Africa Market Update - February 2015

MARKET UPDATE – AFRICA | February 2015
POLITICAL OUTLOOK
Uganda and International Criminal
Court (ICC)
President Yoweri Museveni received much
needed support in his push for African
states to pull out of the ICC. In the concluded
African Union summit, Heads of State
drummed up support against being signatories
to the Rome Statute. Crumbled cases
against Kenyan and Sudanese Presidents,
Uhuru Kenyatta and Omar al-Bashir, respectively,
are likely to give impetus to deliberations
against ICC. Whereas there has been
no indication of retributive action from the
international community, concerns over
inadequate domestic capacity to mete out
justice in view of high crimes will top development
partners’ concern. Ongoing turmoil
in South Sudan will furnish a poignant case
in point for tabling concern over vulnerability
of states to crimes against humanity.
Whereas the handing over of former Lord’s
Resistance Army Commander, Dominic Ongwen,
to the ICC was deemed confusing by
many, we note that Uganda was compelled
to do so as a signatory to the Rome Statute.
ECONOMIC OUTLOOK
Mining and Agriculture Lead Credit
Growth
Mining and agriculture registered the fastest
acceleration of private sector credit between
February and November 2014, pointing
at investor vibrancy in the two sectors.
We expect the mining sector to retain pole
position in growth of credit as the country
rushes to meet targeted commercial oil
production by 2016. Plummeting oil prices
could, however, keep activity at sub-optimal
levels as investors slash exploration expenditure
plans, especially if prices remain depressed
into 2016.
Growth in Private Sector Credit
(Feb ’14 – Nov ’14)
BUSINESS ENVIRONMENT
Commercial bank lending rates remain high in the economy
threatening growth and investment prospects for private sector
players in 2015. At 22.2%, Uganda’s average lending rate
fares relatively poorly against Kenya’s 16.0% and presents
a challenge in access to credit which is a key catalyst for a
competitive business climate. According to World Bank’s Ease
of Doing Business 2015 (ranking 189 countries), Uganda trails
Rwanda and Kenya in facilitating access to credit.
Ease of Access to Credit Ranking 2015
Country
Rwanda 4
Ranking
Kenya 116
Uganda 131
Tanzania 151
Source: Bank of Uganda, StratLink Africa
New discoveries buoy investor activity
In August 2014, discovery of new oil wells
that increased Uganda’s projected reserves
by 85.7% to 6.5 billion barrels occasioned a
surge in the sector’s uptake of credit. The
new estimate of reservoirs places Uganda
at par with giant oil producers such as Sudan
and South Sudan (combined) whose reserves
are estimated at 5.0 billion barrels 5 .
Egypt, with reserves estimated at 4.4 billion
barrels now falls below Uganda’s capacity.
Ethiopia 165
Source: World Bank, StratLink Africa
5 Sudan accounts for 1.5 billion barrels while South Sudan
accounts for 3.5 billion barrels
14 | StratLink Africa Ltd.
www.stratlinkglobal.com