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Absa Africa Financial Markets Index 

(L-R) Jeff Gable, Keith Kalyegira, Prof. Samuel Sejjaaka, Prof. Pamela Mbabazi, Patrick Ayota & David Wandera during the panel discussion

Uganda moves to the fourth spot due to strong data reporting standards, new environmental, social and governance incentives

Kampala, Uganda | THE INDEPENDENT | Uganda’s overall score in the Absa Africa Financial Markets Index increased by six points to 66 in 2022, moving the country up to fourth from sixth place in the rankings, according to data released on Jan.31 in Kampala.

Uganda’s improvement was mainly reflective of strong data reporting standards and new environmental, social and governance incentives.

Uganda’s score for Pillar 3: Market transparency, tax and regulatory environment registered the largest increase to 81, from 60 in 2021. This was largely due to an improvement in ESG initiatives and standards after the Bank of Uganda launched a strategic five-year plan from 2022-27 which focuses on the ‘sustainability of the financial system and climatic risk’.

Within Pillar 3, Uganda continues to score among the highest for financial information transparency and corporate reporting standards.

Uganda’s highest score was 90 which came in Pillar 6: Legal standards and enforceability. This is partly due to the existence of legal provisions for the enforceability of collateral and netting off. Uganda recently partnered with both the European Union and Frontclear BV to support interbank transactions and further use of standard master agreements, which would bolster its score in Pillar 6.

In Pillar 2: Access to foreign exchange, Uganda’s score increased to 84 from 65 which was mainly due to an improvement in foreign exchange interbank liquidity.

The score for foreign exchange reserve adequacy also rose. This indicator stayed relatively stable at four months of imports in Uganda in 2021, while it deteriorated more significantly in other AFMI economies.

Moreover, despite tumult in the global economy and slightly worsening inflation, Uganda’s solid growth prospects and relatively strong macroeconomic data standards mean it ranks third in Pillar 5: Macroeconomic environment and transparency, behind only Egypt and Botswana.

Weak areas 

Despite slight improvements to Uganda’s score in Pillar 1: Market depth, corporate bond turnover and total equity turnover remained low in 2022, according to the index.

The country continues to have a relatively low stock market capitalisation, which fell by 1.5 percentage points as a share of gross domestic product in the 12 months to June 2022. And despite the latest ESG incentives and standards, there is limited availability of ESG products (such as green bonds) on the domestic market.

A key area for improvement is in Pillar 4: Capacity of local investors, where Uganda scores 14. Pension fund assets per capita stood at $125, which is much lower than the average across all index countries of $826.

Mumba Kalifungwa, the managing director for Absa said 2022 was an interesting year.

“The optimism with which it began was dimmed by an even tougher economic environment as a result of inflationary pressures created by a combination of global shocks, supply chain disruptions caused by the pandemic and adverse weather conditions,” he said.

Kalifungwa added that the cost of fuel increased thus also increasing the cost of doing business and production and driving up commodity prices.

“At Absa, we believe that financial markets are vital to Africa’s growth providing an opportunity to tap into domestic capital but also be better positioned to access global capital,” he said.

Bank of Uganda Deputy Governor Michael Atingi–Ego said, the 2022 AFMI is especially encouraging for us because it provides immediate positive reinforcement for the initiatives taken by Uganda and its peers that improved significantly last year.

“The index also depicts starkly the challenges holding us back. As we smile at the progress made in the previous year, we must grit our teeth, clench our fists, and pull up our socks to tackle the persisting challenges and unlock the potential of financial markets to spur national progress. We have taken the initial steps, but a long road remains ahead,” Atingi-Ego said.

Ramathan Ggoobi, the permanent secretary and secretary to the treasury at the Ministry of Finance Planning and Economic Development said, they would use the index to improve planning and decision-making to realize social economic transformation for the people.

About the Absa index

The Absa Africa Financial Markets Index released annually facilitates meaningful debate about the maturity and accessibility of Africa’s financial markets and records the openness and attractiveness of countries across the continent to foreign investment.

The report continues to assess progress and potential across six key pillars: market depth, access to foreign exchange, market transparency, the capacity of local investors, macroeconomic opportunity, and the legality and enforceability of standard financial markets master agreements.

Produced in collaboration with the Official Monetary and Financial Institutions Forum (OMFIF), the index is a credible source of information and insight on financial markets in Africa and macroeconomic indicators, providing vital data for the business community, policymakers, economists, regulators and the various players in the market.

To date, the index ranks the maturity, openness, and accessibility of 26 financial markets in Africa, up from 17 countries when the report was first produced in 2017.


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