Most of the $10m (Shs36.8b) loan Patrick Bitature borrowed from Vantage Mezzanine was used to pay off an older $8m debt the businessman took out from the now-defunct Crane Bank, documents seen by this reporter show.
Mr Bitature injected the money borrowed from Crane Bank into Simba Properties, the real estate development and property management arm of his business empire.
Recent media reports had initially indicated that Mr Bitature used the vast bulk of the loan to erect his Skyz hotel in Naguru and Moyo Close Apartments. This is the first time the earlier indebtedness to Crane Bank has been revealed.
According to the agreement he entered into with Vantage, a copy of which Saturday Monitor has seen, Mr Bitature was to use the $10m loan in three ways. Some $8m was to be used “to repay a large portion of a local currency debt facility from Crane Bank Limited which had been injected into Simba to grow the property businesses.” Then $1,100,000 would be “retained by Simba to be used for capital expenditure and working capital purposes.”
The last chunk of the loan, amounting to $900,000, was to be “used to fund the debt service reserve account.”
This was supposed to be maintained to cover one year of Vantage’s debt service facility and would be released “once the legal mortgages had been registered.”
A protracted legal battle has broken out between Mr Bitature and Vantage, a South African financing and investment partnership, after the Ugandan businessman failed to pay back the loan when it was due.
The loan has now soared to about $32 million (Shs117 billion) including penalties and compounded interest.
The legal dispute between the two parties exploded into the court of public opinion recently when lawyers representing the South African lenders advertised their intention to auction some of Mr Bitature’s prime properties in order to recover their money.
FIA sucked in
Details emerging show that the borrower has taken several steps in the past to challenge the loan and their liability to pay it back. This newspaper has learnt that Mr Bitature’s lawyers wrote to the Financial Intelligence Authority (FIA) in 2020 and asked them to investigate Vantage and the source of the funds it had lent to him. FIA is a government agency charged with identifying proceeds of crime as well as combating money laundering and terrorism financing.
Lawyers representing Mr Bitature asked the FIA to investigate how Vantage Mezzanine got $10m from South Africa and brought it into Uganda without being registered locally. Another complaint Mr Bitature’s lawyers registered was that—under section 12 of the loan agreement— Vantage Mezzanine was shielded from paying any tax on income derived from their business.
According to the lending agreement, Mr Bitature was to repay the loan without any tax deduction, unless a tax deduction is required by law. In the latter case, the borrower would repay any tax deduction made to the lender within three business days of the demand being made.
In addition, the agreement provided that the only taxes that Vantage would pay are those in the jurisdiction where it’s incorporated (i.e., South Africa) or in a jurisdiction in which the company is a resident for tax purposes. Section 12.4 of the agreement says that Mr Bitature was to indemnify Vantage Mezzanine against stamp tax within three business days after Vantage had made the demand.
In their complaint to the FIA in 2020, Mr Bitature’s lawyers alleged that this amounted to tax evasion.
Speaking to Saturday Monitor on the condition of anonymity, so as to be able to speak freely, a member of Vantage Mezzanine’s Ugandan legal team confirmed that they appeared before the FIA in 2020 to defend their client.
“We attended the meeting and explained that there’s no laundering here. The FIA said we understand we shall respond but they have never responded,” he said. “We gave FIA a copy of the agreement and we told them…the basis of this accusation is this so-called tax gross-up but that’s rubbish.”
The lawyer described tax gross-up as a standard term in tax law. He added that it means that the investor is alive to the fact that “the tax law can change anytime and every year tax law in Uganda changes, people go to Parliament and pass new laws.”
He added: “The investor is saying, ‘I’m not Ugandan and I don’t want to suffer the consequences of the tax regime that isn’t mine’.”
Mr Sydney Asubo, the FIA’s executive director, in an interview with Saturday Monitor admitted receiving a petition which raised tax evasion and money laundering allegations. He admitted that the authority had not yet disclosed their findings to either party.
“We can’t give people inconclusive findings,” he said. “There is food you can serve when it’s 80 percent ready, but there is food which you can only serve when it’s 100 percent ready and we are now in that situation.”
However, a highly placed source at the FIA familiar with the matter told Saturday Monitor that the petition “lacks merit.”
