There is an ongoing deadly rivalry among Chinese investors in Uganda and this has sparked serious concerns within the local business community.
The public may be wondering why foreign investors are targeting their counterparts, either to eliminate them or force them out of business.
Insight Post Uganda has gathered critical information from a source close to the bad blood brewing between rival investors at Mbale and Namanve Industrial Parks.
Tensions reached a boiling point when four members of the Tian Tang Group were remanded to Kauga Prison by Mukono Chief Magistrate Roselyn Nsenge, facing charges of attempted murder and conspiracy to commit a felony.
The accused are alleged to have violently assaulted two fellow Chinese investors at their Namanve apartment in the early hours of September 18, 2024, marking a new chapter in the ongoing feud.
Two victims, Liu Qingshan, 63, and Lu Hanbin, 32, both owners of the Ugandan NEC-WATU Automobile Group, sustained serious injuries, likely due to escalating business conflicts. The injuries appear to be tied to growing tensions within their business dealings.
The suspects are Liang Kai, Bin Ding, Chen Cheng, and Wu Zhang, also known as Martin.
Back in 2019, Liu Qinshang, along with fellow investors Yan Sheng and Zhang Zhigang, who owns Tian Tang Group, attended a conference organised by Chinese investors in Uganda.
During this event, Zhang convinced Liu and Yan to explore business opportunities in Uganda.
Following this, the three held a series of meetings and eventually signed a cooperation agreement on December 18, 2019, marking the beginning of their joint investment in the country.
In their 2019 agreement, Liu Qingshan, Yan Sheng, and Zhang Zhigang decided to establish a joint venture company to expand their business operations in Uganda.
The company was set to be based at the Sino-Uganda Mbale Industrial Park, a growing hub for industrial activity in the country.
To ensure their venture complied with Ugandan regulations, they formally incorporated the business as Automobile Group (U) Ltd.
The company had four key shareholders: Liu Qingshan, who owned the largest share at 55%, Yan Sheng with 25%, Zhang Zhigang with 15%, and Wang Kexin holding 5%.
This share distribution reflected their respective roles and investments in the company.
As part of the joint venture agreement, Liu Qingshan and Yan Sheng were responsible for making a significant financial contribution of RMB 30 million (around $4.5 million), which was meant to cover the costs of construction, production, and the overall management of the project.
Their combined investment represented 85% of the company’s total equity, noting their primary role in financing and overseeing the venture’s growth and operations in Uganda.
Zhang Zhigang and Wang Kexin held the remaining 15% between them, supporting the business with their experience and connections in the region.
Paul Zhang Zhigang contributed valuable assets to the joint venture, including 10 acres of land in the Sino Mbale Industrial Park, a 640-square-meter exhibition hall, and a 2,700-square-meter workshop and apartment in the Namanve Industrial Park.
He also offered a three-year rent-free period starting in 2019. These contributions accounted for his 15% share in the company.
The joint venture agreement allowed the parties to terminate their partnership if any member failed to meet their obligations, violated any terms of the agreement, or disregarded the law.
If any disputes arose, they were first to be resolved through friendly negotiations. If that failed, the matter would be handled according to the relevant legal procedures.
After the joint venture got underway, Liu Qingshan began to feel he was being treated unfairly by Zhang Zhigang. As a result, Liu slowed down the development of the factories, which led to tensions among the shareholders.
This business conflict eventually escalated to the point where they could no longer operate together under the terms of the agreement, leading to the current dispute.
On July 1, 2023, the issue was brought before Uganda’s State House Investors Protection Unit for resolution. The unit held several meetings and recorded various proposals to help settle the matter amicably.
Zhang Zhigang suggested conducting a special audit to evaluate the current value of the company before it is dissolved, so he could receive the monetary equivalent of his 15% share in the business.
Liu Qingshan, on the other hand, proposed cutting all business ties with Zhang. He called for an independent audit, ensuring that each shareholder would be responsible for sharing the company’s losses.
He also requested a proper calculation of rent for the Namanve property up until October 16, 2024, with deductions made for any improvements done on the property.
This website has learned that both parties agreed to appoint JNN Associates to carry out a comprehensive audit of the company, evaluating its state from the time it was founded up to the signing of the mediation agreement. The audit would follow international accounting standards.
During the auditing process, it was agreed that the company’s operations would remain unchanged until the dispute was fully resolved.
Furthermore, all parties agreed to refrain from violence, with a clear understanding that any acts of violence would be handled under Uganda’s criminal laws.
This website has further learned that the audit process has not yet been completed due to delays caused by some of the parties during the mediation arrangements.
In the meantime, Liu Qingshan made a separate agreement with the Ugandan government, allowing him to partner with NEC under the business name “NEC WATU.” As part of this arrangement, he was allocated land in Jinja to continue his investments.
On August 27, 2024, Lucy Zhang and Owen Jin, the CEO, and Manager of Tian Tang Group, raised concerns with the State House Investment Protection Unit about Liu Qingshan still occupying their showroom and premises in Namanve Industrial Park. According to them, the time he had requested to use the space had already expired.
They expressed their strong desire to remove Liu from the premises but were advised not to resort to violence or take matters into their own hands. Instead, they were encouraged to resolve the issue legally by filing a case in court.
However, on the night of September 17, 2024, a group of Chinese individuals, allegedly accompanied by army officers, reportedly attacked Liu Qingshan and his family at their Namanve premises.
They were severely assaulted and had to be admitted to Nakasero Hospital for treatment. This unexpected and violent escalation has shocked many involved in the ongoing dispute.
Implication
This situation has several important implications for investment opportunities and development in Uganda:
Investor Confidence: The attack on Liu Qingshan raises serious concerns about the safety of foreign investors in Uganda. Such incidents can scare away potential investors who worry about their safety and the security of their investments.
Legal System: The inability to resolve disputes peacefully and the resulting violence show that Uganda’s legal system might not be as strong as needed. Investors need a fair and reliable legal system to protect their interests and settle disagreements without violence.
Business Relationships: This conflict highlights how important it is to maintain good relationships between businesses. Poor communication and unresolved tensions can lead to disputes that create a negative environment for everyone involved. A cooperative atmosphere is crucial for successful business operations.
Risk Management: The incident stresses the need for better risk management among investors. Companies should evaluate potential conflicts early on and set up clear ways to resolve issues to prevent them from escalating.
Government’s Role: The Ugandan government’s involvement in helping businesses can attract foreign investment, like Liu’s partnership with NEC. However, it also raises questions about fairness. Transparency in government dealings is essential to build trust among investors.
Impact on Local Communities: Violence and business disputes can negatively affect local communities, leading to unrest and stalling development. Sustainable investment should focus on engaging with and benefiting local communities to avoid conflicts.
Need for Regulatory Changes: This situation might lead to calls for changes in regulations to better protect investors, such as stricter oversight of business practices and conflict resolution processes. These reforms can improve the overall investment environment.
Uganda’s Image as an Investment Destination: Negative events like this can harm Uganda’s reputation as a good place to invest. Building a stable and safe image is crucial for attracting and keeping foreign investments.
Call For Salim Saleh’s Intervention
Economic analysts are calling for Salim Saleh, a prominent investment coordinator in Uganda, to step in and address the escalating situation before it spirals further out of control.
Given his influential role and experience in managing investments, Saleh’s intervention is seen as crucial to restoring confidence among investors and ensuring a peaceful resolution to the ongoing disputes.
His involvement could help facilitate dialogue between the conflicting parties, establish clear communication channels, and reinforce the importance of a stable investment environment.
They say that by taking proactive measures, Saleh could not only mitigate the current crisis but also enhance Uganda’s reputation as a safe and attractive destination for foreign investment.
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