COMMENT: Why Bitature bailout is a sensible decision

It is risky for a country to depend on hydropower dams on a single river as the only source of power

COMMENT | PETER NYANZI | Recent media reports that Government is considering to bailout business Patrick Bitature by acquiring Electromaxx, his thermal power generation company based in Tororo District in eastern Uganda, have raised a number of eyebrows.

For some reasons, I think it is a sensible decision that deserves public support.

Firstly, it goes without saying that Vantage Capital accepted to provide the $10 million loan facility because Bitature did present a sound business case.

As we all know, international lenders are not like our local ‘loan sharks’ who simply give out money with their focus on the collateral and without any due diligence on the borrower.

Vantage Capital definitely considered Bitature’s credit worthiness, his business plans and the projected cash flows, and concluded that the Skyz Hotel project would indeed be a viable venture.

And indeed it still is and it would be a great shame if the five-star hotel is sold off cheaply. Skyz Hotel comprises four high-rise buildings atop Naguru Hill, with 141 hotel rooms including luxurious presidential suites.

It is franchised to Protea Hotels of South Africa, owned by Marriott International, the largest hotel chain in the world with a combined total of than 1.4 million rooms in 140 countries worldwide.

Within such a global ecosystem, Skyz Hotel was anticipated to be a cash cow and more so as the country was getting set for a multi-billion dollar oil production phase.

Over the last 15 years, a good number of investors – both local and foreign – have set up valuable investments in anticipation of oil Dollars.

However, almost all the investors in the various sectors including transport, real estate, construction, logistics, hospitality, among others have been counting big losses because Uganda’s first-oil timeline has been a moving target since 2007.

When the MoU between Government and oil companies was first signed in 2014, the investors were promised that ‘first oil’ would flow by 2019.

Five years later, there is no investor for the oil refinery, while the Final Investment Decision for the EACOP was only signed last year.

The new date for first oil has now been shifted to 2025!

To make matters even worse, the COVID-19 pandemic struck in early 2020, bringing the global economy and the international travel industry to a virtual standstill for a period of almost two years. Official reports show that because of the COVID-19 pandemic, global hotel occupancy fell to as low as 30%.

As a direct consequence, many global companies have sought and received bailouts from their respective Governments to save them from total collapse. For example, AIG, Exxon Mobil, Marriot, Boeing, Coca-Cola, etc, have been bailed out by the U.S. Federal Reserve with hundreds of billions of dollars.

In the UK, under an arrangement dubbed the ‘COVID Corporate Financing Facility,’ the government has already released more than 7.5 Billion Pounds to private companies such as Easyjet, Greggs and Redrow.

Secondly, Bitature’s Simba Group is a very important entity in Uganda’s economy. Over a period spanning 25 years, Bitature has invested heavily in a portfolio with interests in telecommunications and media, energy, agriculture, education, real estate, oil & gas, travel and hospitality.

For years, he has served on many high profile Boards including Umeme, Private Sector Foundation, Uganda Investment Authority, among others.

Thirdly, as an acclaimed and reputable local entrepreneur, Bitature is an inspirational icon whose story of rising from nothing and working his socks off to reach where he is, has inspired millions of people. Little wonder that he was identified for a high-level appointment as a diplomat for the Government of Australia.

His Simba Group of Companies directly employs more than 2,500 people and many thousands more indirectly. It would therefore be extremely detrimental to the national economy if the government allowed such a local investor to collapse.

Fourthly, the decision to nationalise Electromaxx, a 50MW thermal plant that uses Heavy Fuel Oil (HFO), is both feasible and sensible. HFO fuel is 30% cheaper than diesel. World-wide, electricity/energy is a national security issue.

Many people don’t know that it is extremely risky for a country to depend on hydropower dams on a single river as our only source of power.

Now, what happens should a major disaster befall Nalubale Dam or a terrible drought hits water levels in Lake Victoria and River Nile to render the downstream power dams non-functional?

Diversifying our energy mix by investing in a thermal plant would therefore be a strategic decision. Acquiring the thermal plant as a standby generator would therefore be akin to hitting two birds with one stone – getting a strategic asset while also bailing an important local investor out of a crisis.

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The writer is a journalist.