John Sebalamu and His Freedom City
So, how big is Freedom City?
At some point I had thought of it being a hotel, but changed my mind. I have not entirely dropped the hotel idea though. The project covers pretty much all the 3.5 acres except for some space behind, which I have reserved for the hotel.
The mall itself, which is four storeys for now, boasts over 8,000 square metres of retail shopping space (the largest of these being a really big supermarket), a banking area (already six major bank branches are operational here) as well as big brand coffee shops, cinema area, a recreation area and health clubs among other key features.
So, where did you get the money to put up something so expensive?
It is largely funded by banks and my personal savings. Any plans for this project and any other projects you are going to undertake soon?
For now, I am concentrating on this project because it’s big with quite a lot of work to do. It is still in its early stages.
We understand at one point you also tried diversifying into garment manufacturing, why did you chose to do so and how did it end?
By 2004 I had gone to China and was importing a lot of garments from there. I thought I would make better money if, rather than import, I added value to raw materials here by manufacturing garments the way Apparel Tri-Star U limited under the AGOA initiative, was doing.
I would create employment through economic linkages. This is the gospel the President was preaching to local investors.
Having identified an affordable source of raw materials in China, I got together with a few business partners and decided to start SEBCO Garments factory, which manufactured clothes locally.
Unfortunately, business did not go smoothly for us as we had problems with URA over an unclear policy on local value adders like us. They classified our raw materials that included buttons, clothes and packaging material wrongly.
They would classify and tax them as finished products yet they were actually raw materials. These items attracted a 150% surcharge!
As a result, our tax liability was so big, which shot our costs of production up. Coupled with on-and-off wrangling and legal taxation battles with URA, I decided to painfully close the company in 2006. I paid off my partners and we called it a day.
That must have been a big financial set-back. How did you recuperate from that?
Considering I was already into large scale garment importation before, I decided to go back into importation of garments from China and Dubai. Unfortunately, the dynamics of the game had changed so much I could no longer fit in there. I opted to concentrate on real estate, which I already had a foothold in as well
Joining real estate
When then did you pick interest in real estate?
In the mid-1990s, the Custodian Board, which had been entrusted with overseeing the property of departed Asian Ugandans, who had been expelled from Uganda by Idi Amin in 1972, started returning the buildings to their original owners. This followed the earlier controversial Expropriated Properties Act of 1982, which President Yoweri Museveni then accelerated and implemented.
Many of these people had, however, lost interest in these properties and in returning to Uganda. Most of them had new lives in wealthy countries in the West. So, they disposed of them cheaply. A building downtown cost between $80,000 and $200,000 (sh72m and sh180m then, which is sh200m and sh500m today).
Unfortunately, most of the people who had leased these buildings from the Custodian Board did not have the money to pay for them. So, Ugandans who had money bought these buildings. I remember that wealthy businessmen like Sudhir Ruparelia and Karim Hirji acquired a lot of prime property around town partly because of the rapport and trust they shared with these departed Asian-Ugandans.
In 1995, I constructed my first building on Ben Kiwanuka Street called Capital House. It was the first of the current shopping arcades you see all over downtown and in other emerging neighborhoods in Kampala. It was a different style from what everyone built.
I copied the style from Dubai. Soon, everyone jumped onto the bandwagon. All people did was simply buy old buildings, break them down and create shopping malls similar to the one I had seen in the Dubai. Traders took up the space fast, which in turn brought in good returns in rent.
You must have gone on a shopping spree of buildings then seeing as the money was obviously coming in
I wish I had. I got excited after my first building and thought I had ‘arrived’. But I was so blinded by what I thought were enormous profits in trading that I failed to see that real estate was the future of business in Kampala. See, at time, Uganda Revenue Authority (URA) was not yet as organized and professional and traders got away with not paying taxes. That accounted for the enormous profits.
So, was that the end of your interest in real estate at the time?
No. But, if I knew then what I know now, I would be better-placed in the property business than I am today.
Between 1995 and 1998, I bought more buildings in town most of which I sold off. The cost of the buildings had shot up to $800,000. I built Naiga Chambers and Mini Price all on Kampala Road. I connected these three with an overpass. Even then, real estate was not my primary interest.
Were you trading in clothes from Dubai the whole time?
Yes. But starting in 1997, URA became stringent. There were taxes we did not understand from VAT to so many others. Traders felt cheated.
That’s the time I started taking property business in Kampala seriously. Unfortunately, the cost of building from 2000 was too high and rapid expansion was not possible. I bought and built a couple of buildings, including Carlton Hotel and former Container Village, but sold many off.
On family in business
You and your siblings come off as a very close and cooperative family. How has this helped you in business?
Yes, we are close and work together in many ways. This is because we realised you can’t stand alone and go very far. You might be good at spotting business opportunities, but fear taking risks, so you need a sibling, who has the guts to take the risk.
In relation to that, no one should deceive you that they like you or trust you if they are at war and suspicious of their siblings and relatives.
Family is also key in business because your family acts as your advisers, mentors and could help you out when you are facing a major challenge.
The New Vision Newspaper