BusyMarkets Kampala #003: A look at Uganda’s murky investment sector

The Ugandan shilling little changed this supported by slight appetite for dollars from importers and the interbank market. The outlook is for a stronger shilling next week. The news of oil exploration starting very soon didn’t seem to faze investors, this could be because the first proceeds are to servicing the growing public debt. Uganda’s debt has risen to 53% of Gross Domestic Product, beyond the debt ceiling as required by the International Monetary Fund.

The govt is taking contractionary monetary policy measures to keep inflation at bay. The intervention of increasing borrowing rates for central bank thus making it hard for commercial banks to lend (trickledown economics) to citizens, budget cuts will also be the talk of town this year. Not “very” key govt sectors will be allocated less than they usually receive like sports, travel of officials abroad, purchase of vehicles for govt officials will take a back seat.

Share and equities investment 101

Before we dive into the shares/equities update, I felt like I could give our audience a refresher. A share indicates a unit of ownership of the company. If you are a shareholder of a company, it implies that you as an investor hold a percentage of ownership of the issuing company. As a shareholder, you stand to benefit in the event of the company’s profits and bear the risks of the company’s losses. Shares have two types: Equity shares and preference shares.

An Initial Public Offering (IPO) is the process of offering shares of a private corporation to the public in a new stock issuance. An IPO allows a firm to raise capital from public investors.

Benefits of Investing in shares

  • Dividend: An investor is entitled to receive a dividend from the company
  • Capital Gain: Gains which arise due to a rise in the market price of the share
  • Limited liability
  • Exercise control: Acquire voting rights
  • Liquidity: benefit of timely liquidation


  • The management of the company decides how much dividend should be given hence not fixed nor controllable by the Investor
  • Fluctuation in Market price
  • Limited control

Tips to look at before buying shares

  • The business model of the company
  • Financial health
  • Future growth potential
  • CEO, Management Team & Leadership
  • Peers, competition and the landscape
  • Social sentiment
  • Earnings and revenue history
  • Institutional Sponsorship

UMEME shares still hold weight

UMEME Uganda is currently at a market price of UGX 280.0000. UMEM has been more volatile than 90% of UG stocks over the past 3 months, typically moving +/- 5% weekly. UMEM’s weekly volatility (5%) has been stable over the past year but is still higher than 75% of UG stocks. This provides a firm buying support level for the long-term investor.

Having govt confirm the buy-out clause priced at roughly UGX 720 per share, provides you with leverage and a massive capital gain and dividend pay-out as well. Investors should hold on to their UMEME shares especially the investors who have owned the stock for not more than two years. In the Money markets, the overnight money was trading on an average of 11.5% compared to the one-week money that was trading at an average of 12%.

Treasury bill interest rates

There was a Treasury bill auction and the results largely held steady. Ideally, the gov would have decided to continue cutting the rates but there is still some appetite for domestic debt especially one to two year tenures, in fact the rates were bettered by almost 1%. This is how prevailing indicative rates look like as of 20th Jan 2023 according to the bank of Uganda.

Period to Invest in Interest rate per annum
91 DAY T-BILL 10.384%
182 DAYT-BILL 10.900%
1 YEAR T-BILL 12.500%
2 YEAR BOND 16.749 %
3 YEAR BOND 13.50%
5 YEAR BOND 16.25%
10 YEAR BOND 17.50%
15 YEAR BOND 16.00%
20 YEAR BOND 17.00%

In addition, investors should look out for the 10-year and 2-year treasury bonds which will be on auction next week. I see returns still looking favorable compared to other papers.

Seth Nuwagaba is an investment banker at one of the biggest banks in East Africa.