UGANDA, Kampala | Real Muloodi News | There has been a media war raging between Mutoni Construction Ltd and Prof Mathias Magoola, Director of the Dei Group, over the construction of a pharmaceutical plant at Matugga on Bombo Road, in the outskirts of Kampala. Each is laying the blame with the other over the failure to deliver the plant.
Prof Mathias Magoola, a Ugandan biochemist, in the early days of the pandemic announced to the world that Uganda had discovered a treatment for Coronavirus.
Prof Magoola’s company, Dei Natural Products (U) Ltd, operating out of the Matugga Industrial Park, was meant to manufacture the COVID 19 treatment medication and needed to construct a massive complex to assist the manufacture and storing of the resulting pharmaceutical goods.
Dei tendered the construction project, and Mutoni Construction (U) Limited was awarded the contract to build phase 1 of the pharmaceutical complex for USh 9.6 billion, without VAT.
However, on October 14, 2021, Mutoni filed a complaint at Police’s Criminal Investigations Directorate (CID), claiming that Magoola and his company has failed to pay them USh 4 billion, money owed for their work constructing the multibillion shilling pharmaceutical utility.
Whereas Dei accuses Mutoni of breaching the terms of their contract, and of demanding money for work not done. According to Dei, it paid Mutoni the required money, but the latter failed to complete the construction of the production plant, and has instead resorted to underhanded methods to extort additional money for work not completed, including dragging them to the Police with false allegations that they were not paid.
“The contractor has resorted to using politicians and security agents to intimidate us to pay for work not done,” Magoola stated in a rebuttal to Mutoni’s payment allegations.
Magoola added: “Mutoni should stop using underhand methods and fulfill the contractual obligations”.
Background, According to Dei Natural Products (U) Ltd
On 27th September 2019, Dei and Mutoni signed the contract for phase 1 of the construction of the of the Pharmaceutical Production Building, at a cost of USh 9.6 billion, to include both labour and construction materials.
According to the terms of the contract, Mutoni was to complete the construction of the building within four (4) months of taking possession of the site. The deadline was therefore 20th February 2020 to hand over the completed building.
But Mutoni was later unable to meet the deadline and requested for an extension.
In an effort to hasten the project, the terms of the contract were reviewed.
Dei’s defence reads, in part, “However, Mutoni was unable to supply the materials and in order to avoid delays, it was mutually agreed by both Dei and Mutoni that the supply of materials be removed from Mutoni and Mutoni only remained with labour contract. Any person familiar with construction will know that the biggest component of construction is materials, and labour only constitutes about 20%. Yet Dei has so far paid Mutoni over USh 6 billion.”
According to Prof Magoola, Dei pressured Mutoni to speed up the project, but the construction company’s promises “were always empty and not complied with.”
Therefore, Dei was contemplating procuring a different company to complete the work. However, Mutoni gave full assurances to Dei that once payment of USh 500 million was advanced, the project would be completed without necessity of further funds.
“On this undertaking and since Dei was desperate to have the building completed and availed; Dei agreed to the payment and parties agreed in principle that then it was not necessary to appoint a successor project manager. The USh 500 million was paid, but Mutoni did not do any work and indeed did not complete the construction as promised,” the pharmaceutical company claims.
Dei says that in response to its complaints about Mutoni’s failure to complete the building as promised, Mutoni shockingly came up with the “manipulated and false claim of over USh 4 billion.”
“Mutoni’s inflated and false claim was naturally rejected by Dei and Dei suggested that an independent entity be engaged to evaluate the project for mutual settlement be engaged, but Mutoni aware of its schemes rejected the proposal and even threatened sinister schemes to tarnish the image of the project,” says Dei.
Dei accuses Mutoni of misrepresenting their ability to complete the project in four months as a ploy to win the tender.
“Mutoni Construction (U) Ltd misrepresented this time line in order to win the contract! They have instead spent over two years and still failed to deliver the project on top of being paid almost USh 6b,” says Dei.
Dei says efforts to resolve the matter before arbitration have been frustrated by Mutoni who rejected court arbitration and instead appealed to the police and the President to resolve the matter.
“That contract did not involve the president of Uganda or the vice president of Kenya, who Mutoni is unfairly bringing into the conflict in order to malign Dei. Mutoni as contractor should know, that it is normal the world over for a dispute to arise in contracts and that is why dispute resolution mechanisms are embedded in contracts, and contractors ought to follow these mechanism and not run to political heads or institutions who have nothing to do with the contracts in the first place,” Dei said in an official statement.
“Mutoni needs to respect the commercial justice mechanisms in this country, and having gone to arbitration, Mutoni should have pursued the arbitration and to respect the process and the decision thereof, rather than resort to maligning Dei in the press,” Dei’s defence reads in part.
Police have since asked Mutoni to petition a civil court for remedy.
Background, According to Mutoni Construction (U) Ltd
Mutoni Construction Uganda Limited was formed in 2007, in a partnership between a group of South African investors led by Dunbar Iain Russell, and locals in Uganda led by one Hakim Semuwemba.
The company evolved from providing turnkey telecoms services to being a full-service construction firm, establishing itself as a market leader in the civil works industry. Warehouses, grain silos, highways, communications projects, earthwork, power plants, real estate development, and civil works are all part of its portfolio.
However, according to an article published in Red Pepper on December 30th, 14 years later, Mutoni Construction is struggling financially. Their deal with Dei is set to push them over the edge, with several debtors are demanding money from the company.
Through their attorneys at Kyagaba & Otatiina Advocates, Mutoni lists over ten bills totaling USh 4 billion that Prof Magoola has reportedly refused to pay, which comprises money for work done on the site, the associated VAT duties of USh819m, plus interest.
They’re also blaming Prof Magoola’s Dei Natural Products Company Ltd for neglecting to pay for the services of SYL Architects Ltd, the project manager and consultant who was meant to verify their payment invoices and complete work certificates regularly and make the necessary payments.
The contractor brought the issues of failure to pay to the employer’s notice (Dei Ltd) multiple times, but Prof Magoola reportedly turned a deaf ear.
Due to Mutoni Construction Ltd’s inability to get fast payments from Prof Magoola, the South African partners fled, leaving Ugandan director Hakim Semuwemba alone to deal with creditors from whom materials like cement and steel had previously been bought on credit.
South Africans sought to meet with President Zuma before departing the country due to mounting debts and legal threats. They pleaded with him to crack down on Prof Magoola.
They also filed a complaint with the State House Anti-Corruption Unit, hoping that Col Edith Nakalema would approach President Museveni, and requesting that Prof Magoola be prosecuted, but to no avail. Officials informed them that the Unit was overburdened with previous cases and complaints.
An effort was also made to inspire local businesspeople in the Matugga area to riot and cause a disturbance at the Matugga Industrial Park. The riot was thwarted when the military was dispatched to safeguard Dei’s business premises. To this day, the troops have never left the premises.
When faced with demands from Prof Magoola, who insisted on delivering the job within a specific time frame, Hakim Semuwemba reportedly resorted to obtaining credit from individual business people, mainly in the Nateete region to keep the building project afloat.
Mutoni borrowed USh600 million from Zaidi Nsubuga, the Nateete-based manufacturer of the Family Bread trademark. Nsubuga’s funds were used to buy cement and iron bars for the Matugga project hoping that Semuwemba would get payment from Prof Magoola and pay up. This never happened, leaving Semuwemba even more vulnerable.
Other vendors that have taken Mutoni Construction to court include EDTUK Ltd and Governance Systems Ltd. Another $190,000 loan was contracted to help purchase a specific roof from Kenya, which was utilised to finish Prof Magoola’s building in Matugga.
Semuwemba was reportedly chased from the site after the roofing project was done instead of being paid what was owed to him. The military was sent in to evict him from the property, and this was when he owed money on employee bills (for 400 workers) and office rent in Naguru (Plot 9 Kimera Close).
Mutoni Construction Ltd, has since relocated from upscale Naguru to the less affluent Kireka Kamuli Road area of Wakiso district.
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