DEI Pharmacy Loses Round One in Shs242bn Equity Bank Loan Battle

Kampala High Court has dismissed an application by businessman Matthias Magoola and his companies seeking to remove the accountants’ professional body from an audit process in their roughly Shs242 billion loan dispute with Equity Bank. Commercial Court Judge Susan Abinyo ruled that DEI Industries International Ltd, DEI Biopharma Ltd and Magoola had failed to prove allegations that the integrity and independence of the Institute of Certified Public Accountants of Uganda (ICPAU) had been compromised. The applicants wanted the court to revoke an earlier order under which ICPAU nominated an independent firm to audit loans extended by Equity Bank Uganda and Equity Bank Kenya. “This application lacks merit,” Abinyo said in a July 29 ruling, dismissing it with costs in the cause. The dispute stems from financing extended to Magoola’s businesses, including DEI Biopharma’s pharmaceutical manufacturing complex at Matugga in Wakiso district, a project the Ugandan government has supported as part of efforts to expand domestic production of medicines and vaccines. Equity Bank previously said it committed up to $100 million (about Shs370 billion) towards construction of the pharmaceutical plant, acquisition of equipment and machinery and working capital. Uganda Development Bank provided another $20 million (about Shs74 billion). The relationship between DEI and Equity Bank later deteriorated over the amount outstanding on the facilities. In June 2024, Equity demanded Shs82.24 billion under facilities in Uganda and $43.23 million (about Shs160 billion) under facilities in Kenya, putting the combined demand at roughly Shs242 billion at an exchange rate of about Shs3,700 to the dollar. DEI disputed the figures and sued Equity Bank Uganda and Equity Bank Kenya in August 2024, seeking an audit and reconciliation of its loan and current accounts to establish the actual debt. The companies also sought the reversal of any amounts found to have been unlawfully debited and an injunction restraining the banks from taking enforcement or recovery measures until the case was determined. Shs723bn Govt Investment The case has attracted wider attention because of the substantial amount of taxpayers’ money invested in DEI Biopharma. In 2025, Auditor General Edward Akol raised concerns over the government’s cumulative Shs723.4 billion investment in the company, citing inadequate due diligence, missing documentation and potential legal risks associated with the transaction. The investment comprised Shs70 billion appropriated in the 2023/24 financial year, Shs75 billion added in December 2023 and Shs578.4 billion approved in an April 2024 supplementary budget to help the company meet debt obligations and operational costs. “Without a valuation report, I could not confirm whether the government received shares worth the value of its investment,” Akol said in his report. The Auditor General’s concerns were separate from the dispute before the Commercial Court but highlighted the government’s significant financial exposure to the pharmaceutical venture. Second Audit Challenged DEI and Equity Bank initially agreed in December 2024 to appoint KPMG to conduct a comprehensive audit of the loan arrangements and determine the outstanding amounts. KPMG completed the exercise and submitted its report to court, but DEI subsequently challenged the process and secured an order setting aside KPMG’s appointment. The court then directed ICPAU to nominate another independent audit firm. ICPAU selected Clayton & Company of Jinja in April 2025. DEI again went to court, this time alleging that ICPAU’s integrity, objectivity and independence had been compromised and seeking to revoke its role in the audit. Abinyo rejected the allegations, saying the applicants had failed to provide evidence showing that ICPAU and Equity Bank colluded in selecting Clayton & Company. “It was not enough for the Applicants to simply state by affidavit and written submissions that the integrity, objectivity and independence of ICPAU had been compromised without proof,” the judge said. Abinyo also ruled that ICPAU was not required to consult DEI or Equity Bank before nominating the auditor, saying consultation with the parties could undermine the independence required by the earlier court order. Clayton & Company completed the audit and submitted its report dated June 28, 2025. Although DEI had filed its challenge on May 22, before the audit report was submitted, Abinyo said the audit process had already started and was subsequently completed. She ruled that the attempt to revoke ICPAU’s appointment was therefore moot and amounted to an abuse of court process. Bid to Amend Suit Rejected The court also rejected DEI’s attempt to amend its main lawsuit, including changes intended to remove the requirement for an audit and reflect payments made after the case was filed. DEI argued that the amendment would align its claim with its own audit of the loans and take account of payments made to Equity Bank in December 2024. But Abinyo said the central issue remained whether DEI owed Equity Bank money and, if so, how much. “The question on how much shall be streamlined during scheduling and does not require an amendment of the plaint,” she said. The ruling does not determine how much DEI ultimately owes Equity Bank, if anything, or resolve the substantive allegations concerning the administration of the loans. The main suit will return to the Commercial Court on November 13, 2026, for scheduling.