Covid vaccine factory runs out of cash 

Cash strapped Dei BioPharma Ltd., a multi-billion-dollar pharmaceutical drug and mRNA vaccine manufacturing facility, is under threat of auction two years after Kenyan President Dr. William Ruto and President Yoweri Museveni commissioned its construction in June 2020 in Matugga in the central district of Wakiso.

The facility, owned by biochemist Mathias Magoola and funded by Equity Bank Ltd., positioned itself on the cutting edge of producing affordable, high-quality medicines for cancer and malaria treatment. The facility is projected to produce one billion doses of mRNA vaccines upon completion.

The Observer has learnt that Equity Bank Ltd., provided US $100 million (Shs 368.7 billion) in funding for construction, the importation of hi-tech medical equipment and machines, as well as working capital support. Uganda Development Bank contributed US$20 million (Shs 73.7 billion) and Tropical Bank contributed US$ 2 million (Shs 7.3 billion) in loans.

The Observer has learnt that Magoola is choking on the loans. Last month, through Kaweesi and Partners Advocates, Tropical Bank published a notice to auction some of Magoola’s properties in Matugga to recover its money. The properties include Kyadondo Block 82, Plot 1081, and Plot 1082—about 51 acres of land—and another 9.5 acres located near the Dei Pharmaceutical facility.

This paper has established that Equity Bank is under pressure to put Magoola’s property up for sale. Magoola owns several companies, including Dei Industries, which deals in maize and wheat milling and processing: Dei BioPharma Ltd.; Dei Natural Products; and others.

Magoola signed an off-take agreement with the government to supply drugs for more than 10 years. Under the agreement, the government will save billions spent on the importation of drugs.

Magoola’s financial distress

We have learnt that Magoola applied for a loan of $60 million (Shs 221 billion) from Equity Bank to boost Dei Industries. At that time, Magoola was setting up a pharmaceutical manufacturing facility. When COVID-19 broke out in 2020, Magoola’s partners convinced him to ditch the original plan and switch to vaccine manufacturing.

According to a source, Magoola applied for another loan worth $60 million (Shs 221 billion) from Equity Bank under Dei BioPharma Ltd., to manufacture COVID-19 vaccines because he lacked capital. He also invested Dei Industries’ initial working capital in Dei BioPharma Ltd. That was the genesis of his financial problems.

Dei Industries later defaulted on the loan repayment. This prompted the Bank of Uganda (BoU) to ask Equity Bank to recall the two loans. BoU insisted the client would not be able to service the loans.

“Equity Bank explained to BoU that their client will repay all two loans once he begins manufacturing and selling drugs and vaccines, which the bank regulator refused to do. BOU is right about the loans, but it is at the same time under pressure from importers of these drugs…,” the source said.

The Observer established that officials from the Bank of Uganda, Equity Bank, and other institutions met President Yoweri Museveni in Vietnam over Magoola’s loans. The president insisted in the meeting that the factory should not be sold or auctioned because it will save the region the burden of importing foreign drugs. The president advised that Magoola should be given more money to finish the factory.

“Don’t worry about the factory because Magoola staked land near the factory and Dei Industries’ milling machines as security,” the source said.

The source said the ministry of Finance, and State House are considering acquiring shares in Dei Biopharm Ltd., to save the multibillion-dollar venture.

“Magoola is looking for potential investors to buy shares from the company, be it 50% or less, to complete the facility. He has invested billions of shillings in the manufacturing of COVID-19 vaccines but is stuck because he has no money,” the source said.

The source said the CEO of Equity Bank, James Mwangi, has flown to Uganda several times to inspect the facility and is willing to offer more money, but BoU insists the borrower will not be able to service the loan. Recently, Magoola’s company, Dei Minerals, was struggling to pay $72,437,850 (Shs 268 billion) in legal fees to former Urban Development minister and Kampala lawyer Isaac Musumba.

The money is 30 per cent of the decretal sum of $211,459,500 that Magoola and his company, Dei Minerals International, earned from VIDEOCON INDUSTRIES LTD, a UK-India-based firm, for breach of contract, when VIDEOCON refused to return DEI’s mining licenses. DEI lost the licenses, the mines, and all the income they would have earned from them.

Magoala’s fight with Mutoni Construction

In January 2022, Magoola was embroiled in a Shs 4 billion arbitration battle with Mutoni Construction (U) Limited, a South African company, contracted to build a pharmaceutical manufacturing warehouse at Kigogwa, Matugga.

Represented by Hakim Semuwemba, Mutoni Construction (U) Limited claimed construction work started in September 2019, and in May 2020, Magoola hosted President Museveni and former Speaker of Parliament Rebecca Kadaga at the site.

Magoola explained that Mutoni Construction continues (with credit for supplies of materials and equipment) to build and finish the project. He said that his financial backers would find it easier to bring forth more money for the project after it takes on an almost complete shape.

The construction company completed the structure, but when its officials presented the bill for more than Shs 4 billion, Magoola said he did not have money.

“After 2-3 months of back and forth, Magoola got his loan in the millions of dollars from Equity Bank. He quickly somersaulted on Mutoni, saying that he did not owe any money to us. He arranged for soldiers to guard the site and keep us out, plus other unpaid suppliers. He stopped answering our phone calls, emails, and other messages,” Semuwemba said.
The Observer understands that the matter was resolved.

Equity Bank’s efforts to restructure Magoola’s loans

On December 13, 2022, Anthony Kituuka, the managing director of Equity Bank, petitioned the Deputy Governor of the Bank of Uganda, Michael Atingi-Ego, requesting the downgrade of credit facilities to Dei Industries International Limited, an exemption from provisioning for the next 12 months, as well as the restructuring of the facilities.

In a letter dated January 17, 2023, the Governor declined Equity Bank’s plea on the grounds that credit facilities had been restructured multiple times and any further restructuring would violate Regulation 13(c) of the Financial Institutions and Regulations.

“The wheat factory, which was the primary source for repayment of the credit facility from Equity Bank, is not operational, and hence there are no cash flows to service the loans as intended,” Atingi-Ego said.

Atingi-Ego said, “The adverse classification of the facilities is warranted in line with Regulation 10(4), which stipulates that significant departure from the primary source of repayment, too liberal repayment terms, and modification of the credit terms and conditions to cure delinquency shall warrant adverse classification even when the credit facility is current or up to date. Therefore, the downgrade of the credit facilities stands without reconsideration.”

The Observer learned that Equity Bank wanted to inject another  $55 million (Shs 202.6 billion) into the company as working capital for it to embark on the production of drugs. This paper also established that the factory had been completed and the machines had been installed.

Equity bank speaks

Anthony Kituuka, the managing director of Equity Bank Limited, was not available for comment. He didn’t pick up or return our calls. Aide Charles, the contact person who is in charge of the two loan accounts at Equity Bank, promised to call back this reporter, but he didn’t.

Interviewed for this story, Barbara Among, the spokesperson of Equity Bank, said Magoola owes them some money, but they have not published any notice to sell off his property. She declined to reveal the total amount of money.

“I have checked in the system. Equity Bank has not placed any advertisements intending to auction Magoola’s property; maybe it is another bank. Please cross-check with them,” she said.

Background

Right at the onset of the COVID-19 pandemic in March 2020, then-Speaker of Parliament Kadaga kicked up a public storm when she claimed that a local pharmaceutical company was about to manufacture an alleged “cure” for the coronavirus disease.

She told parliament that the local pharmaceutical company would start producing a cure for the coronavirus disease in two weeks. Her statement came after a meeting with Professor Sarfaraz Niazi, a scientist from the University of Illinois in the United States, and Magoola, the proprietors of Dei Biopharma Uganda Limited.

“Professor Sarfaraz Khan Niazi developed an effective advanced sanitizer that has been proven to kill the COVID-19 virus instantly. Tests were recently conducted in the US and Glasgow, and a certificate of analysis showed the ability of the product to kill the virus in seconds. The trials are starting today in the United States of America,” said Kadaga.

Mathias Magoola, a biochemist working for the pharmaceutical company, and Niazi also met President Yoweri Museveni and seemed to convince him that the product would kill not just COVID-19 but any virus.

Kadaga added that Professor Niazi was one of the world’s most prolific inventors with more than 100 pharmaceutical patents, adding that he had developed more than 3000 formulas, which he donated to DEI Pharmaceuticals to help Uganda become self-sufficient in essential medicines.

“A young man named Mathias Magoola has established two industries; one in Luzira, manufacturing malaria and cancer drugs, and another in Matugga, which will be the biggest pharmaceutical industry on this continent. This professor came to assist with setting up that industry,” Kadaga said.

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