Secrets of Sh15bn loan row pitting Ruto, Equity Bank and Uganda firm

The Saturday Nation this week pieced together the secrets of the Sh15 billion controversy pitting the Deputy President, Equity Bank and Dei Pharmaceuticals. It discovered a trail of dealings between Nairobi and Kampala and, interestingly, the nurturing of a bosom-buddy relationship between Dr Ruto and Mr Museveni.

The discovery also came hot on the heels of a widely reported incident at Wilson Airport in Nairobi, where Dr Ruto was denied permission to travel to Kampala. Part of the reason he was prevented from boarding his chartered plane on Monday was that he had taken part in a presidential function that had not been sanctioned by his boss, President Uhuru Kenyatta, during his visit last month, security sources intimated to the Nation.

But it is the controversy surrounding the Sh15 billion loan to Dei Pharmaceuticals that could reveal much more about the Deputy President’s travels to Uganda, as well as expose the connection between political leadership and big money deals.

On Wednesday this week, Dr Ruto said he had been invited to Kampala last month, where he was the chief guest of a ground-breaking ceremony for a vaccine manufacturing plant, because he assisted the investor get a loan from Equity Bank.

The visit, which took place on July 6, and which culminated in talks between President Museveni and Dr Ruto, began with a trip to Dei Pharmaceuticals in Matuga, 16 kilometres north of Kampala. While there, the two leaders set in motion the construction of what would be Uganda’s first local vaccine manufacturing plant.

“The investor of that factory came to this office and sat on the same seat where you are seated two years ago and asked if I could connect them with Equity Bank,” DP Ruto told Inooro FM on Wednesday. “I picked the phone, called Equity and told them: ‘There is an East African investor in my office. You have a branch in Uganda. Can you help him set up the business he wants?’ The businessman got $150 million (Sh15 billion) and used it to set up a factory.”

Equity Bank had not responded to our questions regarding this loan by last evening. Among the clarifications we sought from the bank was the monetary value of its partnership with Dei, whether that partnership was still active, the amount of money the bank has already loaned Dei, and whether indeed that partnership had been brokered by the Deputy President. The Nation will publish the bank’s response once it gets it.

The bank’s annual statements for the 2019 financial year show that it had indeed funded Dei, but it does not indicate by how much. The report notes that the funding was part of its efforts to assist companies in the jurisdictions it operates in to come up with homegrown solutions to fight the Covid-19 pandemic.

“The group is working with its customers to expand their opportunities in the health sector by financing them to manufacture health requirements such as face masks and Personal Protective Equipment (PPEs), preferably locally, while helping to create regional supply chains,” said the bank in its report.

“In Uganda, Equity Bank has partnered with Dei Group Ltd, a pharmaceutical company, to finance its expansion of a pharmaceutical, biotech and research plant to scale their capacity to manufacture and deliver critical and effective drug solutions, and to achieve their goal of becoming the largest drug manufacturing plant,” said the bank.

The pharmaceuticals business is one of the seven sectors that the Dei Group, a conglomerate of companies that is one of the biggest manufacturers in Uganda, has invested in. The company also produces agricultural chemicals, food, beauty products, technology, and is also active in the mining sector.

Started in 2006, the Dei Group, under businessman Nathan Magoola, has flourished into one of the biggest companies in Uganda, with interests in almost every sector. The company enjoys a good relationship with the Ugandan government.

Mr Magoola is described on his company’s website as a “professional chemist with over 15 years of experience working with key areas of expertise in the mining sector and medical research”. But his quest to be the first person to manufacture a Covid-19 vaccine on Ugandan soil almost collapsed after Dei Pharma’s accounts were frozen days before the groundbreaking ceremony for its vaccine factory in 2020.

The freezing of the company’s accounts by Uganda’s Financial Intelligence Authority (FIA) was made public by President Museveni during his State of the Nation Address on June 4. Formed in 2014, the FIA is to Uganda what the Financial Reporting Centre (FRC) is to Kenya. Its job is to combat money laundering and terrorism financing.

“Magoola and Dr Kyakulaga, now supported by some African banks such as Equity Bank of Kenya, are creating a world-class pharmaceutical group known as Dei Pharma that will make all the medicine the country needs, and even export some,” said President Museveni in his State of the Nation address last year.

“Incredibly, three days ago, a group answering to the description of the so-called Financial Intelligence Authority had closed their bank accounts claiming that they did not know where their money was coming from and what it was doing,” said the Ugandan President.

A day before reading the riot act to FIA, President Museveni had visited Dei Pharma Industries where he laid down a foundation stone for a laboratory named after him. Equity Bank Uganda posted the visit on its Facebook page. It said the “state-of-the-art laboratory, which will be used in pharmaceutical quality control, biotech research and drug discovery in Uganda, will be run by Ugandans and is supported by Equity Bank”.

In parliament the next day, President Museveni threatened to deal with those in-charge of FIA for freezing Dei’s accounts.

“Why couldn’t Financial Intelligence check what these people were doing on the ground? How could they fail to know that the money was coming from Equity and other banks?” he asked. “I am going to get to the bottom of these treacheries by all these elements that have been fighting our revolution.”

In 2020, Mr Magoola sparked controversy after former Ugandan Parliament Speaker Rebecca Kadaga claimed his company had created a cure for the coronavirus.

Before then, Mr Magoola had been arrested in 2013 in India, alongside Minister Isaac Musumba and MP Michael Mawanda, on allegations of trying to extort $20 million (Sh2 billion) from Indian mining company Videocon.

The genesis of the saga was in Kisoro, western Uganda, where Magoola and Musumba had acquired 600 acres of land containing wolfram in September 2006. Wolfram is a rare mineral used in the manufacture of plane engines and bombs. Dei Minerals International was given a licence to mine the mineral a few weeks after applying for it. It then sold 60 per cent majority shareholding to Videocon Natural Resources PLC, according to Ugandan publication The Observer.

After selling majority stake in Dei Minerals International, Magoola is said to have applied for another licence under the trade name Dei Minerals. This action immediately put him on a collision course with Videocon.

Although the case was eventually thrown out by the Indian Supreme Court, the mineral drama gave Mr Magoola enough publicity to launch him into the deep end of the business world, eventually transforming him into a tycoon.

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