The Capital Market of Uganda presentation

The Capital Market of Uganda
– a plausible exit option for Strategic Investments
Investment prospects
Uganda’s capital markets
Liquidity options
Recent global investor participation
• The country is about 240,000 square kilometers (slightly bigger
than Minnesota), 17% of which is covered by water bodies.
• Uganda is a land-linked country in East Africa, the gateway into the
hinterland of the Great Lakes region. The country is connected to 5
Eastern African countries – namely Tanzania and Rwanda to the
South & South West, Kenya to the East, South Sudan to the North
and Democratic Republic of Congo to the East, by a network of
paved roads following the Government’s past five year (and
ongoing) investment in road infrastructure.
• The GDP of Uganda is USD 21 billion and the country has a
population of 33 million people – the 9th most populated African
• Uganda is the 11th largest coffee producer in the World
• Uganda is home to the source of the 6,650 Km River Nile, 7% of
which flows through Uganda.
Uganda Investment Highlights
Fully liberalized
Security of
High real GDP
• Free inflow and out flow of capital
• 100% foreign ownership of investment allowed
• Guaranteed under the constitution and the investment code
• Uganda is a signatory to major international investment protection
agreements like MIGA, OPIC and CREFAA
• Between 2008 and 2011 Uganda had GDP CAGR growth of 8%, much
higher than SSA of 4.0%
• Looking forward Uganda is expected top grow 8% on average for next
5 years. A stark contrast to anaemic OECD growth rates of less than 1%
Investment prospects
• Investment opportunities exist in infrastructure development, oil and gas, tourism, agriculture
and mining. In the mining sector, 37 licenses will soon be abolished and amendments to laws
affecting 307 licenses will be completed opening up possibilities of investing in a sector with
rare earth, precious metals and other mineral resources estimated at over USD 500 billion
(about 3 times larger than the estimated value of the national oil & gas resources).
Investment is sought in early stage resource proving and development activities. In the
agriculture sector, opportunities exist to grow and process commodities like cocoa and coffee.
• In the oil and gas sector, proven reserves are about 3.5 billion. Opportunities for further
exploration exist in the 60% unexplored areas known to have oil and gas reserves. The hydro
power potential of the country is estimated at over 2,500 MW and the geothermal potential
is estimated at 450 MW. Immediate investment prospects in the a) 600 MW Karuma and 183
MW Isimba hydro power plants where Government of Uganda is required to provide 15% of
the combined USD 2.27 billion project cost; b) 60,000 bbl / day refinery estimated to cost USD
2.5 billion where Government of Uganda together with the other East African countries, will
be a 40% project funder and contributor; and c) a proposed 1,400 km pipeline from the oil &
gas fields in western Uganda to the Kenya coast.
Investment prospects
• 45% of the waters of Lake Victoria, the 2nd largest fresh water lake in the world,
lie within the Ugandan borders. The lake has over 3,000 islands whose tourism
potential remains unexploited. In addition Uganda is immensely endowed with
over 1,000 bird species, some of which are endemic to the country, mainly in the
Albertine region. These constitute 67% of Africa's and 11% of the world's total bird
population, making the country a must visit for bird lovers.
Acute infrastructure
Natural resources
Political risks
• 50% of Uganda’s population is under the age of 15 years and is
expected to grow from a population of 35 mm today to 96 mm in
2050. It is one of the fastest growing populations in the world.
• Uganda is a laggard on most measures – electricity consumption per
capita, paved road density, broadband penetration; banking penetration;
mobile penetration. These are all opportunities in the near team.
• Estimates are Uganda will need to invest $10 bn over next few years
(Pipeline has $3 bn for roads and $ 4 bn for energy in specific projects).
• Estimates are that oil reserves are between 3 bn and 6 bn
barrels which when exploited will yield double digit growth.
• Production expected at 130,000 to 180,000 bpd by 2016.
• A 180,000 bpd refinery also in the works with expected 30% IRR.
• Political conflicts in the region are no longer norm as democracy is
being institutionalized across the region.
• 72% of Sub-Saharan Africans live in free / partially free democracies.
Uganda has had regular elections over last two decades.
Uganda’s capital markets
• The Capital Markets Industry of Uganda is comprised of the Uganda Securities
Exchange (USE), The Capital Markets Authority, 8 Securities Brokers / Dealers, 5 Fund
Managers and 7 Investment Advisors amongst others. The USE started operations in
1997 and currently has a total market capitalization of USD 21 billion comprised of 8
Ugandan companies with a market capitalization of USD 1.3 billion (only 6% of GDP)
and 8 cross-listed Kenyan companies with a turnover of USD 19.7 billion.
• The total amount of institutional savings in Uganda (provident funds, retirement
benefit funds & life insurance savings) is USD 2 billion which constitutes about 10%
of the GDP. Foreign investors hold an average of 35% of the free float of the shares
traded on the USE.
• The free float on the USE is approximately USD 800 million and the average annual
turnover of the USE over the past two years has been USD 100 million driven mostly
by transactions in the financial services sector (banking) and in the energy sector.
• The relatively small size of Uganda’s capital markets suggests a huge upside potential
when compared with the country’s peers’ stock markets’ capitalization as a
proportion of GDP, and in view of the positive growth prospects of the economy of
Uganda going forward.
Investment liquidity options
• Even though it is comparatively small, the capital markets in Uganda are rapidly
growing and will continue to provide an opportunity to fully or partially exit
mature investments (after 7 – 9 years) of investments in the optimum range of
USD 30 – 80 million deal ticket sizes, for investors seeking exit options aside
from trade sales. Bigger investments can easily be exited through dual listings
within any of the other four East African countries’ stock exchanges – the
Nairobi Stock Exchange, the Dar-Es-Salaam Stock Exchange, and the Rwanda
Stock Exchange for purposes of assured liquidity and price discovery.
Recent global investor participation
• Re-known Private Equity firms like Actis, Blackstone, Norfund, Aureos
Capital, Investec and others have successfully participated in investments
in the energy and financial services sectors of Uganda’s economy. There is
increasing interest in infrastructure investments from China, Turkey and
other emerging market countries.

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