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

LESSONS: (cont)  Transition issues  Structure of industry – Role reallocation  Ownership structure Vz Financing  Regulation & resources  Implementing the reforms  Legislative framework (Structure)  Unbundling & Demonopolisation  Regulator – independence!!!

New Government Role  Creating the Enabling Environment  Macro-economic stability  Policies that encourage investment  Political consensus – role of private sector  Truck record on adequate tariffs  Developmental role  Projected to reduce with sector growth  Provide guarantees for;  Utilities with poor credit rating  Political risks (e.g. expropriation)

New Government Role (Cont.)  Regulation  Autonomous/independent  Predictable  Transparent  Socially optimal investment levels  Supportive not inhibitive  Sovereign Powers – PS enabling  Land acquisition  Cross-border issues e.g Joint concesssioning  relation to other supportive legislation

What Govt should not do!  Over-specify  Don’t interfere in managing PS borne risks  Manage over expectation!!!!  Balance pricing & Investment  Inconsistent  Be credible partner  Avoid ending up with litigation  The Private Sector is watching!!!

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

THANK YOU