By Moses Kaketo
‘‘The decision in Ham vs. DTB does have very wide reaching implications.’’ Said Makerere University Don Robert Kirunda shortly after the ruling on Wednesday
The Commercial Division Judge, Henry Peter Adonyo ruled that DTB Kenya said that DTB acted illegally in lending money to Ham Enterprises.
The DTB is battling Hamis Kiggundu over Ugx. 39.7bn which the businessman acquired to facilitate his businesses and defaulted on payment.
Kiggundu had acquired the money in: $6.2m, $3.2m, $458,604 and Sh2.8b from both DTB Uganda and DTB Kenya between February 2011 and September 2016. The loans were consolidated later in 2018 and were to run for five years, ending August 23, 2023.
Justice Adonyo ruled that DTB Kenya didn’t have the license from Bank of Uganda as provided for under the Financial Institutions Act 2004.
Like Don Robert Kirunda had prophesied, the ruling was likely to have further reaching implications on the economy and the country at large.
Uganda Bankers Association Join DTB to Challenge the ruling
Uganda Bankers Association (UBA), an association that brings together all commercial Banks in Uganda In a statement voiced their concerns over Court ruling against one of its members
The UBA warns that the judgement placed at risk the entire syndicated portfolio currently seated with commercial banks, which is now about Ugx. 5.7 trillion.
The statement signed by Association chairman Mathias Katamba and Executive director Wilbroad Humphrey reveals that these loans run across various sectors including real estate, road construction, energy covering hydroelectric power, oil and gas and manufacturing among others.
The figures exclude syndicated lending to government of Uganda who is the largest beneficiary of syndicated lending for various development programs in the country.
Earlier city lawyer Silver Kayondo whose specializes in business and banking reacting to the court ruling observed:
‘‘Syndicated facilities are standard practice within the banking industry. The essence of the Commercial Court ought to be a specialist and well-informed dispute resolution body that gets such simple basics right.’’
The association warned that judgment also sent ‘’ our international partner agencies and lenders in shockwaves and with implications for Uganda as a investment destination
I can't shake these three cases off my mind: Jamwa v. Uganda, BoU v. CBL, Ham v. DTB. The window for attracting FDI into Uganda is closing slowly but steadily.
— Robert Kirunda (@RKirunda) October 7, 2020
In the meeting held on Thursday morning, the CEO’s of 35 member institutions agreed, as an interested party to join their member- Diamond Trust in its appeal at the higher court to determine the case on its merits.
They intend to jointly file for a stay of execution of the orders of the judge, as ruled yesterday.
They also called on other stakeholders including bank of Uganda, ministry of Finance, Attorney General to pronounce themselves on the matter.
Indeed, Thursday evening, the Central bank, ministry of Finance had responded
Government reassures Lenders
In statement signed by Dr. Ssengonzi Damulira on behalf of the permanent secretary to the treasury, The Finance Ministry reassured the financial agencies of its commitment to its public debt after a judge ruled in a court case that the syndicated loans were illegal.
The Ministry said it had “received concerns from different development partners and financing institutions regarding its position on syndicated financing arrangements and public debt obligations external and domestic
In this regard, government reiterated its “commitment made to all its financing partners in respect to all procured and future syndicated loans and assure them that it will undertake all its obligations and duties under the different frameworks in line with Article 160 (1) of the Constitution of the Republic of Uganda and Section 38 of the Public Finance Management Act (2015).”
Governor Emmanuel Mutebile assures
In a press statement issued on Thursday evening, the governor bank of Uganda Prof. Emmanuel Tumusime Mutebile reassured all stakeholders and the general public that BOU remains ‘ ‘ committed to ensuring a resilient, sound and stable financial sector’’ following court ruling
He adds: for now we await the detailed written judgment of the court to assess the implication and determine an appropriate response thereto.
Ugandans speak out on the ruling
Robert Kazooba: what we know for sure is that HAM had a loan obligation and that almost all major banks in Uganda are small subsidiaries of big multinational one hence the syndicate loans. The poor don’t build high fences around themselves.
Mulindwa Rugumayo: I guess they gave the Hamis a financial bailout that will have consequences for the next three decades. Anyway whatever the decision, my hope is that it was an upright conclusion. Otherwise we as a nation need to sow only seeds that are righteous. A middle ground is deceptive
Mercie Odu: Cutting off Ugandan banks and borrowers from the international finance market. How do we get out of this?
Angelina Namakula: Whereas there maybe challenges within the sector (just like any other sector), it is common decency for one to return funds they have borrowed. I don’t want to believe that anyone wouldn’t feel aggrieved if not repaid what they lent.
Edgar Kakoma: We need expertise at divisions of the High court not just allocating someone to a particular division simply because he or she is a judge.
Christine Alupo: These are life changing times for banking and finance in Uganda with precedents and ramifications to contend with.
Syndicated facilities are standard practice within the #banking industry. The essence of the Commercial Court ought to be a specialist and well-informed dispute resolution body that gets such simple basics right. pic.twitter.com/twlU7NXO4r
— Silver Kayondo (@SilverKayondo) October 8, 2020