Who borrows $10 million by mistake?

Brian Mukalazi

What you need to know:

  • If you’re poor with a good business idea, you cannot easily start a business, because you have no capital.

In their 2012 well-written book, Why Nations Fail, authors Daron Acemoglu and James Robinson described the contrast between how Bill Gates - from the United States of America, a developed country - and Carlos Slim – from Mexico, a developing country - became the two world’s richest men.

The authors observed that, on one hand, the rise of Bill Gates and Microsoft were well known, but Gates’ status as the world’s then richest person and the founder of one of the most technologically innovative companies did not stop the US government from keeping an eye on him and his business.

Indeed, since its inception, multiple civil actions, inquiries and penalties have been instituted against Microsoft. For instance, in November 2001, after it was found to be non-compliant to several regulations, Microsoft suffered serious penalties at the hands of the US Justice Department.

On the other hand, in Mexico, Carlos Slim did not make his money by innovation. Carlos Slim has been a master at obtaining exclusive contracts; he managed to monopolise the lucrative telecommunications market in Mexico, and then later extended his reach to the rest of Latin America.

The economic institutions that made Carlos Slim rich are very different from those in the United States. He has made his money in the Mexican economy in large part thanks to his political connections. Carlos Slim has the power to get what he wants but Bill Gates’ power is far more limited.

The facts described in the above two scenarios, especially in Carlos Slim’s case, are not any different from those being experienced in Uganda.

In Uganda, just like in Mexico, wealthy businessmen thrive not because of their talents, but largely because of who they know, who they can influence, and yes, who they can bribe.

The on-going $10 million loan dispute between Vantage Mezzanine, a South African based firm, and the Ugandan-based Simba companies and their proprietor Patrick Bitature, is a classic example of the above argument and how entrepreneurs and businesses operate in poor countries like Uganda.

There’s no dispute to the fact that Simba Properties Investment Company Limited and Patrick Bitature (as guarantor and promoter) borrowed $10 million from Vantage. The issue, however, is that the loan matured and fell due but no repayments were made.

When the case went before court, the Simba Group and Bitature allegedly claimed that Vantage’s Loan was invalid and signed under duress and, therefore, Simba did not have to repay it. Fred Muwema, counsel for Simba, was quoted saying: “You can sign under mistake, you can think it is okay, and later when you come to your lawyer, they tell you this is not allowed”. 

I am not a lawyer and I will not pretend to be one to interpret the legal facts in this dispute. But this is what I know: We live in an unequal world - if you’re poor with a good business idea, you cannot easily start a business, because you have no capital and banks to lend it to you. Instead, economic opportunities are confined to the privileged and the already wealthy.

I have no specific issues with Patrick Bitature. In fact, I respect him as one of Uganda’s most talented businessmen. But my plea is that there’s a need for creation of effective economic and political institutions that can ensure that business people, irrespective of their status, respect the rules of the game, the rule of law and ultimately, ensure that individuals are honest enough to honour their business obligations. There’s just no way somebody can borrow $10 million by mistake!

 Mr Mukalazi is the country director of Every Child Ministries Uganda | [email protected]