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Government to renew Umeme Concession- Matia Kasaija

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Umeme engineers and workmen at work in the field. Over the last 13 years, Umeme has invested $627m (UGX2.4 trillion) into doubling the distribution network to over 34,000km from the 16,000km it inherited and grown customer connections by more than 4 times- from the 290,000 inherited to 1,291,811 by end of 2018. The decision by government to renew Umeme’s concession will allow Umeme to promptly prepare for up to USD1.5 billion investment in the network over the next 10 years.

The Government of Uganda will renew Umeme Limited’s electricity distribution concession, Hon Matia Kasaija the Finance, Planning and economic Development minister, has confirmed, ending months of uncertainty and speculation.

“With respect to power distribution, the distribution concession with Umeme Limited will be renegotiated and extended to ensure further investment, and also lower electricity tariffs,” Kasaija told MPs and the whole country at the reading of the 2019/20 budget speech yesterday, June 13th 2019, at Kampala Serena Hotel.

He said the decision is to enable Umeme promptly undertake the necessary investments needed to facilitate government’s ambitious targets to connect 300,000 customers annually to the grid, with a goal of attaining access to electricity by 30% of the population by end of 2020 and 60% by 2026.

Government, under a reinvigorated industrialization policy also plans to build fully planned and serviced Industrial Parks in 22 locations across the country that will host both medium and large scale industries. In the 2019/20 budget, Kasaija has provided  UGX428.68 billion- out of which UGX147 billion will go towards extending electricity to the parks, UGX103 billion towards, the development of supportive export infrastructure in export processing zones and industrial parks while UGX178 billion will go towards supporting science technology and innovation.

NSSF MD Richard Byarugaba receives a dummy cheque from Umeme MD Selestino Babungi earlier. NSSF, the biggest shareholder in Umeme has welcomed the decision to renew the concession as securing the workers’ investment in the utility company

Government is banking on the recently launched 183 MW Isimba Dam and the expected commissioning of the 600 MW Karuma Dam sometime this year – altogether raising Uganda’s generation capacity to 1,767 MW by end of 2019, to feed this mega-industrialisation push.

Umeme investors welcome Kasaija’s decision

Richard Byarugaba, the NSSF Managing Director, welcomed the pronouncement by government as “Great news!”

“The largest workers investment in the Uganda stock exchange is now secured,” he said.

NSSF is the largest shareholder in Umeme with a 23% stock in the power distributor.

The bourse is yet to react to the announcement by government, but it is expected that institutional investors who have been on the edge, will rush in to absorb more Umeme shares.

Currently, according to a May 30th, 2019 report by investment bankers Crested Capital, Umeme is the hottest stock on the bourse with a dividend yield of about 13.63%.

Umeme’s total dividend for 2018 is UGX40.90 per share,

Umeme to invest up to USD1.5 billion over 10 years

The announcement comes as relief to Umeme who have been looking to the decision so as to start arranging financing for numerous investments needed for the sector, both to cover the remaining 6 years of the current concession and beyond.

Umeme board chairman, Patrick Bitature. He says Umeme is committed and has a demonstrated capacity Uganda’s growth and development agenda

In a recent interview with CEO East Africa, Patrick Bitature the UMeme board chairman, said Umeme will need to invest between USD1 billion and USD1.5 billion over the next  five to ten years, so as to create a robust enough distribution network to last the country for over 20 years.

Bitature said that over the next 6 years, Umeme estimates to invest up to USD450 million in   capital expenditures (CAPEX) alone.

“From our estimates, achieving the above targets, shall require significant investments focusing on uptake of new capacity, increased access, and driving efficiencies in the business operations. The resulting large geographical footprint shall require opening more service centres, building more substations, extending lines, injecting more transformers and recruiting more people on the ground,” Bitature said.

Bitature argued that investing for the long term allows the power distributor to amortise the costs over a longer period, thus resulting in a downward pressure on the end-user tariff.

“We are looking for longer term funding of 15 to 17 years and then we can spread that cost- amortize it over time. That shall have a lowering impact on the tariff,” he said.

According to recent estimates by Ministry of Energy and Mineral Development, when Isimba and Karuma HPP are commissioned and fully absorbed/utilized, it is expected that the weighted generation tariff will reduce from the current US Cents 6.47/kWh (UGX243.43) to US cents 5.34/kWh (UGX200.93), representing a reduction of 17.45%, which shall be reflected in the end-user tariffs.  

Bitature also said that Umeme was willing to reconsider their rate of return- currently at 20% since the investment environment had greatly improved, since 2005 when the concession was signed.

“Today the perceived high risk of the country is much lower than then, so it is easier to attract capital. The policies of this country have been very stable, the movement of foreign exchange, the amount of inflation etc. the risks in many of the areas have been mitigated.

If the high rate of return is the pain in the thigh of the government and the public, we are willing to consider a few points on our rate of return, as long as it makes business sense- for our customers and shareholders,” he told CEO East Africa Magazine.

Over the last 13 years, Umeme has invested $627m (UGX2.4 trillion) into doubling the distribution network to over 34,000km from the 16,000km it inherited and grown customer connections by more than 4 times- from the 290,000 inherited to 1,291,811 by end of 2018.

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Kwame Ejalu’s Kent Holdings, acquires Alexander Forbes’ Ugandan unit; rebrands to Zamara

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Zamara Group’s logo; now the new face of Alexander Forbes Uganda, who have rebranded into Zamara Uganda

Alexander Forbes Financial Services Uganda Limited is now Zamara Actuaries, Administrators and Consultants (U) Limited.

This follows the ongoing exit of the South African financial services group from Uganda and the sale of their 51% stake in Uganda to Kent Holdings Limited- a Ugandan financial services group with interests in insurance brokerage and pensions management.

The two companies affirmed the sale, in a joint statement on August 21st, by Bonga Mokoena the Alexander Forbes Emerging Markets (AFEM) Chief Executive Officer and Kwame Ejalu, the Kent Holdings Limited Chairman.

Kwame Ejalu, the Kent Holdings Limited Chairman wields a rich experience in Uganda’s financial services industry. The Kent/Zamara partnership blends Kent Holdings’ 22 years of local experience and strategic leadership with Zamara’s 23-year African heritage and technical capacity

“Alexander Forbes Emerging Markets (AFEM) and Kent Holdings are pleased to announce that an agreement has been reached on a sale of shares to Kent Holdings Limited. On 2 July 2019, a sale of shares agreement was executed in terms of which, AFEM sold 51% in Alexander Forbes Financial Services Uganda Limited, to Kent Holdings Limited, a co-shareholder in Alexander Forbes Financial Services Uganda Limited,” read the statement.

Kent Holdings, previously owned 49% of the Ugandan operations.  

The statement however said that “the sale of shares agreement is subject to fulfilment of conditions precedent.”

“The terms and conditions of the sale agreement remain confidential,” both executives announced, but confirmed that Alexander Forbes has effected a name change and will now be known as Zamara Actuaries Administrators and Consultants (Uganda) Limited.

The name change was gazetted on 17th July 2019.

“Alexander Forbes Financial Services (Uganda) Limited, has been by a special resolution passed on 10th July 2019 and with the approval of the registrar of companies changed its name to Zamara Actuaries Administrators and Consultants Limited- 17th July 2019,” reads General Notice No. 762 of 2019, extracted from the Gazette.

Miriam Ekirapa Musaali, the Zamara Uganda Chief Operating Officer. She possesses over 11 years in Uganda’s capital markets industry- where she rose to the Director Market Supervision role at Uganda’s capital markets regulator – Capital Markets Authority, from whence she became the Alexander Forbes Uganda (Now Zamara Uganda) COO and Head of Business for slightly for slightly over 2 years. She says, the name change shall not in any way impede the quality of service as the team remains the same “enthusiastic, energetic, creative” team.

In a separate announcement, media announcement run in the local dailies, Zamara also confirmed their entry into the Ugandan market, promising that they called “fresh perspective in the delivery of financial services in Africa.”

Who is Zamara?

According to their media announcement, the Zamara Group is a specialised financial services group providing actuarial advice and retirement administration solutions in financial services, umbrella retirement solutions, investment and risk sectors to individuals, corporates, parastatals and retirement fund clients. 

The firm currently administers assets in excess of KSh. 280 billion an equivalent of UGX 9.995 trillion and is the only actuarial, consulting, accounting and pension administration firm in Kenya to be ISO 9001:2015 certified.

Zamara Group Executive Director , James Olubayi

Uganda is the sixth Zamara operation after Kenya, Nigeria, Rwanda, Tanzania and Malawi. Zamara started operations in Kenya over 23 years ago as Hymans Robertson and later changed to Alexander Forbes (East Africa) Limited before renaming to Zamara Actuaries, Administrators and Consultants Limited, following the exit of Alexander Forbes from the Kenyan market in 2017.

For four consecutive years, Zamara, their umbrella fund, the Zamara Fanaka Retirement Fund (formerly Alexander Forbes Retirement Fund) and Zamara Vuna Pension Plan (formerly Alexander Forbes Vuna Pension Plan), Zamara’s individual pension plan have been variously awarded in Kenya’s Think Business Awards.  

A brand that embodies a fresh perspective on the delivery of financial services

Commenting on the entry of Zamara into Uganda, Kwame Ejalu, the Kent Holdings Chairman said: “We are enthusiastic about this partnership between Kent Holdings and Zamara Group as it marks the entry into Uganda, of a formidable brand that embodies a fresh perspective on the delivery of financial services in Africa. This partnership blends Kent Holdings’ 22 years of local experience and strategic leadership with Zamara’s 23-year African heritage and technical capacity, to deliver innovative and excellent services to our clients, underpinned by simplicity, empathy and trust,” adding: “Zamara Uganda will now add to our portfolio pan-African expertise, actuarial services and other online solutions that we previously did not offer.”

Asked if Zamara had acquired the stake, previously held by Alexander Forbes, he said he would comment on this after “the Alexander Forbes-Kent Holdings transaction is fully complete and all conditions precedent are fulfilled.”

Ejalu however said that Zamara Uganda inherits and will continue to run a managed private pension funds sector in Uganda and managed assets under administration portfolio in excess of UGX380 billion- roughtly 40% sector market share.

James Olubayi, the Zamara Group Executive Director said that the Zamara Group looked at Uganda as “one of the key strategic regions in the market for growth of the group.”

“Zamara aims to elevate the quality of advice and solutions offered to stakeholders and inevitably be a game changer for clients it serves in Uganda. We look forward to the extended partnership with Kent Holdings, clients, stakeholders across Africa,” he said.

Miriam Ekirapa Musaali, Chief Operating Officer, Zamara Uganda who previously was the Alexander Forbes COO said “We remain the same enthusiastic, energetic, creative team that is committed to serving our clients in Uganda. We will no doubt continue to offer superior consulting, advisory and administration services to pension funds in Uganda and further enhance our offering and advice to truly world class levels.”  

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Finance

Stanbic Bank scoops June/July best gov’t securities dealer award

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The Governor Prof. Emmanuel Tumusiime-Mutebile has given an award to Stanbic Bank Uganda (LTD) for being the best performing bank in dealing government securities for the months of June and July 2019. The award was received by Stanbic Bank CEO Mr. Patrick Mweheire during the quarterly Uganda Bankers Association (UBA) meeting at BoU headquarters in Kampala.

Governor BOU Prof. Emmanuel Mutebile(L) and Patrick Mweheire(R), CEO Stanbic Bank Uganda(LTD) at the do

The bank has been recognised by the regulator for its role in the primary dealer system that helps in developing Financial Markets and in reducing the costs associated with issuing Government Securities; through increasing demand, market efficiency, encouraging secondary market trading and improving the quality of Financial Market information.

A primary dealer is a pre-approved bank, broker or financial institution that is able to lend money to the government through treasury bonds and treasury bills. 

Background information on best performing banks in government securities award

In January 2005, the Bank of Uganda initiated the “Award for the Best Performing Primary Dealer in Uganda Government Securities for the Month” to recognize the Primary Dealer that performed best in trading Uganda Government Securities and transmitting information regarding the status of the financial markets to the Central Bank.

A Primary Dealer is any financial intermediary that has signed a Memorandum of Understanding with the Bank of Uganda to execute the following actions on a consistent basis:

§ To participate as counter-party in Uganda Government securities auctions conducted by the Bank of Uganda.
§ To provide the public with prices or yields that they will buy and sell “On-the Run” (the most recently auctioned) Uganda Government securities. i.e. Treasury bills and Treasury bonds on a continuous basis.
§ To provide the public with prices or yields that they will buy Off-the-Run (Other than the most recently auctioned) Uganda Government securities on a continuous basis.
§ To trade with the public Uganda Government securities at the prices or yields that they have quoted.
§ To make available information on the status of the market to the Bank of Uganda on a timely basis.

The points allocated for the Award to the Best Performing Primary Dealer in Uganda Government Securities for the Month are aggregated to determine the winner of the prestigious award.

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dfcu Bank’s H1 profit declines by 14% to UGX35.7 billion

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Interim H1 2019 results for dfcu Bank HY are out, indicating a 14.3% decline in net profit to UGX35.7 billion down from UGX41.6 billion in the same period in 2018.

Deposits declined by 1.5% from UGX2.02 trillion to UGX1.99 trillion while lending went down by 3.8% from UGX1.4 trillion to UGX1.36 trillion.

As a result, the bank’s asset book declined by 2.7% from UGX3.03 trillion to UGX2.95 trillion.

This is the first 6 months of new Managing Director’ Mathias Katamba’s firm grip on the bank, since he assumed full reigns in January this year.

However, compared to December 2018, there was a slight 1.3% growth in assets from UGX2.91 trillion to UGX2.95 trillion. Deposits also registered a slight 0.6% rise to UGX2.02 trillion, from UGX1.97 trillion.

dfcu yet to recover from 2018

dfcu bank, now Uganda’s fourth largest bank with about 10% of industry assets is yet to recover from what analysts say was a hard 2018.

Customer deposits largely remained flat, declining 0.4% from UGX1.99 trillion to UGX1.98 trillion. Lending went down 4.8% from UGX1.33 trillion to UGX1.4 trillion.

Full year profits took a 51.6% hit, reducing from UGX127.6 billion to UGX61.7 billion.

Assets declined 4.7% from UGX3.03 trillion to UGX2.89 trillion.

dfcu’s not-so rosy performance, has had an impact on its share price. Share price rose from UGX681 at the beginning of January 2018, rising 42.4% to hit a climax of UGX970 on 17th July 2018 but closed December 2018 at UGX822.97- a reduction of 15%.

Since the year began, dfcu share price has continued in a free-fall, dropping a further 21%, to UGX650 as of today, August 22nd 2019.   

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