Uganda’s economy has generally been stable in 2019, with inflation contained below 5% and the exchange rate despite being weak trading stable for the better part of the year.
The Central Bank Rate (CBR), a benchmark lending rate for commercial banks has also remained stable at 10% only reducing to 9% in October. Consequently, lending rates have been reducing albeit at a slow pace. Currently, lending rates are averaging 19.82%.
The government is projecting the economy to grow in the range of 5-6% in financial year 2019/20, with agriculture, industry and services projected to grow at 3.8%, 5.6% and 7.8% respectively.
In this article, in no particular order, Business Focus, like it has done in the past two years, analyszes the business moments that shaped and defined the year 2019. Read on!
Fight Over Tycoon Mohan Kiwanuka Empire
Many Ugandans didn’t know Mohan Kiwanuka.
Those who knew him didn’t know he was a wealthy businessman to reckon with until the cat was let out of the bag!
Kiwanuka’s Business Empire is facing unprecedented turbulence resulting from a disagreement with his son, Jordan Ssebuliba Kiwanuka.
Ssebuliba run to court asking it to declare his father a person of unsound mind, purportedly resulting from the reported dementia related ailments. He prayed that court finds his father incapable of running his businesses and instead declare him (Ssebuliba) the overall administrator of tens of family companies.
However, the property mogul has since stood his ground, said he is stable, knows what he is doing and indeed, successfully convinced of the same, Court recently ruled in Kiwanuka’s favour (that he is of sound mind).
Kiwanuka is the Chief Executive Officer of renowned Oscar Industries and runs a number of businesses including properties in Kampala and its environs.
According to documents before Court, Kiwanuka owns 46 prime properties in Kampala worth billions of Shillings.
Of the 46 properties that his son Ssebuliba listed, at least 26 are found in Kololo. Another property which has been cited in the ongoing wrangle is comprised in 50 acres located at Sonde in Mukono District.
The tycoon also owns Radio One and Radio Two.
The case over property fight is still ongoing in Court and it’s not clear how it will end, but certainly it is Kiwanuka’s legacy at stake as his several businesses will be affected.
Tullow Oil’s Deal With Total, CNOOC Flops
When will Uganda see her first oil? In 2018, government pushed the ever-shifting date for Uganda’s first oil from 2020 to 2022. However, this might also change considering the latest developments.
On 29 August 2019, Tullow Oil plc’s farm-down to Total and CNOOC was terminated following the expiry of the Sale and Purchase Agreements (SPAs).
In a statement, Tullow said it was unable to secure a further extension of the SPAs with its Joint Venture Partners, despite previous extensions to the SPAs having been agreed by all parties. This will delay the overdue commercialization of Uganda’s Oil.
“Tullow has worked tirelessly over the last two and a half years to complete this farm down which was structured to re-invest the proceeds in Uganda. Whilst this is a very attractive low-cost development project, we remain committed to reducing our operated equity stake,” said Tullow CEO Paul McDade.
Tullow said the termination of this transaction is a result of being unable to agree all aspects of the tax treatment of the transaction with the government of Uganda which was a condition to completing the SPAs.
“While Tullow’s capital gains tax position had been agreed as per the Group’s disclosure in its 2018 Full Year Results, the Ugandan Revenue Authority and the Joint Venture Partners could not agree on the availability of tax relief for the consideration to be paid by Total and CNOOC as buyers.”
Tullow said in the statement that they will now initiate a new sales process to reduce its 33.33% Operated stake in the Lake Albert project which has over 1.5 billion barrels of discovered recoverable resources and is expected to produce over 230,000 bopd at peak production.
The Joint Venture Partners had been targeting a Final Investment Decision for the Uganda development by the end of 2019, but the termination of this transaction is likely to lead to further delay.
Uganda-Rwanda border impasse affects trade
Uganda and Rwanda are important trade partners, but Rwanda’s closure of the Katuna-Gatuna border since February 2019 has had far reaching effects to the economies of the two countries. This closure has made headlines not only in Uganda but regionally and internationally for the most part of the year.
After closing the border, Rwandan government advised its nationals against crossing to Uganda on condition that they could not guarantee the safety of their nationals in the Ugandan territory.
Rwanda also accused Uganda of hosting and facilitating dissidents especially Rwanda National Congress-RNC and the Democratic Forces for the Liberation of Rwanda- FDLR, which have declared war on the Kigali government. Uganda has denied the allegations.
The border closure has since cost Uganda Shs530 billion since March this year, the Private Sector Foundation of Uganda (PSFU) said recently.
“Uganda has been losing $16 million (Shs58.9b) every month
since Rwanda closed the border, affecting our food and beverages, steel,
roofing materials, cement and sugar,” Gideon Badagawa, the Executive Director of
PSFU recently said, adding that the developments at the Rwanda border were
worsened by the Ebola outbreak in Democratic Republic of Congo and the war in
South Sudan, which has stalled the operational capacity of factories in the
country.
First ever phones assembling plant launched
In late November 2019, Uganda launched its first ever mobile phones and laptops assembly plant in Namanve industrial park, Mukono district. Whereas it’s mainly an assembling factory, it is a step in the right direction.
The factory built by Chinese Electronics firm, ENGO Holdings Limited was installed to produce 2,000 mobile phones, 1,500 smart phones and 800 mini slim laptops when it starts operating at full capacity in 2021. A phone will cost only Shs20, 000.
Frank Tumwebaze, the outgoing Information, Communication and Technology Minister said that the domestic operation of the plant will revolutionize mobile phone connectivity in rural areas for their affordability and efficiency on power consumption and network reception and clarity.
Will this be the case? 2021 isn’t far when the factory starts full production.
Firms Scramble To Grow Marijuana In Uganda
There’s no legal framework on Marijuana growing in Uganda. However, considering the growing demand to grow it in the country and billions involved, government will most likely be left with no option but legalize it.
The debate about Medical cannabis (Marijuana) growing has been ongoing almost throughout the year.
It is understood that a number of international and local firms are seeking to grow marijuana in Uganda to cash in on the growing multi-billion dollar business.
On March 18, 2019, Uganda Investment Authority (UIA) cleared Together Pharma Limited, an Israel firm, to start growing medical cannabis popularly known as marijuana on a commercial scale in Kasese.
In Uganda, the company will operate as Industrial Globus Uganda Ltd. The company had promised to build a marijuana oil extraction plant in Kampala with an initial investment of $5m (Shs18.7 billion).
However, government halted Together Pharma Limited’s investment license, citing lack of necessary laws.
None the less, Industrial Hemp Uganda Ltd and its partners have been growing the crop in the country for the past decade with operations in Kasese and other areas. Will Uganda legalize marijuana growing going forward? Government says the process will be finalized early next year.
African Alliance Exits Uganda’s Stock Market
In April 2019, African Alliance Uganda Ltd exited Uganda’s stock market after 15 years of offering brokerage services. Licensed by Capital Markets Authority (CMA) as a Stock Broker and Investment Advisor, the company ceased to operate its stock brokerage business arm and maintained the Investment Advisor license.
Speaking about the exit, African Alliance CEO, Kenneth Kitariko said that the “stock brokerage business is not making money.”
“…when the business is not making money, you have to plan for the future,” he said, “the shareholders will not be happy to subsidise the stoke broking business in Uganda…it is an issue of survival,” he said.
The company has previously handled some of Uganda’s largest initial public offerings including Umeme, Stanbic and the cross-listing of Nation Media Group on the USE, among others.
Prior to its exit from the stockbrokerage business, African Alliance had in 2010 suspended its unit trust services, citing a low asset base, fluctuating interest rates and poor returns on investment. This development points to the underdevelopment and slow growth of Uganda’s capital markets.
BoU Money saga
One of the widely discussed topics in 2019 was the Bank of Uganda (BoU) money printing scandal.
It was reported that a plane carrying printed currency had 25 pallets yet the consignment was expected to have 20 pallets. News circulated that BoU officials had printed extra money for themselves.
It was revealed that the extra cargo belonged to different individuals and organization including businessman Charles Mbire, United Nations, USAID and Omar Mandela, the proprietor of Café Javas.
Consequently, a number of
Central Banks officials were arrested in the aftermath. These were later charged
in the anti-corruption court. They were
also forced to take leave from office in line with the Public service rules
that require a public servant to step aside, in the face of an investigation.
The BoU officials are Francis Kakeeto, the Assistant Currency Director Bank of
Uganda Mbale Branch, Fred Vito Wanyama, the Verification Officer and the
Currency Director, Charles Malinga Akol. This scandal wasn’t resolved
well as the extra five pellets on the plane weren’t properly explained.
Barclays rebrands into Absa
Barclays brand had existed in Uganda for 92 years.
However, it ceased existing in November 2019 after Barclays bank officially rebranded into Absa Bank Uganda.
The bank’s management said the name change marks the start of a new era for the bank’s operations, one that sees the realisation of an ambition to become an independent African bank.
“Today we begin a new chapter as Absa Bank Uganda Limited, adopting our parent company’s name and brand while retaining our indelible commitment to Uganda and its people. Our new brand is a commitment to Uganda and to the wider continent: Absa is a truly African bank, with global scalability and reach,” said Nazim Mahmood, Managing Director of Absa Bank Uganda Limited on 11th November 2019.
Two banks join banking industry
Uganda’s banking sector has had rough times in recent years. However, with Cameroon based Afriland First Bank Uganda Limited joining the Ugandan market effective September 12, it gives some confidence to the sector and the economy at large.
Opportunity Bank that had been trading as a Credit Institution (Tier 2) also transformed to a Commercial Bank (Tier 1) institution effective September 13, 2019.
This means that Uganda now has 26 commercial banks.
All the new banks are largely foreign owned, implying that only three commercial banks can be truly said to be Ugandan owned. These include Finance Trust Bank, Centenary Bank and Housing Finance Bank.
It remains to be seen whether the two newly licensed banks can disrupt the industry.
Crane Bank Saga continues
Since the controversial take over and sale of Crane Bank by Bank of Uganda in October 2016, property mogul, Sudhir Ruparelia, the key shareholder in the defunct bank has been in the news.
He has not only given sleepless nights to BoU, but also dfcu, the buyer of his bank.
This fight has ended up in Court.
This year, BoU lost a Shs397bn case against Sudhir and the Central Bank was ordered to pay costs.
The Commercial Court in Kampala dismissed a case in which BoU sued Sudhir for allegedly fleecing his own bank (Crane Bank in receivership) of Shs397 billion in fraudulent transactions. The Central Bank was seeking to recover the Shs397bn.
In his ruling, the Head of Commercial Court, David Wangutusi observed that Crane Bank in receivership at the time of instituting the commercial suit against the businessman and his Meera Investments Company was none existent, hence never had powers to sue.
“In conclusion, the plaintiff/ respondent (Crane Bank in receivership) did not have jurisdiction to file HCCS no. 493 of 2017. It’s also my finding that the property the plaintiff was seeking when she filed the suit on June 30th 2017 had earlier been given away by the receiver to Dfcu bank on 24th January 2017, four days into receivership and five months before filing of this suit this leaving the plaintiff/ respondent with no property,” the court ruling reads in part.
Sudhir has successfully defeated the Bank through courts and blocked BoU lawyers of MMAKS Advocates and Sebalu & Lule Advocates who were also his former lawyers from representing BoU in cases involving him (Sudhir) because of conflict of conflict.
Dfcu bank has also reversed its decision to acquire Sudhir’s 48 disputed properties sold by Bank of Uganda following the controversial takeover and sale of Crane Bank.
Uganda Airlines returns to the skies
In August 2019, Uganda re-launched its national carrier, Uganda Airlines, hoping to take a slice of the East African aviation business that is dominated by Ethiopian Airlines. This was after 18 years the national airline went under.
The country is banking on its emerging oil industry and the traditional tourism sector to generate international traffic to sustain the airline.
Though air traffic in Africa is forecast to grow 6% a year, twice as quickly as mature markets, over the next two decades, most state-owned flag carriers on the continent are losing money. The notable exception is Ethiopian Airlines, which analysts say has avoided the mistakes of other regional carriers and not fallen prey to political interference.
Can Uganda Airlines defy regional airlines to run profitably and sustainably?
President Yoweri Museveni thinks the revived Uganda Airlines will not collapse.
“Why do I think the new baby will survive? There are four clientele constituencies that will support this business; Ugandans in the Diaspora, families of Asians of Ugandan descent expelled by Idi Amin, our business people here who travel a lot and the tourists,” Museveni said.
“For the tourists, they have been coming to Uganda despite the inconvenience of making stops in Addis Ababa, Nairobi, Kigali or Dubai. It shows they love Uganda. It will be more convenient now when we have direct flights to London, Dubai, Guangzhou and other cities. This airline should also help our push towards attaining middle-income status. Ugandans spend $400m annually on air travel. At least, some of this money will now come to our own airline, just like we shall check such capital flight when we have our own specialized hospital in Lubowa,” he added.
UTL Saga
Uganda Telecom Ltd (UTL) saga involving top government officials made headlines for second part of 2019.
It all started when State Minister for Investments, Evelyn Anite informed Parliament that Government had lost control over UTL after its Administrator Twebaze Bemanya barred Auditor General, John Muwanga from conducting an audit on the struggling telecom firm.
“We now don’t know the status of the company and how it is operating. It is just very clear that as founding shareholders of the company, technically we have lost control over the company,” Anite said.
After
her revelations, Anite clashed with the Deputy Attorney General Mwesigwa
Rukutana, who disregarded Anite’s directive to fire Bemanya as the
Administrator of UTL.
Bemanya was appointed Administrator of UTL following the exit of Ucom Limited,
a Libyan owned firm that owned 69 per cent shares in March 2017. He
entered into an Administration Deed and the shareholders ceded to him all their
powers to run the company. The saga that also got Secretaety to the
Treasury, Keith Muhakanizi involved attracted the attention of the President.
Anite emerged winner when Court ordered the audit on UTL to take place.
President Museveni has since approved the firing of Bemanya.
UTL
is currently indebted to the tune of Shs530bn. Can it be revived and compete
favourably with MTN and Airtel?
National Coffee bill debate
The National Coffee bill 2018 introduced before Parliament in 2019 caused a lot of debate in the country, with majority farmers rejecting some sections that they say are intended to eliminate them from growing coffee.
The Bill aims to reform the existing law to provide for the UCDA to regulate, promote and oversee the coffee sub-sector; and to regulate all on-farm and off-farm activities in the coffee value chain.
Clause 26(2) reads: “A person shall be registered as a coffee farmer on fulfilling the following requirements-; (a) he or she shall either be growing coffee at the time of registration or shall have proof of his or her intention to commence growing coffee within a period of six months, from the date of registration; and (b) the land where the coffee is grown or is to be grown shall have been evaluated by the Authority (UCDA)and deemed suitable for growing coffee.”
It is one of the clauses that have caused uproar among coffee stakeholders especially smallholder farmers.
At one point, President Yoweri Museveni clashed with Buganda Kingdom Katikkiro over the Bill.
This is after Katikkiro Charles Peter Mayiga criticized a proposal for the registration and licensing of coffee farmers as embedded in the National Coffee Bill currently before parliament.
“I am scared. This issue should be handled with care and we shall continue to offer guidance. I guess from coffee farmers, the government will now legislate herdsmen and how they should or shouldn’t handle their cattle and other products,” Mayiga said.
However, Museveni accused him of spreading lies.
“There is no license, I had this Katikkiro was telling lies…but i sent a message to somebody that he should stop that nonsense,” Museveni said.
Uganda -Russia Nuclear Deal
In September 2019, the Government of Uganda through the Ministry of Energy and Mineral Development signed an Inter-Governmental Agreement (IGA) with Russian Federation on the cooperation in the Field of the use of Nuclear Energy for Peaceful Purposes.
The Agreement establishes a strong cooperative framework with a focus on development of nuclear infrastructure in the Republic of Uganda; production and application of radioisotopes for industrial, healthcare, agricultural use; support towards strengthening nuclear and radiation safety and security, as well as education and training.
The parties agreed to create workgroups to further develop projects; on the construction of nuclear power plants in Uganda and the construction of the Center for nuclear science and technology in Uganda on the basis of a research reactor of Russian design.
The Center of Nuclear Science and Technology will be used for nuclear training, research and development. In addition, the Centre will have facilities for the production of radioisotopes for cancer management.
It will also have an irradiation facility for improving the shelf life of the agricultural produce, sterilization of flowers for export and improving agricultural productivity through research.
