DEBT CRISIS! Secrets why Shs9bn deal may ‘kill’ construction firm Mutoni

Squeezed to the marrow, the firm has even relocated its offices from upscale Naguru to dusty suburbs of Kireka-Kamuli Road in Kira municipality, Wakiso district

Squeezed to the marrow, the firm has even relocated its offices from upscale Naguru to dusty suburbs of Kireka-Kamuli Road in Kira municipality, Wakiso district

By our reporter

Sometime back in 2007, a group of South African investors led by Dunbar Iain Russell, desirous to tap into Uganda’s construction sector, partnered with locals in Uganda led by one Hakim Semuwemba to start Mutoni Construction Uganda limited.

It grew from offering telecommunications turnkey services into a full-service construction company, establishing itself as a leader in the civil works sector. Its portfolio includes building of warehouses, grain silos, Warehouses, roads, telecommunication projects, earthwork, Power Stations, real estate development, and civil works among others. However, 14 years later, the company is struggling to operate to an extent that the South African investors have even freed the country over debts. Zaidi Nsubuga, who manufactures the Family Bread brand from Natete reportedly demands the firm Shs600m. EDTUK Ltd and Governance Systems Ltd are some of the other suppliers that have since dragged Mutoni Construction to court. They are each demanding Shs450m. They also have another debt of $190,000.

Squeezed to the marrow, the firm has even relocated its offices from upscale Naguru (Plot 9 Kimera Close) to dusty suburbs of Kireka-Kamuli Road in Kira municipality, Wakiso district.


Mutoni Construction Ltd bosses are blaming all their woes on Prof Mathias Magoola, a controversial Chemist alongside a mustached man at whose instigation former Speaker of Parliament Rebecca Kadaga mid last year famously told the world Uganda had found the cure for Coronavirus.

This was in the early days of the pandemic and Kadaga innocently marketed Magoola as the man who was going to make a record for Uganda by discovering the cure for Coronavirus. It turned out to be untrue as world reputed scientists scorned the claim that Magoola had found the cure. Kadaga, who had wholeheartedly bought into the Magoola claim, endured public ridicule as thousands of social media users subjected her to harsh scrutiny. Mutoni bosses have now petitioned the Police’s Criminal Investigations Department (CID) and President Museveni demanding action against Magoola.

A flamboyant Kampala tycoon, married to a Munyankole lady called Kellen with whom they live in Muyenga, Prof Magoola (who is renowned for extreme pride, donning expensive suits and cruising in expensive Range Rover cars) is the investor behind Dei Natural Products (U) Ltd through which his Covid19 cure drug was supposed to be manufactured and thereby making every Ugandan proud. Operating on more than 100 acres of land in the Matugga Industrial Park, Dei Natural Products Ltd was meant to compete with Luzira-based Quality Chemicals Ltd in the manufacturing of anti-malarials for the Ugandan market and exportation within the region. And to do this effectively, there was a need to construct a large complex consisting of four different large structures that would facilitate the production and warehousing of the resultant pharmaceutical products. Prof Magoola is still hopeful his dream of eclipsing Quality Chemicals Ltd will come to fruition.

That is how Mutoni Construction Ltd came to be contracted at 9,600,824,483 (Uganda shillings nine billion six hundred  million  eight  hundred  twenty  four  thousand  four  hundred eighty three) excluding VAT to construct one of the structures that were required to complete the Matugga pharmaceutical complex. Because he is always busy and away doing special assignments for the President and the ruling NRM party, Prof Magoola realized he wouldn’t be able to adequately supervise the work and authenticate payment claims relating to work done. He appointed or contracted Santiago Y Lauren (SYL) Architects Ltd to serve as the consultants and project managers on his behalf.

Mutoni Construction ltd bosses supervising one of their projects

This (SYL) company became the intermediary between Magoola’s Dei Natural Products Ltd and Mutoni Construction Ltd. They would complete a certain stage of the work and put in their claim through SYL whose duty was to verify value for money. It would only be upon their clearance that Mutoni Construction Ltd (owned by both Ugandans and South Africans) would get paid.

Believed to be one of the businesses that Prof Mathias Magoola (who is also into the wheat flour and minerals trade) does in partnership with Kenyan Deputy President William Ruto, the same Matugga facility is the one President Museveni and Rebecca Kadaga joined the Kenyan big man to inspect sometime in July 2021. And in respect of the same pharmaceutical business, Equity Bank Uganda advanced a loan facility of $8m. Tropical Bank had previously funded the same project under loan terms and they too claim stake in the same.

When the Equity Bank loan was obtained, the officials of Mutoni Construction Ltd anticipated better cash flow in the finances of Dei Natural Products Ltd. When the same never happened, with rumors flying around that more members of Magoola’s family had acquired American citizenship as the man intensified real estate undertakings in California, the contractor raised a red flag. They wrote several letters reminding Magoola of the invoices and completion certificates in relation to which payment, fast approaching billions, hadn’t been made.

When Magoola totally ignored them, Mutoni Construction Ltd officials referred the matter to the arbitration court accusing him of condemning them to financial hardships. Court documents indicate that as of mid-2021, the company was already failing to pay suppliers from whom materials like cement, steel and other inputs had been obtained in order to do Magoola’s work. Through their lawyers of Kyagaba & Otatiina Advocates based at UEDCL Tower in Nakasero, Mutoni Construction officials are demanding that Magoola pays up to Shs4,108,593,090 which includes money for work done on his site, the resultant VAT obligations of Shs819m plus the accruing interest. They enumerate more than 10 invoices which Magoola allegedly refused to pay for yet they did the work.

They are also faulting Magoola’s Dei Natural Products Company Ltd for failing to pay for the services of SYL Architects Ltd who was supposed to serve as the project manager and consultant through whom their payment invoices and completion of work certificates were supposed to be verified from time to time and the relevant payments effected. That upon developing remuneration-related disagreements, the consultant pulled out yet this was a breach that went to the root of the contract.

That the contractor several times reportedly brought this to the attention of the employer (Dei Ltd), because it was hurting work, but Magoola kept a deaf ear.

That they even proposed names of entities that would fill the vacuum but Magoola frustrated everything asserting he was too busy campaigning for the President’s reelection being a key pillar in the ruling party.

This newspaper has established that inability to get prompt payments from Magoola pushed the company (Mutoni Construction Ltd) into big financial crises prompting some of the South African partners to flee back to South Africa while leaving the Ugandan director Hakim Semuwemba alone to face creditors from whom supplies like cement and steel had previously been obtained on credit all in order to be able to deliver infrastructure at Magoola’s Matugga-based pharmaceutical plant.

Before fleeing the country over growing debts and litigation threats, the South Africans tried to have audience with the President to implore him to crack the whip on Magoola but gave up after their contact told them that Col Edith Nakalema, through whom they hoped to reach Gen Museveni, was fearing reprisals from Magoola. They also sent their complaint to the State House Anti-Corruption Unit, demanding action against Magoola, but were abandoned in the cold with the officials assuring them the Unit was too busy with cases and complaints filed earlier.

Using the same Mutoni Construction Company Ltd, the South Africans had created a profile of trust for themselves to the extent that even the UPDF would contract them to construct some infrastructure relating to Nakasongola Industries and the Air Force Hangers facility in Kajjansi. But even the mighty in the military reportedly feared to intervene on grounds Prof Mathias Magoola was too strong and too connected for anyone to antagonize. They equally tried their connections in Airtel and MTN telecom companies whose telecom towers their company had constructed earlier but still not much progress was made. They had good connections in UWA whose top officials equally backed off fearing reprisals from Magoola who is claimed to be a blue eyed boy of State House.

There was an attempt to incite local businessmen within the Matugga neighborhood, from whom Magoola had been obtaining things like sand, to riot and create a scene in the Matugga Industrial Park but the move was thwarted when the military deployed in the area ostensibly to secure Dei business premises. In fact the soldiers have never left the premises up to this day.

Left alone to face pressures from the much dreaded Magoola who kept demanding delivery of the work within a certain time, Hakim Semuwemba resorted to taking credit from individual businessmen mostly in the Natete area to keep the construction project going. Zaidi Nsubuga, who manufactures Family Bread brand from Natete, is one of those from whom credit (Shs600m) was taken. Nsubuga’s money was used to purchase cement and iron bars to do the work at Matugga in the hope Semuwemba would get money from Magoola and pay up. This never happened, leaving poor Semuwemba more exposed.

EDTUK Ltd and Governance Systems Ltd are some of the other suppliers that have since dragged Mutoni Construction to court. They are each demanding Shs450m. Yet that isn’t all poor Semuwemba has to contend with at the moment. There is another debt of $190,000 which was contracted in order to facilitate the importation of the special roof from Kenya which was used to complete Magoola’s structure at Matugga. But as soon as the roofing job was completed, Semuwemba was reportedly forcefully chased from the site instead of being paid what was considered due. The military was unleashed to force him out of the site and this was at a time he had huge employee bills (relating to 400 workers) and office rent bills in Naguru (Plot 9 Kimera Close) to pay up!

The broke Mutoni Construction Ltd has since relocated to the less glamorous neighborhood of Kireka Kamuli Road in Wakiso district. And yet even when Hakim Semuwemba is going through all this torment, Magoola (who many consider to be untouchable because of his State House connections) hasn’t relented at all.

Mutoni construction firm’s letter to CID

Through his lawyers of JOSKA Advocates (based at Nakawa Business Park), Magoola says he isn’t owed anything. He accuses Mutoni Construction of committing severe contractual breaches manifested in failing to deliver the job within the four months’ time as had been agreed at the beginning. That as far as he is concerned the construction was to be completed in February 2020, which Mutoni Construction failed and in the process caused a lot of financial loss to his business. That plenty of pharmaceutical equipment (won’t disclose details) had been imported and had to be expensively stored for more than 2 years as he waited on the contractor to finish the job. He also asserts that it was a blunder and an illegality for Mutoni Construction officials to turn themselves into project managers yet that was never their mandate under the contract.

That the invoices the contractor claims to have tendered were to come through the project manager or consultant who wasn’t in place after the departure of SYL Architects Ltd. Magoola adds that following the exit of SYL Architects Ltd, he contracted a quantity surveyor whose verification report indicated that Mutoni Construction had actually been overpaid by over Shs70m implying its them to pay him back some money that was undeservedly paid to them as opposed to them claiming over Shs4bn. The lawyers also indicate the more than Shs800m Mutoni Construction is demanding for in VAT refunds is a sham claim because their client Magoola was VAT-exempt since his pharmaceutical business in Matugga falls in those business undertakings that are excused of VAT-related obligations.

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