UGANDA – The government is set to invest US$6.24 million (UGX23 billon) in Mabale tea factory to revive operations of the company.
According to Finance Minister, Matia Kasaija the government will invest the proceeds in buying shares in the company, which has been financially struggling.
Mabale was established as a government-owned business in 1969 but was later privatized to shareholders that took its complete ownership in 2003.
However, the company has been struggling to stay afloat after securing a US$4.61 million (UGX17 billion) credit facility from the Kenya Commercial Bank (KCB) and a US$1.63 million (UGX6 billion) from Stanbic bank for the purchase of new equipment.
The company has been using majority of its revenue in financing its debt, a move that has subsequently resulted into declining quality of green tea, fetching US$1.50 (about UGX4,800) per kilogram on the global market, reports the Independent.
Kasaija says that the government has now agreed to give the factory a financial boost and ensure that its operations are resuscitated.
He affirmed that the government will now give the factory up to US$6.24 million to clear the outstanding loan and retain a balance to boost its operational costs.
The deal was sealed during a recently held private meeting with the factory’s chairman of board of directors Patrick Siisa, the Minister of Local Government Tom Butime and the MD of Uganda Development Corporation Dr Patrick Birungi, among others.
The package, which will be drawn from the treasury through Uganda Development Corporation (UDC) to the factory, will then be converted into shares for the government.
UDC is an investment institution established as a wholly owned government entity with the mandate to facilitate the industrial and economic development of Uganda.
UDC aims at making long-term investments in strategic sectors of the economy in order to stimulate industrial and economic development and thus spur private sector growth.
Patrick Siisa welcomed the intervention noting the board is committed to ensuring that such financial constraints are averted in future. Kasaija promised to seek a tax holiday for the factory.
Siisa notes that the factory, which is owned by 3,000 smallholder tea growers.