MPs question government’s planned investment in Atiak Sugar factory
Government intends to invest Shs 20bn in businesswoman Amina Moghe Hersi’s sugar factory in Atiak, Amuru district.
The sugar factory, Atiak sugar factory Ltd, a $50m (Shs 180bn) investment is currently registered a subsidiary of Horyal investment holding company Ltd with 100% ownership of the Ugandan businesswoman of Somali descent.
But given the financial hardships the company is facing, government intends to enter into a joint venture with Hersi and acquire a 10% stake in the sugar factory.
Trade and Cooperatives Minister Amelia Kyambadde on Wednesday appeared before the Budget committee of Parliament to defend a loan request for the investment.
According to Kyambadde, the Shs 20bn will give government 2 ,020,000 shares in the sugar factory.
This investment, Kyambadde told the MPs was agreed between Horyal investment holding company Ltd and government during a meeting President Yoweri Museveni chaired on July 6, 2017 for government to acquire equity in the company worth $5.2m.
The payback period for the loan is expected to mature in seven years.
However, committee members argued that government used bad negotiators since it would acquired more than 10% shareholding with the Shs 20bn since the company is financially distressed with heavy debts with a number of financial institutions.
Ntenjeru North MP Amos Lugolobi said that the government contribution was heavily undervalued, reasoning that the amount with which government is buying shares in a financially distressed company could have been used to buy shares in a company that is already making profit.
With only 10% shares, Lugoloobi argued, government will not influence the management of this business.
“This venture was based on the evidence that this company secured expensive short term credit from the collapsed Crane Bank to set up this factory with high interest charges, and, if it fails to pay, it will attract interest charges at 36%. This decision rendered the project expensive and not viable since the cost of investment is too high,” Lugolobi said.
Committee members asked government to first audit the financial capacity of the company over the last three years before the investment is done.
Kyambadde however told the committee that the required funds should be approved as government moves on to renegotiate the agreement.
The sugar factory is expected to employ over 3,000 Ugandans while its by-products are expected to produce 6MW of electricity in the first phase.