UGANDA, Kampala | Real Muloodi News | President Museveni has temporarily stopped the auction of the Pearl of Africa Hotel, formerly known as Aya Hotel, which is indebted to the Industrial Development Corporation (IDC) of South Africa. The hotel owes USh647 billion to the South African lender.
In a letter dated May 1 to the IDC, President Museveni emphasised the necessity to halt the auction, allowing time for a meeting to resolve the issue.
“I have been approached by Mohammed of Aya Investment (U) Ltd Group regarding the imminent sale of his hotel due to his indebtedness to Industrial Development Corporation, South Africa. I have been informed that the sale has been sanctioned by the court having decided several cases in your favour,” Museveni stated in his letter.
He added, “However, given that Pearl of Africa Hotel is a strategic investment that was supported by the government through land allocation and other benefits, the government wishes to intervene so that the debt is paid instead of auctioning the hotel. I’m, therefore, directing that the auctioneer halts the sale of the hotel pending my meeting with you. By copy of this letter, I am directing my principal private secretary to organise the meeting this month.”
As of the evening of 13th June 2024, it was unclear whether the meeting between President Museveni and the IDC had occurred.
In an interview, Mr Timothy Kanyerenzi Masembe, the managing partner of MMAKS Advocates, the law firm representing the South African company, confirmed the authenticity of the letter but refrained from commenting further due to client-advocate confidentiality.
Aya Investments was slated for auction in April, with the auction date set for May 3. Armstrong Limited, the appointed bailiffs, was prepared to auction the 23-floor hotel on behalf of the lender and law firms M/S MMAKS Advocates and ENSafrica.
The debt against Aya Investment had grown to USh647 billion from an initial borrowing of about USh316 billion.
Background
From August 13, 2007, to April 21, 2017, Aya Investments (U) Limited and the IDC of South Africa entered multiple Financial Credit Agreements to fund the development of the Pearl of Africa Hotel on Nakasero Hill in Kampala.
The aggregate principal amount disbursed over 20 instances under six Financial Credit Agreements totalled $81,765,318 (USh305.6 billion).
A rift developed between Aya Investments and the South African lender due to the former’s failure to adhere to the terms of the Financial Credit Agreements. This led to several legal battles, ultimately resulting in the hotel being put up for auction.
The Pearl of Africa Hotel project was financed through a series of loans from the IDC of South Africa. These loans were intended to support the construction and development of the hotel, which is considered a strategic investment by the Ugandan government. The total amount borrowed across multiple agreements amounted to approximately $81.77 million (USh305.6 billion).
Aya Investments struggled to meet the repayment terms outlined in the Financial Credit Agreements, leading to a significant increase in the debt.
Over time, the debt ballooned to USh647 billion, more than double the initial borrowing amount. This substantial debt accumulation ultimately led to legal battles and the scheduled auction.
Legal Proceedings and Auction Plans
The ongoing disputes between Aya Investments and the IDC of South Africa resulted in several court cases. These legal battles culminated in the court’s decision to sanction the auction of the Pearl of Africa Hotel.
The auction was set for May 3, with Armstrong Limited appointed as the bailiffs to carry out the auction on behalf of the lender and the law firms representing the IDC.
The planned auction involved the sale of the 23-floor hotel, a significant asset in Kampala’s hospitality sector. The auction was intended to recover the outstanding debt owed by Aya Investments to the IDC.
The IDC and its representatives have not publicly responded to President Museveni’s request to halt the auction. The IDC’s position on the matter and its willingness to engage in discussions with the Ugandan government remain undisclosed.
The Pearl of Africa Hotel, formerly Aya Hotel, is a significant landmark in Kampala’s hospitality industry. The hotel, located on Nakasero Hill, is a key investment supported by the Ugandan government.
Preventing the auction and resolving the debt through government intervention would allow the hotel to continue operations under Aya Investments. This would maintain the hotel’s strategic importance and prevent disruption to its services and employment.
However, if the auction proceeds, the hotel’s ownership and management could change, potentially affecting its operations and strategic position in the hospitality sector.
The resolution of this issue is crucial for the hotel’s future and the interests of all parties involved.
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