Chinese fall prey to loan shark

Sunday November 6 2011

By Emmanuel Gyezaho


It is a bitter pill to swallow for Yuping Zhang, 43, and Jingyue Duan, 39, two Chinese businesswomen. The duo set up shop in Uganda less than two years ago and run a successful merchandise supply company - Kangda Uganda Ltd.

The two women went from owning a business whose net portfolio stood at a reported $1.5 million (about Shs3.9 billion) to regretting ever setting foot in Uganda. Ms Zhang is incarcerated at Luzira Maximum Security Prison and Ms Duan is struggling to survive without her business partner. But what went wrong?

A Sunday Monitor investigation reveals that their troubles stem from a commercial dispute involving a fellow Chinese national, Ms Fang Min, who among other enterprises owns the upscale Fang Fang restaurants in the city centre.

Described by some as a “shrewd businesswoman,” Ms Fang Min, who has since taken on Ugandan citizenship, allegedly offered to the pair what she said was cash to buy one-third stake in their company before unilaterally converting the share contribution into a loan. She allegedly then slapped on a record-shocking interest rate and forcefully enforced the recovery, leading to the collapse of Kangda Ltd.

Theirs is a tale of regret - of mixing business with friendship and blindingly trusting the proprietor of the Fang Fang Group, who is accused of exploiting their lack of command of the English language to dupe them into signing agreements that would lead to the collapse of their business.

Sunday Monitor approached Ms Fang Min for comment on separate occasions but she turned down each of them. However, at an earlier visit to our offices, she described her accusers and former business associates as “criminals” who had “cheated me.”

The Genesis
By May 2010, Kandga Uganda Ltd had become Uchumi Supermarket’s third biggest supplier, according to Mr Gracious Kakaire, a procurement manager at the supermarket. It is about the same time that Ms Fang Min reportedly expressed interest in joining and helping expand the business.

“They would have a turnover of probably Shs100 million or Shs200 million from us every month,” he said. “They were supplying a big range of different general merchandise products, approximately 1, 500 items before their problems began around Christmas last year and they had issues supplying.”

Between May and June 2010, Ms Fang Min advanced Kangda Uganda Ltd a total of $300,000 (Shs786 million) split in two equal installments - a cash facility that Ms Zhang and Ms Duan admit with hindsight that if they had comprehended its terms they never would have accepted. “We signed these documents without knowing,” Ms Duan told this newspaper, tears rolling down her check. “Me, I can speak a little English but Madam Zhang can only say hello, bye, thank you. We trusted Fang Min but she cheated us,” she alleged.

The loan agreements, drafted by Mr Herbert Wakaabu of Kiiza and Kwanza advocates, indicate that the loan was repayable after five years on May 25, 2015 and it attracted an interest of 10 per cent per month or 120 per cent per annum for the first year rising to 160 per cent in the second year. Section 12 of the Money Lenders Act states that interest rates chargeable on loans may not exceed 24 per cent per year.

As it were, for borrowing $150,000 (Shs393m), the two women signed off an agreement that would require them to pay Fang Min monthly interest of $15,000 (Shs39.3m) on the principal sum. Paying that interest in just 10 months would offset the principal loan sum. But the two women had a loan repayment period of five years, which would require them at the end of the day to fork out a colossal $1.14m (Shs2.9bn), more than three times the principal sum.

Tightening the noose
The agreement also compelled the two women to execute a debenture deed in favour of Ms Fang Min, to guarantee repayment of the loan secured from the company’s assets in the event of insolvency. It also compelled Ms Zhang to deposit her passport with Ms Fang Min and personally guarantee the loan’s repayment. Documents show that by the end of October 2010 the company had reportedly repaid Ms Fang Min a total of $135,603 (Shs355m).

Armed with this power, Ms Fang Min eventually took on a 40 per cent shares as collateral. However, she shortly placed the company under receivership and shutdown the business. However, before delivering this fatal blow, Ms Fang Min is said to have called her estranged partners for a meeting at her Fang Fang hotel on November 30, 2010 where Ms Zhang’s journey to Luzira Prison began.

Under alleged duress, the two women signed a “memorandum of satisfaction of debt agreement” drafted by lawyer Mr Wakaabu, in which the company undertook to pay Ms Fang Min under a new payment schedule in three installments compounded by lofty interest.
“She kept us until after midnight and said we would not leave until we sign,” Ms Duan says. “We were speaking in Chinese but she was telling her lawyer what to write in English.”

More crucially, Ms Zhang gave her personal guarantee that the company would in fact pay its debts and in an act that would ultimately land her in prison, issued three post-dated cheques, which she says were only as a guarantee, due between December 16 and January 31, paying out a total of $291,296 (Shs763m) to Ms Fang Min, inclusive of interest.

Ms Fang Min would then allegedly dispatch police officers, travelling in her husband Dr Hu Bin’s vehicle on the evening of December 21, 2010 at about 8:30pm to arrest the two women, said Ms Duan. “They didn’t ask us any questions, they just took us to CPS and they beat us,” she said. “Madam Zhang was badly beaten and she almost died. She was kicked in the head and shoulders and was taken to Nakasero Hospital at 2:30am unconscious where she stayed for 16 days.”

The next day, Ms Fang Min reportedly placed Kangda Ltd under receivership, and proceeded to close the company’s three outlets at Nakasero, Nakumatt Oasis Mall and a warehouse on Nyondo Close, in Bugolobi, a Kampala suburb. Through this act, the two women had lost control of their company and would thus be unable to meet any of the loan obligations.

Ms Fang Min proceeded to bank these Guarantee cheques, which eventually bounced, despite the fact that she now controlled the company through the receivers she had appointed, and the responsibility to pay the company’s debts lay with the receivers and no longer with its directors.

Fang files another complaint
She would then file a criminal complaint through the Divisional CID office at Kampala Central Police Station and the Special Investigation Unit in Naguru and police promptly charged Ms Zhang at Buganda Road Chief Magistrates Court.

On October 28, 2011, Grade I Magistrate Francis Dawa Matenga found Ms Zhang guilty of issuing bounced cheques, condemning her to a year in prison. Ms Zhang’s lawyer, Fredrick Ochieng Obbo, says his clients were dissatisfied with the ruling because the chief magistrate “did not consider all submissions. “We have lodged an appeal before the High Court.”

On Wednesday, the estranged parties were at the High Court in Kampala attending arbitration over receivership of the company. Speaking through a translator, Ms Zhang said: “That judgment was really surprising. These were cheques to Fang Min, who is also a director and shareholder at the company. She used the same money to determine high interest.” She added: “Fang Min wants to eat all of my property.”