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Using his legal skills to tap into oil wellsPublish Date: Jan 31, 2014
Using his legal skills to tap into oil wells
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Elly Karuhanga is the man who has been fundamental in helping lay a foundation for our nascent oil and gas industry.
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Elly Karuhanga is a distinguished lawyer and entrepreneur locally and beyond our borders. He was also a politician. But not enough has been said about Karuhanga, the billionaire businessman who reigns in Kampala’s boardrooms as chairman and director in numerous blue-chip companies.

There is also Karuhanga the man who has been fundamental in helping lay a foundation for our nascent oil and gas industry. This Karuhanga is a far cry from the boy who grew up in Kyamuhunga near the tea estates of Bushenyi district. He tells MICHAEL KANAABI and SEBIDDE KIRYOWA how he has come this far.

Who is Elly Karuhanga?

Elly Karuhanga is a lawyer and businessman. A bornagain Christian, he is married to Stella Muhinda and they have five children.

Their first born, Eugene, is a lawyer with the United Nations in New York, while the second born, Eureka, is an information technology specialist. The couple’s third child, Ellison, is a lawyer. Their fourth child, Edmund, works as his father’s personal assistant, while the last born, Estella, recently enrolled for a master’s degree in business administration.

Background

Karuhanga was born in Kyamuhunga near the tea estates in Bushenyi district. His father was a great grandson of the last king of Igara Kingdom. Karuhanga hails from the ruling Baine Mafundo clan of the extinct kingdom.

Karuhanga had his early primary education at Kyamuhunga Primary School, two years of junior high school at Kinoni Primary School and proceeded to Mbarara High School for his secondary education.

Upon completion of his secondary education, Karuhanga joined National College of Business Studies (NCBS), Nakawa (present-day Makerere University Business School) between 1969 and 1970, graduating with a diploma in business studies.

While at NCBS, an opportunity came Karuhanga’s way in form of a classroom test for new students. The best performer would be rewarded with a paid internship at the local offi ce of American oil company Esso.

Karuhanga came top of his class. From then on, he had an open invitation to Esso Uganda’s offi ce whenever he was on holiday. At Esso, he had the chance to choose a different section to work in every term.

For the period he had his internship at the company, Karuhanga worked in various sections from sales, human resource, accounts to stores. Because of this, unlike his peers, he always had money.

Joining law school

In 1971, Karuhanga was admitted to Makerere University to study law. He later stood against Tumusiime Mutebile, now governor, Bank of Uganda, for the guild presidency seat. The guild elections were the only ones taking place in the country at the time, which made them of national importance. The candidates even debated live on national television.

“Since I was pro-cultural institutions, I was supported by mainly Buganda, John Sentamu (now Bishop of York) and the late Hon. Abu Mayanja, who even gave me his car to use during the campaigns,” Karuhanga recalls.

However, Mutebile won the elections. “He was supported by Rt. Hon. Amama Mbabazi and Hon. Ruhakana Rugunda,” Karuhanga says.


Elly Karuhanga (3rd-R, last row) with the current vice-president Edward Ssekandi (2nd-L, second row) and Chief Justice Benjamin Odoki (2nd-L, first row) at the Law Development Centre in the 1970s


The campaigns taught Karuhanga a lot about basic human nature.

“As we went about campaigning, I noticed that one of my strongest supporters could, for instance, cross to a rival camp and vice-versa without logical cause. As a result, I learnt to place myself above political conflict; there are no permanent friends or enemies in politics. This lesson would later help in parliament and business,” he says.

After Makerere, Karuhanga joined the Law Development Centre (LDC) for his bar course.

His classmates included Margaret Sekajja, the former chairperson of Uganda Human Rights Commission; vice-president Edward Ssekandi; foreign affairs minister Sam Kutesa; John Sentamu (now Bishop of York) and Peter Kabatsi, the former solicitor general of Uganda (1992-2002).

First job

Upon completion of the bar course, even before the results were released, Karuhanga was appointed to teach tax and business administration at LDC, thanks to his background in business studies.

Soon, Karuhanga was offered a scholarship to go and study a master’s degree in banking law in Belgium. However, the LDC administration could not allow him to leave because they could not find a replacement for him.

In protest, Karuhanga resigned from his job and went to work for a private law firm, Gaffa and Kilenge Advocates. Three months later, President Idi Amin decreed that all lawyers work for the government.

This was after Amin had been informed that the Ministry of Justice was understaffed. Karuhanga was ordered to report for duty at the Department of Civil Litigation and International Affairs.

A few months into his work, he was deployed to give legal consul to Uganda’s various embassies overseas. He travelled all over the world and had a stint in the US from 1975 to 1976.

Love and marriage

After he returned from the US, Karuhanga wed his fiancé, Stella Muhinda, on January 10, 1976 at the Sheraton Kampala Hotel.

“We were family friends and had planned to get married soon after university so that we could start a family early, but our plans did not work out,” Karuhanga recalls.

First business

In the late 1970s, Karuhanga decided to try his hand at business. He approached his friend, Prince Andrew Tendo, and they set up a company called Uricon Limited — the sole importer of Tiger Head battery cells. These cells were lucrative business because they were a key part of everyday life. The average person depended on their battery-powered radio sets for information.

Joining politics and moving to exile

With good money from his business, Karuhanga was enticed to join politics. In 1980, he became the chairman of Uganda Patriotic Movement in western region. He was a staunch supporter of Yoweri Museveni. During the 1980 parliamentary elections, Museveni contested against Sam Kutesa, the current foreign affairs minister, for the Nyabushozi County MP seat, but lost.

After the elections, Karuhanga’s home in Muyenga became one of the key residences in Kampala used to coordinate the launch of the National Resistance Army (NRA) attack on Kabamba and other logistics of the Museveni-led rebel group.

The government soon got wind of their activities and planned to raid Karuhanga’s home to arrest him. A friend, who worked in Obote’s government, tipped off Karuhanga and he fled.

The Ministry of Justice had sent Karuhanga to Brussels just before he got entangled with the NRA, so he used the documents to beat security to get to the airport. Karuhanga went to Lesotho, where he had been invited by his friend, Prince John Barigye, who worked with the United Nations in Lesotho. Barigye later became Ankole’s Crown Prince.

Life in exile

While in exile, Karuhanga had to survive on his business acumen. He started importing merchandise with his and Barigye’s wife, selling it to supermarkets in Lesotho through a company they had formed.

Karuhanga later got a spine injury while playing squash in Lesotho.

“While in hospital, I met a man called Letlakhu, who greeted me in Luganda. He said from the way I looked, I was most likely a Munyankore. I was shocked! As we talked, I discovered that this man had lived in Uganda for over 20 years and was a leader in the independent Mafekeng Province (now Mabato) of South Africa,” Karuhanga says.

Upon recovering, thanks to the new friendship with Letlakhu, Karuhanga landed a job as the deputy managing director of the state’s social security fund from 1982 to 1986. He took his family along with him.

Together with his team, Karuhanga grew this new fund. In the process, they built the largest estate in the area at the time, Sun City Hotel, Mafekeng Bus Park, a stadium, shopping malls and hundreds of houses, among other projects.

Karuhanga also started a football team called Mabato Social Security Fund Tigers, which made him popular in the football circles in the area.

Returning to Uganda

As soon as Museveni and the NRA took power in 1986, Karuhanga and his family together with a friend called John Nuwamanya drove to Kampala by road.

“We started two businesses with another friend, a one Dr. Kimbowa, who had been with us in exile in South Africa. The businesses were Eureka Medical Services and Eureka Motors.”

“I had convinced Dr. Kimbowa to return home so I worked with him until the businesses stabilised. Through Eureka Motors, we imported vehicles, while Eureka Medical Services dealt in medical supplies. When the businesses stabilised, I let Dr. Kimbowa run them so that I could embark on other ventures. However, I have retained a stake in these businesses to date. Eureka Medical Services is now called Mednet,” he narrates.

Back to politics

Karuhanga contested and won his first election to represent Nyabushozi County in the National Resistance Council (NRC) in 1988. The NRC was the Fifth Parliament of the Republic of Uganda.

In 1993, the NRC passed the Constituent Assembly (Statute) providing for elections to the Constituent Assembly (CA) to be organised and conducted by an Interim Electoral Commission (IEC) established by the same law in March 1994. The CA, among other things, was charged with formulating and structuring a draft Constitution that would form the basis for the country’s new national Constitution. Karuhanga was elected to the CA.

In accordance with the new Constitution, the IEC organised and conducted the first-ever direct presidential elections in the country on May 7, 1996. Museveni won. Soon after, the IEC conducted parliamentary elections, which ushered in the Sixth Parliament of Uganda. Karuhanga again contested for the Nyabushozi County seat and was elected to Parliament.

Joining private law practice

Two years after Karuhanga joined the NRC, he opened a law firm, Karuhanga and Co. Advocates, on Plot 3 Kintu Road in Kampala. Among his associates were Vivian Katamba, Vivian Kemigisha, Justice David Porter of the Justice Porter Commission, Justus Karuhanga now of Karuhanga Tabaro and Associates to mention but a few.

The firm grew fast, taking on clients such as Nile Breweries, the Madhvani family businesses, Celtel Uganda, Crane Bank, Tropical Bank (then Libyan Arab Uganda Bank), Bank of Baroda, Busitema Gold Mines Limited, Terra Firma Africa and Canmin Resources. Throughout the 1990s, partner with them. They sold us the idea of amalgamating with other law firms and creating an enormous one to boost the capacity and strength of the partnership. We accepted,” Karuhanga recalls.


Kampala Associated Advocates office in Kampala


The first person Karuhanga approached was Justice Bart Katureebe, then Attorney General, a longtime friend, who agreed to join him as a partner in the newly-formed Kampala Associated Advocates.

“I then approached Oscar Kambona, who ran a tax consultancy/bureau and he agreed to join us. Another partner, Sam Mayanja, who was acting managing director of Uganda Development Bank, but run his own firm, Sam Mayanja and Co. Advocates, also agreed to come on board,” Karuhanga says.

Because of the firm’s increasing influence and success, it attracted top-notch lawyers.

“In 2002, Peter Kabatsi retired from his job as solicitor general of Uganda and agreed to join us as well. Subsequently, retired principal judge Herbert Ntabgoba and the late Joseph Mulenga, then a retired Supreme Court judge, joined us. The former joined the team as a senior consultant majoring in intellectual Property in 2004,” Karuhanga says.

In 2006, Kampala Associated Advocates attracted Havard University PhD holder Charles Karimiya, who formerly worked as director of refugees at the United Nations.

“Soon, we recruited David Mpanga, who was then a partner and legal manager at audit firm PricewaterhouseCoopers,” Karuhanga says.

In 2007, Joseph Matsiko, who was the director of civil litigation in the Attorney General’s office, resigned and joined Kampala Associated Advocates.

“We have since been recruiting young lawyers who have won the Attorney General’s prize at Law Development Centre. We send them to Denton in London for training. Unfortunately, some of them leave,” Karuhanga says.

The firm now boasts of 30 lawyers and 20 support staff.

In 2010, Kampala Associated Advocates purchased multi-billion premises formerly occupied by the Kenyan High Commission on Plot 41, Nakasero Road, in Kampala.

Getting into the oil business

At Kampala Associated Advocates, some of Karuhanga’s clients included mining companies. In 2001, Karuhanga was introduced to the directors of Hardman Resources, an Australian oil exploration firm, by some of his clients. He started by offering them legal services and went on to acquire stakes in the company.

In 2006, he was named president of Hardman Resources, Uganda. A year later, the company sold its Ugandan interests to Tullow Oil, which retained Karuhanga as president. Karuhanga dived deeper into the oil business as he traversed the globe visiting various oil operations and establishments.

The one thing Karuhanga has learnt from his time in the oil business is the fact that capital goes where it grows.

“In case of political interference or other hindrances, oil investors move to the next country where conditions are favourable. That is why governments and other stakeholders have to be careful when dealing with these investors,” he warns.

Taking over Kampala’s boardrooms and other businesses

Using his networks, leadership skills and money from his trade, Karuhanga has built his influence and consolidated his position in Kampala’s boardrooms, joining an elite group, which decides the fate of most big businesses and multinationals in town. The group includes Dr. Martin Aliker, tycoon Charles Mbire and Dr. William Kalema.

Karuhanga has been a director in the Madhvani Group of Companies’ tourism division Marasa for over 10 years. He is also a director and majority individual shareholder in dfcu Bank. Karuhanga has been the chairman of the bank’s parent company, Dfcu Limited, since 2006.

Karuhanga is also the chairman of Nile Breweries and its water bottling business, Rwenzori Bottling Company and has been a director there since 2006. He is also the chairman of tobacco giant British American Tobacco Uganda Limited.

Karuhanga is also a shareholder and director in ATM payment solutions company InterSwitch, formerly Bankom Uganda Limited. He holds a number of directorships in local mining companies and is a shareholder in some.

On top of that, he is the chairman of the influential Uganda Chamber of Mines and Petroleum, a business association and lobbyist group that brings together companies in the mining, oil and gas industry. It boasts over 150 member companies, having started out with 10 members.

Becoming consul of Seychelles

In 2006, the president of Seychelles, James Mitchel, appointed Karuhanga consul of the Republic of Seychelles in Uganda. Through this appointment, the relations of Uganda and Seychelles have been strengthened. A number of Ugandans have been appointed justices in Seychelles, including chief justice Egonda Ntende and Justice Duncan Gaswaga.


Elly Karuhanga is the consul of the Republic of Seychelles to Uganda


LEGAL WOES

“At times, clients do not want to pay after have one has rendered them services,” Karuhanga says.

While starting out in his first firm, Karuhanga and Co Advocates, business was hard to come by because people had taken the law into their hands and would settle scores by fighting each other. This has, however, since changed as the economy gets more sophisticated and the demand for professionals increases.

WHAT MAKES KARUHANGA TICK?

In the legal business, Karuhanga says reputation is key; alongside it comes seniority, respect and trust, all of which he has earned from a legal career that spans almost 40 years. This has opened many more doors for him in business.

Karuhanga says everything he does comes down to saving the client money.

“In law, you must put yourself in the other person’s shoes; feel their pain then detach yourself from it and think through the situation critically. This is necessary to give them the best professional advice and service. That is what I always do for my clients,” Karuhanga says.

Law is a 24-hour job. One always has to be ready to serve clients. This round-the-clock availability and readiness to work is what has helped Karuhanga grow his practice and other businesses.

Karuhanga also says he hires the best assistants and associates, only considering those who have a minimum of upper second degrees.

To ensure the highest possible standards of merit and integrity, Karuhanga does not employ relatives.

CHALLENGES IN OIL

Karuhanga says the biggest challenge in the oil industry is that it requires a lot of money to start it yet the returns are not immediate.

“Besides, the risk of not getting back that money is high. Chances of getting oil are only 10 out of every 100 wells you sink yet it takes millions to sink only one exploration well. If it is deep in the sea, you need $200m to sink one well. If you land on the oil, you will get back all the 90% you lost,” Karuhanga says.

But the risk is not only failure to find the oil.

“You might actually find it, but when it is located in an area that is too remote for oil to be a profitable venture,” he says.

Karuhanga says oil may also not be in enough quantities to make it worth the investment. In other cases, the oil is too deep in the ground to be reached.

He adds that the oil may be located in a politically hostile place as the case is in South Sudan and the Republic of Sudan border.

Political interference in oil licensing negotiations, environmental impact assessments, revenue sharing also make the oil business rather challenging.

Sometimes, especially in small economies like ours, banks do not have enough money to finance the exploration and production of oil.

People tend to have high expectations when a country finds oil. Local leaders demand a lion’s share without understanding the dynamics of the business, making the oil company feel like it is not worth the bargain.

Karuhanga believes with more government intervention in terms of improving infrastructure and giving mining companies concessions plus incentives, the oil industry in Uganda is headed for greater heights.

DIAMOND TIPS

  • When starting out in business, entrepreneurs should expect and plan for losses. Losses are inevitable because when one is starting out, one is inexperienced, one has not yet built trust, no one knows and believes in the quality of one’s products. One also lacks loyal customers. However, all these challenges wane with time as costs reduce.
  • Ensure you do proper feasibility studies and consultations before venturing into a business. Do not depend on instinct to start a business. It can become stressful as you will start to borrow money to keep the business afloat.
  • About 70% of people who venture into businesses fail because they do not value mentorship. People fear sharing their ideas with others who could be of help.
  • Persist. Find a niche and hang in there. If the venture is not working out, try another. Do not quit until you break through.
  • To do business, you have to have an extra level of determination, tenacity and resilience coupled with hard work.
  • Do not shun honest work. Many people have neglected farming because they consider it demeaning to work in the village yet there is a lot of money in farming.

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