Basajja should repay this time
Mar 13, 2006
BIG businessman Hassan Basajjabalaba is being sued by Uganda Development Bank for non-payment of a US $ 3,000,000 loan dating back to 2002. He borrowed the money to buy hides and skins for export.
BIG businessman Hassan Basajjabalaba is being sued by Uganda Development Bank for non-payment of a US $ 3,000,000 loan dating back to 2002. He borrowed the money to buy hides and skins for export. It was secured by a property at 24 William Street which UDB claims was given an inflated value of 11.5 billion shillings.
This should be a routine commercial court case. A company borrows money and fails to pay. The bank seeks recovery of its funds. It happens every day.
However in 2003 Basajjabalaba ran into financial difficulties and was bailed out by the state. His liabilities with commercial banks were an estimated 25 million dollars. Government arranged a debt restructuring through the Bank of Uganda and assumed responsibility for around half Basajjabalaba’s debt while the commercial banks kept the rest. The bail-out probably cost Uganda $12 million.
Basajjabalaba blamed his troubles on the falling world price of hides and skins. But there was also speculation that he had over-expanded too rapidly and that his expensive investments in property, hotels and Kampala International University were not properly paying their way.
Now he is in court again over a loan that appears to relate to the original problem of hides and skins exports. It is not clear why this loan was not bundled into the original restructuring exercise but $3 million is a lot of money.
Government should not bail out individual businessmen. It is not fair. The businessmen who get support tend to be those who are politically well connected rather than those who are special cases.
If government wants to subsidise companies, it should do so on a sectoral basis to benefit all eligible companies equally. Subsidies would then be for strategic national interest rather than for individual benefit.
This time Basajjabalaba should repay the loan and not the government. If necessary, he should sell some of his many assets.
Ends
This should be a routine commercial court case. A company borrows money and fails to pay. The bank seeks recovery of its funds. It happens every day.
However in 2003 Basajjabalaba ran into financial difficulties and was bailed out by the state. His liabilities with commercial banks were an estimated 25 million dollars. Government arranged a debt restructuring through the Bank of Uganda and assumed responsibility for around half Basajjabalaba’s debt while the commercial banks kept the rest. The bail-out probably cost Uganda $12 million.
Basajjabalaba blamed his troubles on the falling world price of hides and skins. But there was also speculation that he had over-expanded too rapidly and that his expensive investments in property, hotels and Kampala International University were not properly paying their way.
Now he is in court again over a loan that appears to relate to the original problem of hides and skins exports. It is not clear why this loan was not bundled into the original restructuring exercise but $3 million is a lot of money.
Government should not bail out individual businessmen. It is not fair. The businessmen who get support tend to be those who are politically well connected rather than those who are special cases.
If government wants to subsidise companies, it should do so on a sectoral basis to benefit all eligible companies equally. Subsidies would then be for strategic national interest rather than for individual benefit.
This time Basajjabalaba should repay the loan and not the government. If necessary, he should sell some of his many assets.
Ends