Areas for improvement
The index says that the country has the highest tax rates on dividends in the region with no exemptions or incentives to encourage financial market development.
In addition, its lowest ranking is on ‘capacity of local investors’ reflecting in large part the country’s low level of pension fund assets per capita. Initiatives to broaden access to pension plans should be considered in future financial inclusion strategies, the index suggests.
Uganda’s second-lowest ranking is in pillar 6 (legality and enforceability of standard financial markets master agreements), where it is 12th. This is mostly due to weaknesses, as measured by the World Bank, in its insolvency framework. Improving this score can help attract international investors, who want to be sure they can quickly and easily reclaim at least some of their capital from a failing investment.
To bolster market capitalisation, Uganda’s Capital Markets Authority, with backing from the executive, is developing mandatory listings for firms in strategic sectors such as telecommunications, tier one banks and mining firms to increase the number of listed companies on its bourse.
Tumubweine Twinemanzi, the executive director Bank Supervision at Bank of Uganda who spoke on behalf of Governor Emmanuel Tumusiime Mutebile, said the index exposes opportunities but also challenges to the Ugandan economy that must be deliberately addressed.
In line with the index, Tumubweine said that the central bank, in their monetary policy actions would ensure that it encourages private sector growth.
“BoU will continue working with banks to fix the financial system and the Capital Markets Authority to expand liquidity and put in place a mechanism to ensure that any impact of financial crisis is kept at minimum,” he said.
Jeff Gable, an economist and the brain behind the index, said there are three things that drivers of Uganda’s economy must be concerned about. The first one is debt sustainability; the other is fiscal deficit (spending more than what the government collects as tax revenue) and the third is importing more than what the country exports.