Uganda becomes the preferred destination for East African businesses
A new business order is emerging in the East African region fueled by especially Kenyan businesses on an expansion binge. Uganda has become the new investment darling for most of this companies due to its heightened rate of economic reforms, a move that is now toppling Rwanda from its long held enviable position as a leading business hub in Africa.
Uganda has overtaken Kenya as a preferred destination for foreign investors seeking opportunities in East Africa, according to a new World Bank report. Kenya, which is East Africa’s largest economy, lost its grip on reforming the business environment to finish at number 121 from position 109 out of the 185 countries surveyed for the Doing Business 2013 report. The report shows that Kenya’s lacklustre performance was mainly the result of inability to sustain reforms it started in the area of awarding building permits.
The report, which promises to put pressure on Kenya’s policy makers, show that Uganda, which has been trailing Kenya since the report began being published, is now ranked at position 120. One of the key elements that is now making Uganda preferable to many businesses has been its aggressive reforms in area of corporate insolvency and mortgage laws that have made it easier for entrepreneurs to access the title registry and digitisation of title records compared to its counterparts.
“Digitising records at the title registry has increased efficiency at the assessor’s office and made it possible for more banks to accept stamp duty payment,” read the report. Uganda is now East Africa’s second most competitive economy when it comes to ease of doing business after Rwanda, which is the world’s 52nd most attractive investment destination.
Kenyan executives with operations across the region agreed with the World Bank’s ranking, saying Nairobi has been particularly slow in decision-making and pushing reforms through. Vimal Shah, the chief executive of Bidco Oil Refineries, a producer of fast moving consumer goods with operations in both Kenya and Uganda, said it has become much easier to do business in Uganda than in Kenya. “It is easier because decisions are made faster and there is no procrastination while in Kenya under the present circumstances it takes too long to get things done,” said Mr Shah.
Tanzania, which is ranked 134th globally and Burundi at number 159 out of the 185 economies surveyed are the region’s fourth and fifth most attractive economies to foreign investors.
Uganda has equally strengthened rules on creation of mortgages, establishment of the duties of mortgagors and mortgagees, providing remedies for mortgagors and mortgagees and establishing the powers of receivers something all investors have been crying to governments to assure them of.
Uganda is also Kenya’s largest export destination in Africa and the third largest source of imported goods in the region.
A number of Kenyan banks, including KCB Group, Diamond Trust Bank (DTB), Bank of Africa (BOA), Fina, Equity, Imperial, NIC and African Banking Corporation have subsidiaries in Uganda.
Having been through severe economic hardships, Uganda today boasts of having a political stable environment which is characterized by low inflation, stable exchange rates and consistently high economic growth. After having gone through a tumultuous period in Idi Amin’s regime, today Uganda is a country at relative peace.
Supermarkets and retail stores in Uganda are also dominated by South African and Kenyan chains. Leading Kenyan supermarkets Tuskys, Nakumatt and Uchumi have all set up shop in Uganda buoyed by the impressive business climate and cost of doing business.
A 2011 report commissioned by World Bank dubbed: “Beyond the Nakumatt Generation: Distribution Services in East Africa shows that annual retail sales in Uganda hit an impressive 13 per cent last year, the best across the region.
The need for expansion has come at an appropriate time. Uganda has been registering an impressive GDP growth rate in the last decade and has been successful in keeping its inflation rate under control. The Ugandan economy has been expanding in size and stature as it begins to attract foreign direct investments from all around the world.
And its not just Kenyan businesses people that have set eyes on this pearl of Africa nation. Dubai's re-exports to Uganda have more than doubled in the last 5 years due to increased trade between the two countries. The country's economic performance in the last few years has generated a lot of interest in business circles around the world. Economists believe that the country has an economy with great potential as it is endowed with significant natural resources, including amply fertile land, regular rainfall, rich mineral deposits and a skilled labour force. Little wonder then that economic forecasts for Uganda predict that the country is now poised for rapid economic growth and development.
Kenyan professionals are also confident of working in Uganda. Nearly a quarter of employees in Uganda’s stockbrokerage firms, fund managers, investment advisers and other industry licensees are Kenyans, a survey by the capital markets regulator says.
Kenyan retail investors have also been some of the biggest participants in the Uganda stock market where majority of Kenyan companies are also cross listed. Kenyan investors were among the biggest buyers in the Stanbic Uganda initial public offer (IPO) of 2007 and the Umeme IPO.
Even ordinary Kenyan traders are crossing over to Uganda due to the favourable terms of doing business as the Kenyan markets become unbearable for them. Recently, egg traders crossed Uganda in big numbers in such of cheaper eggs as the Kenyan poultry farmers buffeted by high prices of feeds increased the egg prices by a huge margin, chasing away traders.
