Electricity, at what price?

Uganda is producing estimated 850MW. During peak demand, consumption can shoot up to 580MW rendering 270MW redundant. Speaking at the National budget day, President Museveni noted that the country has capacity to handle heavy manufacturing industries that are primarily dependant on electricity. But also, it signals that Uganda has opened her ways to other countries in the region that wish to import electricity. Uganda can earn some little foreign exchange.

By 2020, Uganda expects to be producing 2500MW. However, there is a grimy picture on the faces of consumers. Uganda is generating more than what her citizens can consume. Government had anticipated demand to grow after coming up with the Power Sector Investment Plan in 2010. This did not happen. In fact, in some cases the demand is declining. Exports to Tanzania were anticipated to increase from 10MW in 2008 to 16MW in 2012, increasing by 3% per year. On the other hand export to Kenya would remain stable at around 6 MW. Considering the actual outcome from 2008 to 2015, export to Tanzania remained at around 12MW. A short fall of 4MW.

The Power Sector Investment Plan projected that the total number of customers would increase from 10,000; 5,000; 15,000 for Base Case, Low Case and High Case respectively in 2008 to 250,000; 456,668 and 618,290 in 2012. This forecast was based on the 2002-2012 Rural Electrification Plan. However, this number of connections was not achieved. This leaves the few consumers having to pay higher tariffs for the electricity generated. This brings us to the most important aspect for the high tariffs.

“Uganda is disadvantaged by the nature of contracts it entered into with the generating companies. Uganda has to pay for whatever is generated. It is like having a 62 passenger bus with 20 people on board but you have to pay for the 42 vacant seats. The owner of the bus shifts the burden to the person hiring it.” Noted Dr. Fred Muhumuza. It is capacity charge not seats occupied! This is the same instance in the electricity sector.

With big manufacturers set to exist Ugandan market, the talk about excess electricity may not come to an end in the short time. Uganda risks producing electricity for which is not consumed locally but can’t even export the surplus. The electricity being exported to the neighbouring countries is sold at a cheaper price.

By 2020, domestic demand is estimated at 60%. The remaining 40% will not be utilised. This means this should be a catalyst for government to stimulate more investments through attracting Direct Foreign Investments. If government intends to export surplus electricity, that is wrong. It might not get the returns it wishes. The only way is make electricity affordable and stimulate private sector investments.

Government has for long given tax incentives to companies. It is not tax incentives that drive industrialisation, it is the cost of doing business that attract investments. If even you gave a tax incentive for a 20 years period and the investor is not realising profits, he is not motivated to commit resources into such economy. Uganda currently is said to be the giving more tax incentives than any other country in the East African region, but it is a least destination for investors. There is high costs of doing business in Uganda aggregated more by high electricity prices and soaring interest rates.

Even if government is committed to infrastructure, the country needs to address the issue of public finance management inefficiencies characterised by high levels of corruption. The government should implement the Anti-corruption law.

Blockchain: The future of business

Frankly speaking, the internet is amazing, and it is changing the world. The internet is a part of everything we do, it has significantly influenced industries like newspapers, and retail, reinvented others like how we manage our money, and created new industries such as social media and online dating. Do you see where am coming from? The internet has been a force to reckon with and continues to be. In fact, the most life transforming days of the internet may still be ahead of us. Continue reading

To what extent has Umeme supported the achievement of the Electricity Sector Reforms?

Affordable and abundant availability of power is a pre-requisite for economic development, with the potential to have a multiplier effect on GDP growth. Continue reading

Nuclear Energy In Uganda

Uganda recently signed a Memorandum of Understanding with the Russian State Atomic Energy Corporation (ROSATOM) to peacefully use nuclear energy. The agreement was signed by state minister Simon D’Ujanga on behalf of Uganda and Nikolai Spasskiy the deputy director general of ROSATOM. ROSATOM already runs Uranium extraction and production, nuclear power generation, nuclear fuel, nuclear weapons and nuclear safety activities in Russia and other parts of the world. The company also claims to be Russia’s largest electricity generating company producing 196.37 kilowatt-hour of electricity in 2016, or 18.3 percent of the country’s total generation of electricity. This agreement came after Uganda’s ministry of energy team led by Undersecretary Prisca Boonabantu travelled to China at the invitation of Zhonguan Engineering Corporation (CZEC), a subsidiary of China National Nuclear Corporation (CNNC), as part of the ongoing discussions with Beijing to help Kampala develop peaceful nuclear at about $3 billion. Continue reading

Prepare for hunger

From the print edition: Sept/ Oct.2017

The time bomb is ticking; this is not your usual Al-Shabaab, Al-Qaeda time bomb style. It is due to poor planning, an increasing population that is growing rapidly at 3.5% annually, coupled with a reducing life span, poor farming decisions and a changing climate that has brought about a change in farming seasons not forgetting the influx of refugees in the country.

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Dstv’s Bad Choices: how a wrong business model threatens to fail a giant

No business can take their current market share for granted.Technology is changing so fast that existing business models are rendered inadequate overnight just like that. And DStv is not spared.

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USE undergoes demutualisation

What being an exchange PLC entails?

On 31st August 2017, the Uganda Securities Exchange announced that it had received a formal approval from the Capital Markets Authority to operate as a demutualised entity stock exchange in accordance of the Capital Markets (Amendment) Act 2016 and the Capital Markets (Establishment of Stock Exchange) (Amendment) Regulations 2016.

Demutualisation is a process of transforming a mutual/co-operative association into a public company by converting the interests of the members into shareholdings that can be traded like the shares of the company. Investors can now trade USE shares as we speak. It is now a public company limited by shares.

USE is a member of the African Stock Exchanges Association and remasins the principal stock exchange of Uganda irrespective of this transformation. It operates under the dominion of Uganda’s Capital markets Authority. The CMA reports to Bank of Uganda.

Their flagship stock index is the Uganda All Share Index which was launched in 2003. As of the week 18th-22nd September 2017, the ALSI index session closed at 375.29 up by 0.43 basis points from the previous week with its most active counters being Umeme limited and SBU. The turnover during the same period stood at 130,889,789 less than that in the previous week of 374,384,273.

The exchange has grown and is currently trading 16 listed local and East Africa companies. It operates in close association with the Dares Salaam Stock Exchange of Tanzania, the Rwandan Stock Exchange in Rwanda and the Nairobi Stock Exchange of Kenya.  Rumour has it that in the not so distant future we shall see a merger of the three which will result in formation of a single East African bourse. But that remains a rumour.

The exchange was founded in June 1997 but started trading in January the following year. At first only the East African Development bank had issued a Ugx. 10 billion 4-year bond and was the only listing. There was limited trading per week. But this did not stop it from expanding.

This was followed by a host of milestones. On 27th March, 2001, the first ever cross border listing in the East African market occurred where East African Breweries Limited (EABL) was listed on the Uganda capital markets. This followed the listing of the first financial institution on the Uganda Capital Market, Bank of Baroda Ltd. Jubilee Holdings limited became the first insurance institution to list on the UCM in 2006. In July, 2015, USE automated its trading platform where the CSD systems were integrated with the Automated Trading System eliminating the manual process of data capture. And at the beginning of 2017, it launched an e-platform dubbed Easy Portal in a bid to ease access for investors to track their portfolio and buy shares online during public offerings beating Kenya to become the first in the region to roll out the portal.

Yet efforts to demutualise the exchange have been underway since 2007, it has taken them more than 10 years to finally get approval. Yes, demutualisation is yet another milestone in the advancement of this entity. But what does it mean for USE to be demutualised? Is it economically feasible? SB gives you an in-depth insight on this issue at hand.

Connotation of USE being a PLC

Of course, USE will not only be able to conduct commercial business to make a profit just like a normal corporate entity, but also put in place a board of directors to look after its day to day operations. Previously, investors were reluctant to invest their proceeds with USE. Most of them were uncertain of where the funds would go, others had doubts about the management. Many investors believed that the exchange was subject to manipulation especially when it is run by a governing council. This was drifting the exchange away from its vision of being Uganda’s preferred institution for investments and sourcing of capital. Demutualisation will give control of USE to even investors that don’t have trading rights. So everyone will be able to take part.

To meet its mission to create an efficient and secure East African market place that will enhance the competitive strength of the local capital market in Uganda, there will also be an independent, transparent and flexible governance structure. Once an exchange is listed as a PLC, it’s governed by the normal corporate governance standards and ethics to ensure more transparency. It’s set to induce investors to trade more freely which will most definitely boost USE’s turnover which stood at Ugx. 130,889,789 as reported at the end of September 2017. The exchange will further attract investment from other sources; hedge funds, mutual funds and other institutional traders.

USE also plans to self-list through an Initial Public Offer in the next couple of years. This will enable Ugandan investors to buy stake in the exchange. Take for instance, demutualisation in India where their existing members stake was reduced to 49% and the rest was put up for trading. With more stake listed, USE will be able to raise more revenue. As per today, reported by USE C.E.O, Mr. Paul Bwiso, the initial shareholders are African Alliance Uganda Ltd, Baroda Capital Ltd, Crane Financial Serviced Ltd, Crested Capital Dyer and Blair Uganda Ltd, Equity Stock Brockers Ltd and UAP financial services Ltd.

But are these targets feasible in Uganda’s problematic economy?

All is well on paper doesn’t necessarily mean it ends well in practice

Going public entails many things and one of them is inducing an exit strategy. This gives options to founders and existing stakeholders to exit the business at some point in the not so distant future. The likes of Charles Mbiire, Birbal S. Dhaka, Francis Kajura, to mention but a few could be using this process to exit the business. And with a pending board of directors, we could see a change in management approach which could have adverse effects on the persistently growing exchange. Handing over stake to the public might breed detrimental board decisions like those Umeme limited is currently undergoing that have seen it hit an all-time low half year loss of Ugx. 47 billion.

SB understands the effort USE is taking to make its business transparent. But this does not come cheap. Being transparent involves appointment of supplementary staff viz fraud experts, at least two directors, suitably qualified company secretary, producing higher transparency accounts in less time than had previously been produced, the list is endless. Some of these USE already has but the processes will most likely consume more time and effort which would be previously used to grow the business. Time is money!

This demutualisation is set to increase public scrutiny of the exchange by analysts and receive more media observation. USE now has to disclose more detailed data about the business and performance irrespective of its influence on investors’ decisions. Of course a positive report could boost investor numbers but we shouldn’t overlook unanticipated pitfalls. When Umeme limited was flourishing, there was negligible scrutiny but in these hard times, the whole public is questioning their management. Every tabloid from Newvision, the Daily Monitor, Weekly Observer to Summit Business magazine, has a story on their worrying figures. Previously, USE could disclose limited data for public scrutiny but as per this development, they should avoid any minor lapses which could alarm the public adversely affecting its business.

Previously, USE’s governing council could investigate and monitor interested stakeholders before giving them the privilege to buy its stake. The initial shareholders are visible evidence. With the PLC, it’s going to become harder for them to make decisions on pending stakeholders. There is a possibility that the governing council chaired by Charles Mbiire could receive drastic uncalled for changes in which the existing stakeholders could lose control of the direction of the exchange, face disputes or even spend more time managing shareholder expectations while the exchange lags behind. To make matters worse, institutional stakeholders expect consultation and adoption of their policies (self-centred most times) in return for their investments. If for instance USE takes a drastic investment in different products that could be of long term benefit to the exchange like ATS, stakeholders might look at the short term losses in making their decisions which could further hinder the exchange. Is this the path USE is following?

With limited monitoring from the governing council and more power to a board of directors, USE is at threat of experiencing a “dirty” takeover. We call it dirty because of what the investor has done behind the radar in building their share base. Large shareholders could take advantage of small shareholders to build their stake in the company consequently taking it over. For instance, alias Kebba could take advantage of three small shareholders, buy their shares underground with limited monitoring and build enough stake to take over USE as the highest shareholder. With this influence, the company in question could use this advantage to manipulate USE’s share price in their favour. Such bid attempts have led to the downfall of many a company take Crane Bank limited for example where there was fraudulent acquisition of shares. We hope USE doesn’t follow into these footsteps.

A previously long run focused business model that USE had adopted, installing Easy Portals and ATS, could change in the not so distant future. Added pressure imposed on the stock market with USE’s share price representing the value of the exchange, stakeholders will always hope for a healthy return. Not only will the investors want satisfactory dividends from profits, they’ll also expect a subsequent share price increment. A focus on share price results into an impromptu change in business strategy. Instead of long term benefiting developments, top management will instead focus on short term goals to meet investor expectations. Instead of holding out for new innovations and investing heavily in these to sustain USE’s growing brand, management will be more interested in making short term profits and reducing on costs. This will most definitely be detrimental to Uganda’s capital markets if the issue is not mitigated early. This is what analysts term as short-termism.

In an economy where big PLCs are struggling to counter their operation costs, reporting losses in their performance reports, undergoing highly volatile share price situations and massively criticised for expansion in their confines relative to the dividend for investors, USE is in for enigma. The choice is yours, you could ignore what other PLCs have undergone or prepare to mitigate them.

1st Annual Cyber Security and Risk Management Conference.

We are organizing the 1st Annual Cyber Security and Risk Management (CSRM) conference because a lot has changed in the cyber space.


We need a conversation with leaders across board on how to proactively anticipate and manage risk which is attendant to automation. We are dealing in an era of artificial intelligence, big data and advanced analytics. So if you are not able to go deep into that area as a financial institution, a telecom company and regardless of any business, you are excessively overexposed because the era of automation is upon us.

As we talk all most every business is powered by technology and computers in the field of operations. You can’t therefore sit back because the risk landscape, things that prevent your business from achieving its objectives have also changed. The leaders must bring the conservation to the level of the Board as well as senior management team to ask what might happen to the systems and cause business failure. And that is the conversation the conference brings on the table. Register to attend

You have had stories about Equifax and many other businesses whose systems have been hacked. Even organizations that run critical missions have also been attacked. The current case in the United States were over 150m credit cards and National Social Security Fund numbers of citizens are in the hands of cyber criminals. It means that you are not safe. You do not know when the attack will come but it is better to anticipate it. The landscape and space for cyberattacks have changed significantly and people need to know from a practical point of view by real professionals.