AFRICA DIASPORA INVESTMENT FORUM London UK 19 th-20

AFRICA DIASPORA INVESTMENT FORUM London UK, 19 th-20 th November, 2004 PRIVATISATION IN UGANDA Michael Opagi Privatisation Unit, Uganda

Uganda Public Enterprise Reform & Divestiture program • Divestiture process is guided by – Govt Policy of a private sector led Growth – PERD Statute – Divestiture Guidelines – Procedures Manual – Sector Policy Reviews

The Divestiture Program • Guided by Procedures Manual which has – streamlined the divestiture process. – Enhanced the transparency, integrity and quality of the divestiture process. • Process – – Policy guideline/classification -> divestiture strategy Due diligence Divestiture Action Plan Transaction -> Completion • Status – First phase focused on commercial enterprises – Second phase handled Utilities starting with Telecom sector – Complete program end 2005/2006

Investment Opportunities • Investment Opportunities: – Agro Processing: Kinyara Sugar Works Ltd, Ranching, – Housing and constructions : NHCC, Mortgage financing, low cost housing – Financial Services sector: Mortgage Financing, Insurance (NIC), Capital market services in Collective Investment Schemes (CIS), funds management and financial advisory services, Long term development financing for industry and agriculture – Tourism - concessions in the National Parks, provision of alternative high standards hotel facilities, and Mandela National Stadium

Opportunities Cont. • Telecom Sector – Duopoly ending June 2005, other opportunities in broadband IT services like call centers, rural telecommunication services • Electricity sector – Independent Power Producers • Water Sector – Long term lease • Capital Markets: - Future IPOs : Stanbic, UTL, Kinyara, Barclays, Kakira, Apollo • New Vehicle – Privatisation Fund/Unit Trust to provide an open ended fund

Other Opportunities • Procurement related opportunities – Consultancy to provide transaction advisory services in the divestiture process. – All outsourced assignments advertised in local and international media

Achievements • Development of the Capital market and increased Public Participation – 5 Successful IPOs; smaller units to Ugandans achieving 75% • Subsidies have reduced by about 76% from 1994 to 2001. Subsidies have reduced largely as a result of restructuring, privatization, and debt settlement activities. • Improve management of remaining enterprises and utilization of resources through introduction of corporate governance, board representation and prior to approval of operating plans.

Achievements Cont. • Bigger Tax Base for Government • Increased Export Earnings • Development of human resource capacity in Uganda • New technology and better safety conditions in the production process have generally improved working conditions for employees. • Improved worker environment (better pay and benefits) • Enhanced product diversification

LESSONS: q Privatization Outcomes driven by Ø Recognition of the partnership role Ø Risk allocation to guide the Govt Role Viz PS Ø Risk taken by whoever can control it best q Policies to be clearly understood; Ø Means not an end on its own Ø Legislative and institutional support Ø Recognition of stake holders

LESSONS: (cont) q. Transition issues ØStructure of industry – Role reallocation ØOwnership structure Vz Financing ØRegulation & resources q. Implementing the reforms ØLegislative framework (Structure) ØUnbundling & Demonopolisation ØRegulator – independence!!!

New Government Role q. Creating the Enabling Environment ØMacro-economic stability ØPolicies that encourage investment ØPolitical consensus – role of private sector ØTruck record on adequate tariffs q. Developmental role ØProjected to reduce with sector growth ØProvide guarantees for; v. Utilities with poor credit rating v. Political risks (e. g. expropriation)

New Government Role (Cont. ) q. Regulation ØAutonomous/independent ØPredictable ØTransparent ØSocially optimal investment levels ØSupportive not inhibitive q. Sovereign Powers – PS enabling ØLand acquisition ØCross-border issues e. g Joint concesssioning Ø relation to other supportive legislation

What Govt should not do! q. Over-specify ØDon’t interfere in managing PS borne risks ØManage over expectation!!!! ØBalance pricing & Investment q. Inconsistent ØBe credible partner ØAvoid ending up with litigation ØThe Private Sector is watching!!!

Conclusion q High level support not enough q Support Legal & Institutional framework q Managing stakeholder expectations q Balancing risks Govt/PSP ref Tariffs q Resolution of sticky issues before/after PSP q Public Education /dialogue crucial for buy-in q One solution don’t fit all (sector/country) q Refine PSP and social responsibility q Regulatory capacity / Dev’t role

THANK YOU