Uganda has recorded remarkable performance in the Absa 2021 Africa Financial Markets (AFM) Index report, jumping to 5th position, up from 10th position in 2020.
Speaking at the launch of the report on Wednesday, March 9, 2022 in Kampala, Mr Mumba Kalifungwa, the Managing Director of Absa Uganda, said the AFM Index 2021 report assesses progress and potential across 6 pillars: market depth, access to foreign exchange, market transparency, capacity of local of local investors, macro-economic opportunities and the legality of standard financial markets.
Mr Dan Wandera, the Absa Head of Financial Markets and Executive Director, said as a country, Uganda has one for the highest scores for fully implementing International Financial Reporting standards. The harmonized score was impacted by changes in other countries.
This was under Pillar 3; Market transparency, tax and regulatory environment.
Pillar 3 scores countries on the conduciveness of the regulatory environment for local and foreign investment, gauged through tax incentives, reporting standards and market transparency.
“However, we have performed poorly in: Capacity of local investors, Market regulatory and on Tax, we have the highest tax on dividends. We can improve on some elements in this,” he said.
According to the report, survey respondents highlighted the less favourable tax regime in Uganda, where the withholding tax rate on interest and dividends for non-residents is at the higher end at 20% and 15%, respectively.
The report further states that Uganda improved its ranking by 5 places, moving up to 5th, the highest score in Pillar 6: Enforceability of standard master agreements.
“Uganda, which is tied in fourth place with Mauritius in this pillar, has made considerable progress in making netting enforceable under its domestic law over the past year. The country enacted the National Payment Systems Act towards the end of 2020. The law includes a dedicated section on collateral arrangements and includes the ‘Enforcement of close-out netting provisions’,” the report reads in part.
“This recognises that the close-out netting provisions are valid, enforceable and binding on third parties, including a liquidator, without prior notice of an order of court,” it adds.
To further strengthen its netting-off and insolvency regulatory regime, the report states that Bank of Uganda is developing a separate and more explicit netting bill that will become the governing legislation for financial transactions documented under master agreements of ISDA and the Global Master Repurchase Agreement.
According to the report, Uganda outstanding sovereign bonds increased by 67% to $5.1bn. Similarly, the equities market cap increased to just under $6bn June 2021, up from $5bn the previous year, matched with an 87% year-on-year increase in turnover.
Geff Gable, the Chief Economist at Absa hailed Uganda’s improvment, saying the oil factor will soon play a big role in its rankings.
“Uganda’s score improved on the AFM Index 2021 while other markets saw their scores fall. Much of the activity is returning even as credit growth becomes modest. Uganda’s oil development is close to becoming a reality and investment is set to rise and be transformative for Uganda’s economy,” Gable said.
Absa Group is listed on the Johannesburg Stock Exchange and is one of Africa’s largest diversified financial services groups.
Miriam Ekiraapa, Director Legal and Board Affairs at Capital Markets Authority, said there is need for more collaboration between regulators of financial institutions to look at investment limits.
“You cannot have big markets when you boast of one big fund. We need more pension funds that can grow and consume the market space,” she said.
Uganda’s Secretary to the Treasury Ramathan Ggoobi said the country is capable of even doing better.
“The depth and liquidity of capital markets is fundamental to supporting economic growth, creating investment opportunities and attracting foreign and local capitals. I’m optimistic about Uganda’s economic recovery. With the reforms we have embarked on, we will prosper in the medium term,” Ggoobi said.
Michael Atingi-Ego, deputy governor of Bank of Uganda, while giving his keynote address at the launch of the survey, said despite the effects of the pandemic, Uganda managed to perform well.
Atingi-Ego said the ranking shows that there is need to sustain good policies and strategies that will power the financial market to drive economic growth and socio-economic transformation.
“Targeting the top of the index is symbolic of our determination to nudge, push and incentivize the fuller development of our financial markets. Effective and efficient financial markets in an open, transparent, and progressive economic environment will sustain and broaden our capacity to attract global capital, promote the effective use of domestic resources, increase resilience to economic shocks, and stimulate the economic recovery that remains fragile partly due to subdued investment,” he said.
Uganda was one of the 4 countries that posted improved scores and one of the 2 countries with improved scores above 50%.
You must be logged in to post a comment.