A long-running fight between Ugandan businessman Patrick Bitature and Vantage Capital has gone a notch higher with the lender seeking to auction the jewels of Bitature’s real estate empire in Kampala.
Vantage Capital, based in South Africa and one of the continent’s largest mezzanine debt providers, has retained auctioneers to sell off some of Bitature’s key properties. They include the 30-unit Elizabeth Royal Apartments in Kololo, Skyz Hotel in Naguru, and Moyo Close Apartments, also in Kololo.
The properties are owned by Bitature’s Simba Telecom Limited but were mortgaged under his real estate holding company, Simba Properties Investment Company Limited.
The dispute goes back to 2014 when Vantage Capital lent Bitature $10 million to invest in the 14-unit Moyo Close Apartments and the Skyz Hotel in Naguru which were both still under construction. It was the first investment the South African lender was making in Uganda.
“Vantage brings an important and exciting new model of financing to the East African region. Simba Group is pleased to have found a strong mezzanine financing partner who provides medium-term growth capital but does not want to take our hard-earned equity,” Patrick Bitature, the founder and chairman of Simba Group said at the time.
Warren van der Merwe, the chief operating officer of the Mezzanine capital provider, gushed: “Simba has managed to build an impressive and successful group of businesses, through a combination of entrepreneurial flair and highly professional management. “Theirs is the kind of story that underpins our Pan African investment strategy of supporting mid-market family-owned businesses that are seeking to raise growth capital without having to dilute their shareholding. This is the kind of Group we would like to back in future transactions.”
But the honeymoon did not last long. Sources familiar with the transaction, but who spoke on condition of anonymity in order to speak freely, said that almost a decade later, Bitature and his Simba Group of companies have not paid back a single dollar to the South African lender.
“After receiving the money, instead of paying back the loan they hired lawyers to say that the South Africans were not authorised to lend in Uganda and could not therefore claim to recover the loan,” a source familiar with the matter said. “So, the matter has been pending in court over the years, bouncing from one courtroom to another.”
Another source said: “Their agreement had a provision for arbitration, that in case they disagree, they find an independent arbiter to settle matters. But when the matter went to that stage lawyers for Simba Group then changed position and said the nature of the deal amounted to financial institutions business which should have been regulated by Bank of Uganda, which the South Africans were not, since they are a venture capital fund, not a bank.”
On 16 June 2021 Justice Boniface Wamala of the Commercial Division of the High Court of Uganda ruled that the arbitration agreement between Simba and Vantage was valid and sent the two parties to arbitration.
Two days later, Vantage sought to transfer shares in Simba Properties Investment Company Limited, Simba Properties Limited, Linda Properties Limited, and Elgon Terrace Hotel Limited, all owned by Bitature, into its name as provided for by their financing agreement.
However, officials at the Uganda Registration Services Bureau refused to transfer the properties on the basis that there was still a legal dispute between the two parties which was still under arbitration. When Vantage applied for judicial review to challenge this position, Justice Musa Ssekaana of the High Court dismissed the application on the basis that the Vantage partnership was not registered as a company in Uganda and could, therefore, not sue or be sued. He, however, noted that URSB should have gone ahead with the share transfer.
Sources familiar with the matter say that the $10 million extended to Bitature has now grown threefold to around $30 million with interest, charges, and penalties. Companies associated with the businessman have had a separate running dispute with Absa Bank over a multi-million-dollar loan.
Bitature is one of the leading indigenous businessmen and sits on several boards, including of Umeme, the power distributor, and Bollore Transport and Logistics Uganda. Industry watchers say the dispute could undermine international confidence in Uganda’s corporate governance sector and make it harder for private sector players to get flexible financing from private equity and venture capital funds.
