Previous Quarterly Editions
Expropriation Risk: 57 57 57 61 Political Violence Risk: 59 59 60 60 Terrorism Risk: 40 40 40 40 Exchange Transfer and Trade Sanction Risk: 55 55 55 55 Sovereign Default Risk: 66 66 66 66
TREND ▲
The situation remains tense in Uganda almost three months after the country’s highly controversial general election, in which incumbent President Yoweri Museveni won his sixth elected term of office. The President officially polled 58.6% of the vote. However, his main challenger, opposition parliamentarian Robert Kyagulanyi, better known as the Afro-beat pop superstar Bobi Wine, alleged widespread voter fraud and decried the security services’ heavy-handed tactics throughout the campaigns.
Wine himself was arrested multiple times over the election period. Following one of these arrests, in November 2020, the authorities fired teargas and live rounds into crowds of his supporters, leaving at least 54 people dead and 65 seriously injured. This incident alone made the 2021 polls the most troubled since Uganda’s notorious 1980 general election (which saw the country collapse into civil war months afterwards).
Over the course of the campaigns, the police also detained hundreds of supporters of Wine’s party, the National Unity Platform (NUP), usually without charge. Under pressure from international human rights organisations, following the elections, the police eventually released the names of 177 suspects that it was holding in detention. However, the NUP claims that up to 600 more of its supporters remain unaccounted for.
In mid-March 2021, when Wine managed to break his de facto house arrest to protest for the release of these detainees, he was again arrested. In this context, the potential for further unrest remains high, especially in the capital of Kampala.
President Museveni continues to foster a business-friendly environment, including welcoming foreign direct investment. In 2019, the government passed a new Investment Code Act, which contains a range of new provisions on protection from expropriation. The code does away with previous restrictions on foreign investment in certain sectors, especially crop and livestock production, and removes monetary thresholds for investors to qualify for incentives.
However, the code also makes it mandatory for all foreign companies to register with the Uganda Investment Authority or risk imprisonment. While the code has been generally welcomed by foreign investors, there remains some frustration over how bureaucratic Uganda’s business environment has become, and over high levels of corruption. Additionally, although the code opens the investment environment, other recent government moves have sought to impose new restrictions on some sectors. For example, in late 2019, parliament passed a new Communications Licencing Framework which imposes a 20% stock listing requirement on mobile telephone providers, to limit repatriation of profits.
TREND ►
Uganda’s security situation has improved dramatically in recent years, following the resolution of several major armed insurgencies and especially that of Joseph Kony’s Lord’s Resistance Army (LRA). Since the LRA’s move out of Uganda in 2008, and the subsequent implementation of the ‘Peace, Recovery and Development Plan for Northern Uganda’, the security situation has vastly improved throughout the north.
However, with Museveni continuing to maintain his grip on power through a creeping authoritarianism, it is likely that the kinds of violent street protests seen during the 2021 election campaign will increase in frequency and scale. The situation remains tense, with only a major military and police deployment around the capital maintaining the peace. In this context, it might take only a small trigger incident for further violent protests to erupt.
While Museveni remains in power, given his control over the security services, any such protests would be unlikely to escalate into broader civil violence. However, as and when Museveni does eventually leave power, there is an increased risk of more widespread conflict. Uganda has never had a peaceful transfer of power since independence (1962), and it seems increasingly unlikely that the end of the Museveni regime will be its first.
Uganda has been occasionally targeted by terrorist attacks over recent decades, most notoriously in July 2010, when suicide bombers from the Somalia Islamist group al-Shabaab targeted two venues in Kampala in which crowds had gathered to watch the soccer World Cup. The attacks killed 74 people and left 85 seriously injured.
As the largest contributor to the African Union Mission in Somalia (AMISOM), Uganda remains a prime target for future al-Shabaab attacks. However, since then the Uganda military and intelligence services have significantly extended their counterterrorism surveillance (including with major technological upgrades provided by the United States and Israel). This has reduced the chances that further attacks will be successful.
In early March 2021, the US State Department reclassified the Allied Democratic Forces (ADF) as a designated Foreign Terrorist Organisation, and its head, Seka Musa Baluku, as a Specifically Designated Global Terrorist. Although the ADF originated in Uganda, and initially recruited primarily from slum areas of Kampala, it has been based in the eastern Democratic Republic of Congo for the past decade and has posed little security threat inside Uganda since 2013 (since when its occasional cross-border attacks have largely ceased).
However, Uganda’s government accuses the group of still carrying out targeted killings in Kampala. For example, in 2018, Museveni claimed the ADF was responsible for a spate of murders around the capital. Although the State Department’s redesignation of the group is largely symbolic (as previous attempts to sanction the group’s international funding streams and recruitment mechanisms have proved largely ineffective), it is possible that it could result in the ADF switching tactics, to mount a new campaign inside Uganda as well.
Uganda does not have restrictions on capital transfers into or out of the country. However, if a foreign investor has benefitted from tax incentives on an original investment, they are required to get a certificate of approval from the authorities in order to ‘externalise’ those funds. There are no restrictions on the currencies that investments can be converted into, as the Uganda Shilling (UGX) floats on global currency markets.
Following the recent contested elections, both the United States and European Union have sharpened their criticism of the government’s increasingly autocratic rule. However, as the United States’ main security ally in the region, it is highly unlikely that sanctions would be imposed against the Museveni regime.
Uganda’s public debt grew substantially during the first half of 2020, driven by new borrowing to cope with COVID-19’s effects. Most of this new debt came from the International Monetary Fund (IMF), which provided a series of emergency grants under its Catastrophe Containment and Relief Trust. The public debt now stands at just over 40% of GDP, two-thirds of which is owed to external creditors.
These numbers do not take account of government spending on the recent election campaigns, during which public spending again grew significantly. Both the Bank of Uganda (BoU) and IMF agree that the country’s debt is still within an acceptable ceiling- debt distress remains relatively far off. Nevertheless, they both agree that a further shock could see Uganda vulnerable.
However, against this, the BoU is optimistic about the overall economic situation. At the end of 2020, the bank’s latest Monetary Policy Report highlighted improvements in the outlook, related especially to progress on global rollout of COVID-19 vaccines. The report forecast that Uganda’s economy may grow by 3.5-4.5% for the 2020-21 fiscal year (July to June), which is a significant improvement on the 2-3% forecast in the BoU’s previous report.
Yet some sectors will remain weak, especially tourism, while the overall forecast is highly dependent upon Uganda receiving up to nine million doses of COVID-19 vaccines under the terms of the COVID-19 Vaccine Global Access (COVAX) consortium. To date, the rollout of COVAX has run significantly behind schedule.
Return to contents Next Chapter
