How the Pearl slipped through Aya’s fingers

The Pearl of Africa Hotel on Nakasero Hill in Kampala.  Photo/file

What you need to know:

This week, nearly a decade after the hotel was opened, Ugandans were greeted by adverts announcing the sale of the five-star hotel to recoup debts for a financial institution.

On the eve of hosting the 2007 Commonwealth Heads of Government Meeting (Chogm), Uganda found itself struggling to meet a high occupancy rate. With 4,000 rooms needed, five-star hotels such as Kampala Serena Hotel and Sheraton Kampala Hotel could only do so much.

The government moved to allay fears by sanctioning the hasty construction of lodging facilities. One of the hotels that was to shoot up on the back of a $90m (Shs337b) kitty was Kampala Hilton. It was, however, not until 2013 that the hotel was completed. The Aya brothers, who ran the rule over the construction, opted to call the lodging facility the Pearl of Africa Hotel.

This week, nearly a decade after the hotel was opened amid fanfare and ululation, Ugandans were greeted by newspaper adverts announcing the sale of the five-star hotel to recoup debts for a financial institution.

Auctioneers from Armstrong Limited indicated in the advertisement that the 296-roomed hotel whose 23 floors squat on 32,000 square metres of land in the leafy suburb of Nakasero in Kampala, will go under the hammer.

“We shall proceed to sell the property unless the judgment debtor pays to the entire outstanding decretal sum, including interest and our fees,” the auctioneers revealed.

Rocky start

Even before the construction of the hotel, owned by Sudanese businessman Hamid Mohammed, could start, it was plunged into controversy. The trigger of the acrimony was the fact that Aya Group didn’t buy the land on which the hotel eventually planted its feet. The government instead donated the land that, besides being valued at $10m (Shs37.4b), played host to the Uganda Broadcasting Corporation (UBC), the national broadcaster, and the Information ministry.  

The other outstanding question was if Aya Group had executed a performance bond. This is a contract construction bond which guarantees a contractor will complete a project according to the terms outlined in a contract by the project owner.

Another query was how UBC’s relocation was going to affect its signals. At the time, it emerged that though relocating UBC was a huge undertaking, the government hadn’t provided funds for the same. Mr Mohammed’s promise to inject $90m into the project was supposed to allay fears; yet by 2008, it emerged that the Aya Group, or Aya brothers as they insisted on being called, were struggling financially. 

Financial hiccups?

Lawyer Muzamiru Kibedi first exposed their financial struggles when, at the backend of 2008, he asked the High Court to sell the incomplete property. This was on account that the Aya brothers had failed to clear Shs4.4b incurred in legal fees. Mr Kibedi, now a Court of Appeal justice, accused the Aya brothers of breaching an agreement in which they had agreed to give him five percent of the $41.4m (Shs155b) loan he had helped them get from an unspecified bank. 

The ultimate aim of the loan, it was disclosed, was to help the Aya brothers complete the construction of the hotel. It later emerged the loan was secured from the Industrial Development Corporation (IDC), a South African finance company. Kibedi is believed to have played a key role.

But then the High Court withdrew the order that had green-lit Kibedi to sell the property. The issue was later settled out of the courtroom. Rumours, however, still persisted that the Aya brothers were struggling to complete the hotel. 

When the structure was in the second phase of construction, sources said Mr Mohammed was looking for another investor to take away the burden. The Sudanese businessman, in his capacity as the Aya Group chairman, vehemently denied the allegations.

“This is a private sector initiative funded from our own resources and with the support of reputable international financiers,” he said in 2009, adding that the project attracted “standard commercial terms after a thorough evaluation.”

At that time $70m (Shs262b) out of a projected $100m (Shs374.4b) had been spent on the project. Mr Mohammed insisted that the hotel would receive its first guest in 2010. This didn’t happen. 

Breaking the silence

After keeping a measured silence when many Chogm-related projects hit a dead end, President Museveni finally weighed in on the stalling of the Aya Group hotel project. Such was the uncommon interest he showed that he often visited its site. One such visit in September 2012 would culminate in the State House releasing a dossier. Besides regretting delays, the President described Mr Kibedi as a “confused lawyer”.

Mr Museveni even threatened to drag the lawyer to the Law Council, adding that he should have been investigated for professional misconduct. The President further said in the statement that Mr Kibedi “confused documents for a stakeholder from IDC in South Africa and delayed project implementation”.

Mr Kibedi’s defence was that under the Advocates Remuneration Rules, as a lawyer, he was entitled to five percent of the loan secured for his client, as legal fees. Later, the High Court issued a certificate of taxation, requiring Aya Group to pay Kibedi $2.5m (Shs9.4b).

Aya Group had earlier offered Mr Kibedi $3,000 (Shs11.2m) which he flatly rejected, then accused the group of conniving to defraud them. The matter would later be settled amicably.

“He is free to make allegations however wild they may be,” Mr Kibedi said referring to Mr Museveni, adding, “But as for me, I have no claim against Aya Group; they also have no case against me.” 

Even with the delay of the completion of the hotel and the opening date revised to March 2013, Mr Museveni still praised the Aya brothers. He opined that they had grabbed an opportunity to utilise a dormant asset.

“There were old government buildings for the Ministry of Information here but Uganda was not earning anything; instead, it was spending money to maintain them,” Mr Museveni said, adding, “Then these people said the spot was underutilised and that it could bring in more money. If a woman is barren, you don’t chase her away, but you devise ways to get one who produces.”

Bribery claims

Still, the fears that the project would suffer the same fate as that of a five-star hotel Saudi Prince Al Waleed bin Talal reportedly offered to erect on a piece of land formerly occupied by Shimon Demonstration School persisted. Mr Museveni thought otherwise, reasoning that the delays were down to shady government officials. 

“For the investors, if you come across some corrupt officers asking for bribes, I have appointed a senior advisor on investments with a hotline for reporting anyone who asks for bribes or frustrates investments. If caught, they will be put in the freezer,” he said.

It was not until October 2013 that the hotel opened its doors to clients.

“We are employing about 1,350 Ugandans working in three shifts of 450 per day. The Hilton Group has already ranked this the Waldorf Astoria category, meaning it is among the topmost standards of the Hilton Brand,” Mr Mohammed boasted after the opening. 

Regardless, it was not until 2017 that Mr Museveni officially opened the hotel. After cutting the tape, the President tore into public servants who frustrate foreign investors. He warned that their days of corruption were numbered.

Scandal after scandal

By this time, Mr Mohammed was involved in a sex scandal that later led to the arrest of then junior Labour minister, Mr Herbert Kabafunzaki. Weeks before Mr Kabafunzaki’s arrest, it was alleged that the erstwhile minister had attempted to extract a bribe out of Mr Mohammed to make the sexual harassment claims go away.

Workers at the Pearl of Africa Hotel accused Mr Mohammed of underpaying them, as well as harassing some of them sexually. Mr Mohammed said Mr Kabafunzaki later suggested an amicable solution to the problem. He further revealed that the minister asked for Shs30 million to “kill” the matter. 

Mr Mohammed testified against Mr Kabafunzaki at the Anti-Corruption Court. In 2021, Justice Margaret Tibulya convicted Mr Kabafunzaki of corruption having found him guilty of soliciting a bribe from Mr Mohammed worth Shs5m.  

After Mr Museveni officially opened the hotel, it staggered from one financial crisis to another. In 2018, Kampala Capital City Authority (KCCA), for instance, threatened to close it on grounds that it hadn’t paid taxes that ranged from hotel to local service. Service providers such as Sanlam, Fresh Cuts, Total, and electricity distributor Umeme had also gone to court demanding the hotel to clear their money. 

Problems home and away

As the hotel toiled to clear operational bills in Kampala, it also came to light that the Aya brothers had failed to pay the debt from South Africa that had enabled them to construct the hotel. By 2021, dark clouds were gathering when Aya Group put in a temporary injunction stopping the sale of its hotel by IDC. This was after the South Africans made it clear that they wanted to sell the hotel to recover the money lent to Aya Group. In its defence, Aya Group accused IDC of committing a litany of breaches in the financing agreements, which resulted in the gross delay of hotel operations and the heavy losses occasioned.

Earlier this year, the liquidation process of Aya Investments Uganda Ltd commenced, and court-appointed Mr Robert Mugabe, the director of insolvency and receivership at the Uganda Registration Services Bureau (URSB), as the official receiver, and subsequently, the provisional liquidator.

ISSUE

As the hotel toiled to clear operational bills in Kampala, it also came to light that the Aya brothers had failed to pay the debt from South Africa that had enabled them to construct the hotel. By 2021, dark clouds were gathering when Aya Group put in a temporary injunction stopping the sale of its hotel by Industrial Development Corporation (IDC). This was after the South Africans made it clear that they wanted to sell the hotel to recover the money lent to Aya Group.