Samuel Mukasa, who is renowned as Uganda’s leading and affluent figure in the poultry industry, faces the impending loss of his multimillion-dollar company assets due to a bank loan. His company, which operates hatcheries and sells chicks across East Africa, once held a dominant 65% share of Uganda’s poultry market prior to the COVID-19 pandemic.
The pandemic outbreak resulted in the company experiencing significant losses, including its market share, suppliers, and workforce. Details regarding the bank loan in question are currently unclear. Nevertheless, the legal representatives of the lenders, Tumusiime, Kabega & Co. Advocates, have now publicly announced the intention to auction Biinzika’s properties by October 12, 2023.
In their announcement, the lawyers stated: “Duly instructed by our client, the registered mortgagee, a financial institution, we hereby provide notice of our intention to sell the land and associated developments described below to recover the outstanding mortgage amounts, unless the debtor (Biyinzika) settles the mortgage arrears, along with associated fees and recovery costs, prior to the sale date (30 days from now).”
The properties advertised for sale encompass Dina Apartments in Ntinda, Kampala; 41 acres of land in Kasambya, featuring hatcheries with a capacity of 460,000 birds per week; and 100 acres of land in Bulemeezi.
Due to the adverse economic consequences of the COVID-19 pandemic, many indigenous Ugandan companies and businesses are on the brink of losing, or have already lost, tangible assets they had used as collateral for obtaining bank loans. These companies are now reportedly seeking government bailouts to stabilize their financial structures.
Numerous factors, including high commercial bank interest rates, the government’s delayed payments to suppliers, political instability in key regional export markets such as South Sudan, and a weakened economy, have been cited as reasons for the poor performance of these companies.
Members of the Biyinizika family have been quoted in the media requesting government assistance, as their company was a significant employer and a source of foreign exchange through poultry exports to the region.
Some of the companies that have received government bailouts recently include Atiak Sugar and Roko Construction Company, among others. Experts argue that government bailouts should be limited to companies that make substantial contributions to the national treasury through taxes and employment generation.
Moreover, these companies should undergo thorough audits to determine the causes of their business failures and assess their ability to repay the bailout funds. Research indicates that firms tend to recover more successfully from non-governmental bailouts, partly because governments do not monitor them as closely as major shareholders and banks.
Furthermore, governments may provide bailouts to maintain employment or sustain the economy, irrespective of a firm’s performance, and they may prioritize firms with government connections. Finance experts recommend struggling companies explore options like raising capital from the financial markets.
One significant advantage of financing through public share offerings is that the company is not obligated to repay shareholders at a later date, unlike bank loans that involve monthly interest payments and principal repayment upon maturity. This relieves the company’s cash flow constraints, as the equity finance raised can be used to address pressing debts and provide much-needed cash flow for business operations.
