his hides business due to the following reasons:
•Delays at the airports after Sept. 11, 2001 terrorist attacks on the U.S. This was coupled with the fall in prices of hides. This resulted in the loss of $7.2 million.
•The rejection of 150 containers of hides by a buyer in Pakistan resulted in the loss of $2 million.
•The introduction of a 15 percent tax on exports by Uganda Revenue Authority (URA) resulted in the loss of $1.5 million.
•The other loss of $9.87 million came when an Italian company auctioned his 72 containers of hides after he failed to pay $6 million for equipment to build a tannery in Mbarara. The total loss is $23.67 million or about Shs 40 billion.
The memo says President Museveni asked BoU to rescue Basajjabalaba because the hides and skins business contributed 5 percent of total revenue from exports.
If Standard Chartered Bank were to lose the money it lent Basajjabalaba, the loss would “wipe out almost all the core capital of Standard Bank which now stands at Shs 35bn.
Although the Chartered Group head office in London could possibly rescue the bank, there is serious reputation risk to Standard Chartered Bank in Uganda,” reads the internal memo.
However, merely paying off Basajjabalaba’s debts is not enough to resurrect his hides and skins business. He needs an additional Shs 14 billion to restart.
Research shows that it may be good for the economy for government to rescue a sinking private company. Bailouts are, however, prone to controversy.
Questions that often arise include the strategic importance of the affected sector to the economy and the choice of actual beneficiaries.
The Governor, Mr. Tumusiime-Mutebile, refused to discuss what he called board issues when called this week. Sources, however, said that he too had vehemently opposed the rescue bid, at one point threatening to resign in protest.
It is not clear whether the government managed to make the board change its mind or whether it simply went ahead with the bailout against the board’s advice.
Just as in our first story on this matter, attempts to get Bassajjabalaba’s side of the story were futile.
See related story
List of Basajja assets to be sold to recover money:
1. Mbarara High Street plot, (Stanchart - Shs 350 million).
2. White Horse Inn hotel/Kabale (Orient Bank - Shs 1 billion)
3. Munyonyo residence (Stanchart - Shs 1.5 billion)
4. Lumumba Avenue, plot 30 offices. (Shs 300 million).
5. Kitante Road, Plot 29 residential (Stanbic - Shs 300 million).
6. Nsambya plot. (Shs 150 million)
7. Six plots in Bugolobi (Shs 180 million.)
8. Kisugu plot residential (Stanchart - Shs 450 million).
9. Jinja Road plot - complex. (Shs 1.3 billion.)
Other Basajjabalaba assets not on sale/sold
10. Plot 12 Luwum Street. Mall/hotel (EADB - Shs 4 billion).
11. Plot 17 Market Street, mall/hotel (EADB - Shs 4 billion).
12. Nkrumah Road mall/offices (Stanchart Shs 1.5 billion).
13. Plot 5 K William Street, Mall (UDB - Shs 3 billion)
14. Plot 16D Market Street, mall. (PTA - Shs 3 billion).
15. Kampala Regency Hotel (Stanbic - Shs 5 billion).
16. Lake View Hotel Mbarara (EADB - Shs 4.5 billion).
17. Bushenyi Store (PTA - Shs 1.55 billion).
18. Mbarara Tannery (PTA - Shs 2 billion).
19. Plot 61 Bugolobi residential (Stanchart - Shs 500 million). 20. Plot 1 Channel Lane store/offices (Stanchart Shs 4 billion).
21. Plot 3A Channel Lane (Stanchart - Shs 1 billion).
22. Uganda Meat Industries (Stanchart - Shs 2.5 billion).
23. Kampala International University (Shs 12 billion).
24. Bushenyi residences (Shs 300 million).
25. Kampala City Abattoir (EADB - Shs 3 billion).
Basajjabalaba sold UCB mansion at Sh16m
Businessman Hassan Basajjabalaba irregularly received fresh titles to properties he had earlier mortgaged to Bank of Uganda as security for a multi-million dollar loan, and then quickly sold off the properties to his cronies in an attempt to conceal their ownership, court documents reveal.
Bank of Uganda is seeking to reverse the consent decree upon which the new titles were issued and re-establish its right over the properties as it seeks to recover a $18.3 million (over Shs35 billion) loan owed by the businessman.
BoU saved Mr Basajjabalaba’s business empire from collapsing in 2004 when, on the directives of President Museveni, whose party the businessman belongs to and sponsors, it paid off his debt owed to two commercial banks. As security for the loan, which the businessman was supposed to pay back to BoU, titles to properties he had mortgaged to the banks were handed over to the Central Bank.
The Central Bank now accuses Mr Basajjabalaba of allegedly using a fake court order dated June 25, 2008 to acquire new titles to the properties and selling them rapidly, leaving BoU holding onto worthless paper.
Court documents seen by Daily Monitor indicate that having illegally repossessed the titles to at least 22 of his prime properties within Kampala city and its suburbs in July, the businessman entered multiple transfers on each of them within a fortnight.
In a sworn affidavit that is part of an application currently before Principal Judge James Ogoola, BoU’s legal counsel Margaret Kasule, says the multiple transfers to the purported purchasers were meant to put the properties out of BoU’s reach. Evidence shows that all the 22 properties were transferred to six of Mr Basajjabalaba’s associates, who kept selling and transferring the properties among themselves, with the help of the same advocate, identified as Iyamulemye Tweheyo.
Court documents have named the six associates as Saidi Kayondo, Dan Katarihwa Kwatampora, Stephen Kagoro, Silagi Tumwine, Imam Kankurihemu and James Magezi. “Registration of the properties to (the six men) was done through fraud which they were privy to,” says BoU’s Kasule in her affidavit, adding that land documents clearly show that the men were nominees of Mr Basajjabalaba in the alleged fraud.
The banks have also attached valuation reports from 2001, when the properties were mortgaged to the commercial banks, to show the gross undervaluation of the properties in this year’s rapid transfers.
In one such case, the Uganda Commercial Bank mansion in Munyonyo, which Mr Basajjabalaba bought several years ago and which was valued at Shs1.8 billion in 2001, was sold in July at Shs16 million. Two prime residential buildings in Kisugu, a city suburb, valued at Shs450 million in 2001 were sold at Shs15 million each while a commercial building valued seven years ago at Shs3.2 billion was sold at Shs100 million.
Another residential house in Bugolobi valued at Shs560 million was sold for Shs105 million and a Shs2.2 billion commercial building on Nkrumah Road was sold for Shs120 million. BoU earlier faulted the Commissioner Land Registration, Ms Sarah Basangwa Kulata, for ignoring the existing mortgages on the properties and for issuing fresh titles without issuing a public notice as required by law.
Ms Kulata said on Wednesday she had not seen the latest BoU complaint. “But when I see it, I will respond,” she told Daily Monitor by telephone. Mr Basajjabalaba had not filed his defence by yesterday and efforts to speak to the businessman proved futile. But when Daily Monitor broke the story on November 21, Mr Basajjabalaba issued a press statement in which he said he had been offered the titles in a swap debt settlement with the government.
Friday, June 4, 2010
What does one have to do to get Basajjabalaba type of favours?
Posted by williamkituuka.com at 7:15 AM
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