Law experts have warned Uganda government could face serious legal challenges for repossessing Uganda Telecom after London High Court ordered Zambia to compensate Libya $380m for nationalizing Zamtel.
The Libyan Investment Authority (LIA), the investment arm of the Libyan government dragged the Zambian government to court for abruptly reversing the sale of Zamtel without compensation.
The Libyan company owned a 75 percent share of Zamtel while the Zambian government owned 25 percent.
According to the Financial Times of London, the Libyan Investment Authority reportedly pursued similar action against Chad, Rwanda and Niger.
In the report, the LIA claims that the four countries took advantage of “Libya’s political turmoil to nationalise assets belonging to the country’s $66 billion sovereign funds” following the eight-month long conflict that brought a brutal end to Muammar Gaddafi’s 40-year rule.
At the beginning of 2011, LAP Green Networks, a subsidiary of LIA, held stakes in nine telecoms operators across sub-Saharan Africa, including Chad’s Sotel Tchad, Oricel in Côte d’Ivoire and Gemtel Telecom in South Sudan.
Legal brains now say the precedent could be used against Uganda which recently decided to repossess shares held by the Libyan government in UTL.
Ugandan government decided to take over the assets and liabilities of the indebted telecom company, of which the Libyan state owns 69 percent. Libya acquired the shares in 2010.
Following the collapse of the Gaddafi regime in 2011, UTL has been facing financial challenges as a result of poor management.
The Ugandan government announced that it had repossessed the telecommunications firm, after the Libyans refused to provide further funding.
Kampala-based lawyer, Bob Kasango said if Uganda does not learn from this experience, it could face the “same implications.”
“The expropriation of LAPGreen Assets in UTL will land us in bigger trouble. Why are we trying save UTL anyway? What’s its strategic value to the nation? Why should we pump billions of tax payer shillings into an entity that isn’t commercially viable and people have to be forced by Presidential Decree almost to deal with it?” wondered lawyer Kasango.
He said the decision Uganda took to expropriate the shares of LAPGreen will come back to bite the country.
“The Shs.200bn that the President has directed be converted into equity is nothing but creative accounting to shore up a non-viable entity, and we will as in the case of Zambia pay more in the long run. We are just stupidly postponing a problem,” he warned.
UTL is bleeding financially in local and foreign debts amounting to Shs128 billion.
Industry players have since accused the Minister of State for Privatization, Evelyne Anite and the Official Receiver of over-zealousness and lacking knowledge in corporate law issues and commercial contracts with States hence misadvising the president on the state and future of UTL.
Separately, Kasango warned that the President’s directive “promotes anti-trust practices and rewards technological stagnation and lack of entrepreneurship”
The lawyer wondered why the president is directing all government agencies to procure services from when UTL, a 2G network “when we are heading for 5G.”
“To get to 5G technology, UTL needs a quantum jump and that will mean injecting into at least $100m to bring it up to speed. And what message are we sending to companies that invest heavily in Research and Development and Technology, to stay ahead? And why did we privatize UTL in the first place? The very reasons we privatized it are the very reasons we are expropriating it now! We have come full circle – we have learnt nothing and forgotten nothing.”
UTL has been a troubled network and it could also drag the government of Uganda into a legal trouble should the Libyan government pursue a court case.