Business moments of 2013: a Look at the performance of uganda’s Leading sectors

By The CEO Team

A period of 12 months culminating into end of the year is not short time. During the course of this period, a lot of events happened both positive and negative, but as human beings, memorizing all the events is an arduous task, yet they are important in our lives. This is why The CEO Magazine saw it relevant to review major business events that characterized 2013 and their importance to Uganda’s economy. Just imagine, what could the year 2013 have  been without the following events?

Mergers & Acquisitions (Banking)

 The year 2013 will probably go in the history of Uganda’s banking  sector after Actis sold 45 percent stake in the Development  Finance Company of Uganda (DFCU) Bank to Norfund (The  Norwegian Fund for Developing Countries) and Rabobank at a total of US$42m.

This was the 2nd largest corporate deal in 2013, after the Airtel acquisition of Warid. Rabo Development BV  a subsidiary of Rabobank from the Netherlands, bought a 27.54 percent stake in Dfcu Limited from Actis, a London based equity fund while Norfund increased its stake in Dfcu to 27.54 percent after buying an additional 17.54% shares, still from Actis.

The addition of Rabobank Group to the DFCU board was  a major  boost to the Ugandan bank, given that the Dutch bank is among the top 30 largest financial institutions in the world and is an international financial services giant operating on the basis of cooperative principles with a predominant focus on providing all finance services in the domestic market. Internationally, the Group’s focus is on food and agriculture  in line with DFCU’s rural orientation.

In line with its cooperative roots, Rabobank Group is a cooperative bank, which operates in 44 countries and its international experience and exposure is expected to give DFCU a significant boost as it roots to be Uganda’s leading indigenous bank.Through Rabo Development, Rabobank will provide technical and management assistance as well as expertise to the new partner bank and will be represented in the board of directors and in management, which is expected to be a major contributor to the bank’s expansion and growth in the next few years.

This deal became the largest transaction facilitated by the USE, especially in determining the price.In 2013 still, the newer banks, in particular the West African ones  Global Trust Bank, Ecobank and UBA continued to be on spotlight after they registered the fourth year of losses as per the 2012 financial statements. Will 2013 be a year of turnaround? We’re just about five months away from the answer.

Further, banks continued expanding through opening more branches. However, Crane bank stood out. They didn’t only open branches but also drove the best media campaign among banks, by keeping their customers and potential ones informed about new developments. By November, they had opened nine branches in 2013, bringing the total number to 36 with plans to open four more by December 2013.

Additionally, Crane bank partnered with MTN Uganda in October to offer Mobile Money ATM cash out services to their members, an initiative aimed at promoting financial inclusion for all. This partnership allows MTN customers to withdraw money from Crane Bank’s ATMs using their phone whether or not they hold a crane bank account which adds a higher level of convenience since it caters for both the banked and the unbanked an  innovation that was  powered by Technology Associates.

Still on the banking scene, a banking sector overview report released by African Alliance Uganda revealed that there is still the likelihood that smaller banks could still be swallowed up by the larger banks. Previous projections by various analysts including African Alliance, had pointed to some potential Mergers and Acquisitions (M&A’s) in the sector after Bank of Uganda (BoU) increased minimum capital requirements to Ushs 25bn  by March 2013.

However, current indicators from BoU indicate that the banking sector is stable. In fact, according to the 2012 Annual Supervision report, Emmanuel Tumusiime  Mutebile noted that the sector is “very profitable and well capitalized, with a core capital adequacy ratio (regulatory tier 1 capital to risk-weighted assets) of 18.8 percent at the end of the year, which is well above the regulatory minimum of 8.0 percent.