Finance

Finance (406)

East Africa’s Food Basket: Balancing Import Substitution & Regionalism

By Christopher Burke, WMC Africa

Government support for the promotion of agriculture in the 2020/21 budget with the scrapping of VAT on agricultural equipment and processed milk are welcome steps in the right direction; however, care is required in the utilization of import duties to pursue import substitution associated with agricultural products.  Uganda is a relatively small economy and must maintain access to regional markets.

Tagged the “Pearl of Africa” over a century ago, Uganda remains “gifted by nature.” Geographically located at the centre of one of the fastest growing and most dynamic economic regions in the world, Uganda has become a prominent procurement and distribution hub for the greater East African region. Strategically located at the head of the Nile River and extremely rich in natural resources with fertile soils and consistent rainfall across much of the country; Uganda clearly has the potential to be a food basket for the region. 

Even before the COVID 19 pandemic, East Africa was leading economic growth on the African continent consistently registering over 5 percent while the global economic slowdown over the past decade saw growth in Europe and North America hovering between 1 and 2 percent.  While the Bank of Uganda’s projected economic growth for Uganda in 2020 is now between 2.5 t0 3.5 percent, the negative balance of payments is expected to increase significantly this year with reduced demand for Uganda’s exports while foreign debt continues to escalate.

The population of the East Africa including Uganda, Kenya, Tanzania, Rwanda, Burundi and South Sudan is approximately 185 million people.  If we add in the 17.6 million people living in the four provinces of eastern Democratic Republic of Congo (DRC) comprising Haut-Uele, Orientale, Maniema, North Kivu and South Kivu we have almost 20 percent of the total population of the African continent—a very substantial market.

Though still low, purchasing power parity is rising and Uganda’s population of 42 million people is among the fastest growing and youngest in the world.  Nonetheless, the Ugandan market is relatively small and underdeveloped. Exports are dominated by raw produce, particularly agricultural products. This is a binding constraint that needs to be addressed before Uganda can fully import substitute and gain wider access to regional and international markets.

Still heavily reliant on subsistence agriculture, government must explore ways to promote value addition to develop the agricultural sector.  Every segment of the value chain requires strengthening, starting with the farmers, to ensure good quality and competitively priced produce.  The reduction in taxes on agricultural equipment goes a long way towards this, but it needs to be complemented with a coherent effort focused on value chain development. Until the internal market can distribute rewards fairly across the value chain, it will be difficult to develop a production system that is responsive to the sophisticated standards of regional and international markets.

Import substitution is the first step in the development of an export sector and critical to improving the balance of payments; however, a viable import substitution strategy requires that production first meets the needs of the domestic market.  Substantial investment is required to achieve this and to exploit the economies of scale presented by the regional market, government must look at ways to improve trade relations with neighbouring countries within the East Africa Community (EAC) and the Common Markets for East and Central Africa (COMESA).  

The development and full implementation of robust regional tariff regimes would provide serious economic benefit.  The development of larger markets through the realization of trading communities would attract the necessary investment for the production of goods and services for regional markets and position Uganda as a trade hub in East Africa and better position the region to take on an increasingly fractious world.  

 

 

Former ICT Minister Mulira Commends Victoria University Online Learning Initiatives

Senior Presidential Advisor on ICT Hon Ham Mulira has commended Victoria University for putting in place early measures to help students continue with their classes uninterrupted during the COVID 19 pandemic.

Hon Mulira while addressing the media at Victoria University in Kampala said that such early initiatives like giving each new student a laptop will provide them with ability to study away from the university during this lockdown period caused by coronavirus.

“Corona Virus started as a health problem in China several thousands of miles away. We did not know the kind of impact it was going to have on several sectors. We have seen what it has done to so many economies around the world,”

“One of the areas which has been greatly affected is education. Students had to be asked to go home because they could not stay in an environment with great risks for COVID 19 infection,” Mulira said.

He adds that government through the National Council for Higher Education has come up with online/ distance learning guidelines for Higher learning education institutions on how to use technology as a medium of communication to impart knowledge to students while they are away from school.

” In Uganda we have 15m students who were asked to go home because they could not continue with their formal education in traditional means yet education has to continue. The solution was to adopt technology in the infusion of imparting knowledge through online/distance learning.”

The former ICT minister however explained that COVID 19 has come with some positive effects on education saying that online learning had been tried long ago and failed but said the COVID rebooted the interest in need of online education.

” At Victoria University students who register get laptops issued to him or her and they started this before COVID. This has been ongoing and provides their students with the ability to study away from the university” Mulira noted.

He further asked the university to address the issue of connectivity using internet to enable students get the best.

Dr Krishna Sharma the Vice chancellor Victoria University also noted that it is the responsibility of universities and education institutions to foresee and come up with innovative ways to ensure they are not interrupted by any pandemic.

“It was the responsibility of universities to foresee and prepare self accordingly. For Victoria University our team had already done guidelines two months ago before these of NCHE came out. We did a survey to find out the challenges of students, our staff and ourselves came out with our own guidelines,” he said.

Dr. Sharma says the university is ready to commence online teaching adding that all the issues raised in the guidelines by NCHE have already been in place at Victoria University.

“As VU most of the issues NCHE is asking we have been practicing them. We have been using them with our students and training our staff with effective utilizing e-learning resources”.

“We are ready to roll. We started getting students to apply, register and pay online. We can also teach online and evaluate them online. This is the responsibility of the universities to take up and come up with innovative ways that best fits our staff, our localities and students”.

He said the online classes will be conducted at free cost while those who will not be able will be provided with printed contents for self-study.

SOURCE: command1Post.com

Senior Presidential Advisor on ICT Hon Ham Mulira has commended Victoria University for putting in place early measures to help students continue with their classes uninterrupted during the COVID 19 pandemic.

Hon Mulira while addressing the media at Victoria University in Kampala said that such early initiatives like giving each new student a laptop will provide them with ability to study away from the university during this lockdown period caused by corona virus.

“Corona Virus started as a health problem in China several thousands of miles away. We did not know the kind of impact it was going to have on several sectors. We have seen what it has done to so many economies around the world,”

“One of the areas which has been greatly affected is education. Students had to be asked to go home because they could not stay in an environment with great risks for COVID 19 infection,” Mulira said.

He adds that government through the National Council for Higher Education has come up with online/ distance learning guidelines for Higher learning education institutions on how to use technology as a medium of communication to impart knowledge to students while they are away from school.

” In Uganda we have 15m students who were asked to go home because they could not continue with their formal education in traditional means yet education has to continue. The solution was to adopt technology in the infusion of imparting knowledge through online/distance learning.”

The former ICT minister however explained that COVID 19 has come with some positive effects on education saying that online learning had been tried long ago and failed but said the COVID rebooted the interest in need of online education.

” At Victoria University students who register get laptops issued to him or her and they started this before COVID. This has been ongoing and provides their students with the ability to study away from the university” Mulira noted.

He further asked the university to address the issue of connectivity using internet to enable students get the best.

Dr Krishna Sharma the Vice chancellor Victoria University also noted that it is the responsibility of universities and education institutions to foresee and come up with innovative ways to ensure they are not interrupted by any pandemic.

“It was the responsibility of universities to foresee and prepare self accordingly. For Victoria University our team had already done guidelines two months ago before these of NCHE came out. We did a survey to find out the challenges of students, our staff and ourselves came out with our own guidelines,” he said.

Dr. Sharma says the university is ready to commence online teaching adding that all the issues raised in the guidelines by NCHE have already been in place at Victoria University.

“As VU most of the issues NCHE is asking we have been practicing them. We have been using them with our students and training our staff with effective utilizing e-learning resources”.

“We are ready to roll. We started getting students to apply, register and pay online. We can also teach online and evaluate them online. This is the responsibility of the universities to take up and come up with innovative ways that best fits our staff, our localities and students”.

He said the online classes will be conducted at free cost while those who will not be able will be provided with printed contents for self-study.

SOURCE: command1Post.com

Sudhir Lawyers Say BoU Inaccurate On Why Shs379bn Case Was Dismissed

Kampala Associated Advocates (KAA), the law firm representing city businessman Sudhir Ruparelia have responded to a statement issued by the Bank of Uganda’s Governor, Prof. Emmanuel Tumusiime-Mutebile criticizing Court of Appeal’s decision dismissing the case in which BoU (Crane Bank in receivership) sued the businessman.

In a well detailed statement, KAA lawyers say that the statement circulated by the Bank of Uganda to the media contained many inaccuracies and falsehoods.

We reproduce the full statement below;

We act for and on behalf of Dr Sudhir Ruparelia and Meera Investments Limited. Our attention has been drawn to a press release issued by Bank of Uganda on 30th June 2020. The press release was issued on behalf of Crane Bank Limited by the Governor of the Bank of Uganda and published in the print and social media in Uganda. It contained many inaccurate and false statements. Our instructions are to correct the public record.

Why the Case was dismissed by the Court:

1. High Court Civil Suit 493 of 2017 (the suit forming the subject of the appeal) was filed by the Bank of Uganda in the names of Crane Bank Limited in Receivership.

The High Court considered the case and determined that it was not legally tenable as there was no cause of action. The case was accordingly dismissed. There is no court in any part of the world that can proceed to hear a case where no cause of action is disclosed.

2. In both the High Court and the Court of Appeal, the Bank of Uganda addressed the Courts urging them to ignore the fact that it had no cause of action and proceed to hear the case anyway. Bank of Uganda was inviting the courts to ignore the law. Both Courts rejected this legally untenable plea that is now being made in the press.

3. The Court of Appeal in its written judgment stated at page 16 that:

“The Appellant {Bank of Uganda} raises an issue that the court ought to have overlooked the preliminary objections and instead looked at the matter on its merits… we respectfully disagree with the Appellant that if a pleading does not disclose a cause of action or locus standi, the courts should still inquire into the merits of the main case. That would be an action in futility. The courts are not meant to award moot judgments. If a person has no cause of action, then the merits of the case cannot be inquired into lest the court may end up condemning a party who should not have been condemned.”

4. The Bank of Uganda should not be allowed to disrespect the

Courts, when it is the one that went to the courts to seek redress in the first place. If they are unhappy with the decisions of the Court, the legal remedy is to file an appeal and not to criticize the court in the press.

The false claim that tax payers’ money was injected into Crane Bank and Bank of Uganda’s failure to account for it:

5. Bank of Uganda makes a false allegation that tax payers’ money was used to settle Crane Bank Depositors. This statement is used several times in the press statement but it is not part of the case Bank of Uganda filed. It is an allegation designed to sway public opinion, and has nothing to do with the case.

6. Independent inquiries conducted by both the Auditor General and the

Parliament of Uganda (COSASE Committee) have all reported that there was no evidence to support Bank of Uganda’s claims that tax payers’ money was allegedly spent on paying depositors. Money went missing from Bank of

Uganda and remains unaccounted for.

7. Ever since Bank of Uganda took over Crane Bank, it has not published any audited accounts of the Crane Bank. There are no audited accounts for the period of Statutory Management or Receivership. This means that there are no documents of Crane Bank Limited that prove the Bank of Uganda’s allegation that it injected tax payers’ money into Crane Bank.

8. The Head of the legal department at Bank of Uganda in sworn evidence before the High Court stated on oath that Bank of Uganda had not made any loss of money on account of Crane Bank and that it had no legal interest in any case against shareholders. This statement on oath means that Bank of Uganda did not inject into Crane Bank any tax payers’ money.

In direct contradiction of this oath and pleadings filed in court, Bank of Uganda now claims in the press that it is seeking tax payers’ money that it had used to pay depositors.

9. Bank of Uganda’s auditors stated that the money Crane Bank Limited needed to survive was only 130bn shillings. Bank of Uganda alleges (without evidence or any rationale) that it injected 497 billion into Crane Bank and has failed to account for it as shown by both the COSASE and Auditor General’s Reports.

10. There is no forensic Report of any kind that states that US $92 million was extracted from Crane Bank by Dr. Ruparelia as Bank of Uganda alleges in the press statement.

11. Crane bank was subjected to numerous annual, quarterly and special audits and all its financial statements were approved every year by the Bank of Uganda without reservation of any kind. Not one of them alleged any extraction by Dr. Ruparelia. This allegation is absurd.

The unreliability of Bank of Uganda’s so-called

forensic investigation:

12. This so-called forensic investigation undertaken by Bank of Uganda is unreliable because the investigators did not interview Dr. Ruparelia, or the Managing Director or the Executive Director as required under forensic audit guidelines. A forensic audit cannot make conclusions without hearing both sides of an issue. This irredeemably taints the so-called forensic investigation and makes the findings unreliable.

A one-sided forensic investigation is not an objective investigation and cannot stand up to legal scrutiny.

13. The official reason given by Bank of Uganda to the public for the takeover of management of Crane Bank Limited was under capitalization due to provisioning for nonperforming loans, not the so-called extraction that is alleged in the press statement, which is an attempt to soil Dr. Ruparelia’s image.

The false allegation that Dr. Ruparelia owned 100% of Crane Bank:

14. The allegation that Dr. Ruparelia owned 100% of Crane Bank is false. All the shareholders of Crane Bank were vetted and approved by the Bank of Uganda in accordance with the Financial Institutions Act.

The allegations made about a settlement agreement:

15. The case Bank of Uganda filed in the High Court and the Appeal in the

Court of Appeal did not include any claims of any kind or any allegations of any kind in relation to a settlement agreement with Dr. Ruparelia. Because Dr. Ruparelia has filed a counter claim, whose subject matter is based on that settlement agreement, the Sub Judice rule precludes him from elaborating more on that matter here.

Constitutional Bar to the claims made against Meera Investments Limited:

16. Meera Investments Limited is a separate legal entity that is not regulated by Bank of Uganda and holds a reversionary interest in real property that the Bank of Uganda would like to take over without any legal basis and in violation of the Constitution of Uganda. This issue was considered by both the High Court and the Court of Appeal and was rejected both times on constitutional grounds. The Bank of Uganda wants the Courts to disregard the Constitution of Uganda to give them what they want.

Bank of Uganda’s complaint in the press that the Courts are limiting its powers to supervise closed banks:

17. It is not the Judgments of the High Court and Court of Appeal that restrict the powers of Bank of Uganda in resolution of closed banks as suggested by the Bank of Uganda in the press statement.

Both judgments stated clearly that the limitation on Bank of Uganda’s powers are found in the Financial Institutions Act.

If the Bank of Uganda is unhappy with those limitations, the appropriate remedy should be to seek to reform the law and amend the statute. It should not be to criticize the Courts in the press as it has done.

Dr Sudhir Ruparelia reserves the right to challenge these malicious and ill-founded allegations.

Kampala Assosiated Advocates

KAA HOUSE, Plot 41 Nakasero Road

P.O.Box 9566, Kampala Uganda,

Tel: +256 (0) 414 344 123

+256 (0) 312 244 100

Web: www.kaa.co.ug

MP Odonga Otto Wants Bank Of Uganda To Apologize To Former Crane Bank Owners

Aruu County MP Hon Odonga Otto has asked Bank of Uganda to swallow its pride and apologize to the former management of Crane Bank Ltd because it has been severely proven wrong for closing their financial institution.

Hon Otto remarked that the report of the committee of parliament clearly states that some criminals in the Central bank connived and sold former Crane Bank owned by Dr. Sudhir Ruparelia for personal gains.

”Bank of Uganda should swallow their pride and apologize to the management of Crane Bank because the report of the committee of parliament is clear, some criminals in BoU sold Crane Bank for personal gains now the truth is coming out and Bank of Uganda is losing”. Hon Odonga said.

The legislator who is also a lawyer says in order to save the tax payer’s money being wasted by Bank of Uganda, the report of the Committee of Parliament should be followed and implemented.

He also noted that it's not perfect time for bank of Uganda to appeal Court of Appeal judgement saying that the writing on the wall is very clear, Bank of Uganda is wrong and will continue to lose even in the supreme court.

” To save taxpayers of money the report should be followed because this is not the perfect time for Bank of Uganda to appeal and the writing on the wall is clear” He adds.

“First of all if you are selling a bank its the liquidity, not the buildings, do the buildings belong to Crane Bank Ltd?"

“I can have a building belonging to Odonga Otto Company Ltd and I can be running my business in those buildings. If the business goes bad, its not the buildings”. Explained Aruu legislator.

He called on the Central bank officials to save the country from their expensive lawyers and concede the matter of Crane bank LTD.

” I think Bank of Uganda should just save us from those big lawyers to save taxpayers and swallow their pride and just say we concede on this matter of Crane Bank Ltd”.

MP Katuntu To BoU: You Will Lose To Sudhir In Supreme Court

Member of Parliament (MP) for Bugweri County and former Chairman of Parliament’s Committee on Commissions State Authorities and State Enterprises (COSASE) Abdu Katuntu believes that Bank of Uganda (BoU) will yet again lose to Dr. Sudhir Ruperelia and his Meera Investments Limited in the Supreme Court where it intends to take the matter.

Bank of Uganda, through a suit by Crane Bank Limited (CBL), wants the Dr Ruparelia, the proprietor of the now-defunct Crane Bank, and Meera Investments to pay about Shs397 billion which they allegedly swindled from the nonoperational commercial bank.

The Emmanuel Tumusime Mutebile led BoU, also the central bank and regulator of the financial institutions in Uganda has already lost the same case in High Court (commercial court) and Court of Appeal. They are preparing to take the case to the Supreme Court for redress after not getting satisfied with the rulings of the lower courts.

And now Katuntu, who led MPs that investigated the mismanagement and sell of several commercial banks by Bank of Uganda is in agreement with the ruling of the commercial court which said that CBL in receivership cannot sue because the law bars it.

According to a report by The Second Opinion, Katuntu said that BoU closed CBL and other six banks with carelessness and impunity even though the lending institutions had weaknesses in running their businesses.

COSASE probe under Katuntu established that BoU did not follow the established guidelines and procedures in closing the banks and that corruption took place in the process.

Petition Demands That Anti- Corruption Court Indicts Bank Of Uganda Ex-officials

The Anti- Corruption division of High Court in Kampala has been petitioned to indict and hold culpable 3 former executives of the Bank of Uganda, over allegations of involving themselves in corruption and the fraudulent sale of former Crane Bank to dfcu Bank.

This is in a petition filed by a concerned Ugandan Sam Brian Kakuru seeking the High Court to institute an investigation into the operations of Louis Kasekende, Justine Bagyenda and Benedict Ssekabira.

Bagyenda is former executive director of Bank of Uganda in charge of supervision also at the heart of dubiously selling banks, Louis Austin Kasekende was the former deputy governor Bank of Uganda while Sekabira was the director Capital markets in the Central bank.

Kakuru thus wants the court to question them and their intent to establish their role into the illegal sale of former Crane Bank valued at Shs1.3trillions and handed over to Dfcu at only 200bn, not in cash. Six other banks were also victims of the above individuals’ heinous dealings.

According to the petition, Kakuru wants the Anti-Corruption Court to base its investigations on the 2019 findings of the Committee on the Commission, State Authorities and Statutory Enterprises (COSASE) and the Auditor General’s Report, which implicated Kasekende, Bagyenda, Ssekabira and other officials at the Central bank in having had a hand in the dubious sale of Crane Bank and several other commercial banks.

He further wants President Yoweri Kaguta Museveni to use his prerogative power conferred upon him by the Constitution to invoke investigation and reprimand for the named former BoU officials, because of their involvement in a litany of corruption activities, with intent to amass obscene wealth.

“The former Bank of Uganda (BoU) officials conspired with the mysterious Nile River Acquisition Company as the Company bought off secured debts of International Credit Bank (ICB), Greenland Bank and Cooperative Bank at Shs8.89 billion representing a 26 per cent discount of the total secured loans.

“The loan portfolio sold included secured loans of Shs34.5 billion which had a valid, legal or equitable mortgage on the real property and were supported with legal documentation. I noted that the contract price of Shs8.878 billion represented 26% of the total secured loan and 7 percent of the total loan portfolio implying that the loans were sold at a discount.” The Auditor Genera; John Muwanga say in his special audit report of BoU on defunct banks (Annex 3).”

Kakuru adds in his petition that “The Financial Institutions Act (FIA) provides ways in which the Bank of Uganda may take over and resolve the financial institution that is in distress. BoU fraudulently closed Crane Bank ignoring sections 89 (1), (2) (e) and (9) of the FIA Act (Annex 1).”

“Corruption implicated former BoU official fraudulently closed Central Bank without conduction of an evaluation of the assets and liabilities of Crane Bank before they were transferred to Dfcu Bank.

“On April 10, 2018, I requested for P&A agreement, including the details of the assets and liabilities transferred after taking into account the requisite valuation. I noted that BoU did not carry out a valuation of the assets and liabilities of CBL. In the absence of the valuation, I could not establish how the terms for the transfer of assets and liabilities in the P& A were determined,” Mr Muwanga’s report reads in part (Annex 2).”

He also adds that “BoU was deliberately involved in obstruction of justice to Chairman Ruparelia Group through misappropriation of taxpayers’ money to hire MAAKS Advocates that created a scenario of allegedly taking Shs397 billion out of the financial institution in alleged fraudulent transactions and land title transfers. MAKKS Advocates had been previously hired as lawyers for Ruparelia Group, a case that was crashed in court as a conflict of interest (Annex3).”

“The ACD of the High Court must investigate and prosecute former BoU corruption implicated officials the circumstances that led to the closure of Cooperative Bank after unearthed questions regarding the particular identity of the bank that was closed, after two groups of shareholders came up claiming ownership of the bank, with each sharing the same names. (Annex 1).

Greenland Bank equity investment in African Export-import Bank (Egypt) worth USD45,000 had accumulated dividends of USD22,410 as at 30th November 2015, however, the liquidator (BOU) had not sold off the shares and therefore the funds were embezzled by the corruption implicated former BoU officials (Annex 1).

The Petitioner wants Bank of Uganda Governor Emmanuel Tumusiime Mutebile who was requested by COSASE to prepare a response to the demand for Shs20 billion from the Central Bank by businessman Chris Tushabe Karobwa.

Mr Karobwa petitioned Parliament faulting former BoU officials for bringing his business empire down after officials mismanaged properties worth Shs1.4Billions which he had mortgaged in Cooperative Bank before it was closed and liquidated in 1999.

He also claims that Shs3Billion that was on his account in Cooperative Bank at the time of closure was stolen on top of BoU seizing and grounding his two Mercedes Benz lorries.”

SOURCE: Command1Post

Kampala Landlords Demand For Tax Waivers, Tax Holiday

The Managing Director of Crane Management Services, the leading real estate company and landlord in Kampala, Rajiv Ruparelia, has reechoed the most pressing need of his colleagues the landlords by demanding tax waivers from government and tax holidays from Uganda Revenue Authority as the country emerges to stand on its feet from the guillotines of COVID-19 pandemic.

Rajiv while speaking at a press conference to announce key Standard Operating Procedures (SOPs) Crane Management Services has put in place at all its properties to avert the spread of the coronavirus asked special considerations were government can write off taxes for companies most hit by COVID-19 including landlords.

“We are one big family. A building is useless without tenants. However, tenants can’t operate without a building. So, we are like a marriage and this marriage is very intimate. But unfortunately, the government has not given any waivers to this industry,” Rajiv noted with dismay.

“If you look at it, URA has only deferred their payments. They have not said that this year we are going to give special considerations where we are going to write off taxes for companies. If you look at NSSF, they have not given any conditions where companies can reduce the liabilities to pay NSSF,” he said.

“All they are saying is that if you’re not going to pay in February or March pay in August. But that is not solving a problem as an economy or for landlords. Now even the Central Bank has given some ease to the commercial banks and but does not tell the banks that we have given some special liquidity in order to be able to subsidize the interest that you will face because landlords cannot pay the banks. You see, when the tenant pays the landlord, the landlord takes the money and pays the bank.”

COVID-19 Pandemic Deepens Need For Low Cost Effective Remittances

As the world commemorated the 2020 International Day of Family Remittances (IDFR) on June 16 in this game-changing year, it is important to draw attention to the millions of migrant workers globally who play a vital role in global economies says the UN.

Countries around the world went to battle with a novel virus that emerged late in 2019 in order to save millions of lives, enforcing strict stay-at-home measures to curb the virus’s  spread. As a result economies globally came to a complete or a near-complete standstill.

This will have directly impacted the more than 200 million migrant workers who support their 800 million family members back in their home countries (United Nations, 2020).

In April, the World Bank predicted the sharpest decline of remittances in recent history. Global remittances were projected to decline sharply by about 20 percent in 2020 due to the economic crisis induced by the COVID-19 pandemic and shutdown. Remittance flows to Sub-Saharan Africa are expected to decline by 23.1 percent to reach $37 billion in 2020, while a recovery of 4 percent is expected in 2021.

For those families depending on remittances to fund their basic living costs, the risk of falling below the poverty line has increased substantially.

Cashless transaction

This illustrates Huawei’s position that Digital Financial Services (DFS) offers a new means for people, government and businesses to transact in a cashless way.

“With the pandemic forcing people to socially distance themselves from others, the adoption of DFS has been increasing across countries like Nigeria, Ghana and South Africa. In Kenya where mobile money has already made great inroads, the government has actively promoted cashless transactions as a means to limit contact spread of the virus,” says Edison Xie, Director of Media Affairs, Huawei Southern Africa Region.

A MasterCard global consumer study conducted in April 2020 indicated that 75 percent of South African consumers were using contactless payments with 88 percent of the South African respondents viewing contactless as a cleaner as well as faster way to pay and to limit the amount of time spent in stores.

Estimates for DFS adoption globally may be as high has 67 percent post pandemic adjusted 5-10 percent upwards from pre-pandemic estimates of 57% (Forbes Africa, 2020). Yet for the most marginalised and vulnerable in our economies and in society, some barriers remain that prevent more widespread adoption and use of DSF for remittances.

High cost

“”The most expensive corridors are observed mainly in the Southern African region, with costs as high as 20 percent. At the other end of the spectrum, the less expensive corridors had average costs of less than 3.6 percent,” says Xie.

The World Bank estimated a cost of around 6.7 percent on a remittance value of $200 but for Sub Saharan Africa, this cost rose to 9 percent even through intra-regional migrants in Sub-Saharan Africa comprised over two-thirds of all international migration from the region. The United Nations estimated that between US$200-300 was spent on the costs of transfers (United Nations, 2020).

Xie says that the major contributor to the high costs of remittances is the costly operations of cross border money operators handling cash transfers.

“Reducing the reliance on cash transfers and currency exchanges is thus an important way to reduce remittance costs for those sending money to Sub Saharan countries.  Digital money transfer options become essential to facilitating lower costs remittances for migrant workers,” he said.

As DFS adoption increases and the ecosystem expands to bring in more services suited to the market it serves, evolution of the platforms coupled with increased support from government in the form of consumer protection, costs of remittances can be expected to gradually reduce.

Digital Divide

Digital Financial Services allow for a multitude of benefits to be realised for countries and their people. Greater control of funds (how they flow and who they reach), improved accountability in systems and the ability of recipients of funds digitally to better manage resources for their own development. It is important, however, for the full digital financial services ecosystem and value chain to be considered when initiatives are undertaken to improve participation rates.

DFS and remittances will thrive when the basics are in place to ensure every citizen in a country has equal access to the tools to participate in this part of the digital economy. Access to Broadband connectivity, access to smartphones to access digital financial and other services, access to affordable data, relevant content and the ability to understand and use these services are all essential precursors to a fully participative population.

It is therefore crucial for governments across the continent to put their full might behind addressing the digital divide; firstly with widespread, quality Broadband access to all and then reducing barriers to accessing the Internet and digital services with speed.

“Let us use this International Remittance Day to take stock of where we are as countries responding to our people’s needs for services to improve the quality of their lives, in particular financial services,” says Xie

Court Of Appeal Dismisses BoU’s Shs.397b Case Against Sudhir

Businessman Dr. Sudhir Ruparelia has won a case in the Court of Appeal in which Bank of Uganda (BoU) contested the ruling of the lower court.

The court upheld the judgment of Commercial Court in an application filed by BoU seeking a refund of UGX 397 billion from Sudhir which he allegedly pulled out from Crane Bank.

“The person (petitioner) should pay cost and that is non other than Bank of Uganda because Margret Kasule filed on behalf of Bank of Uganda. They knew Crane Bank was in receivership as it wasn’t in existence but they went ahead to sue it” read the judgement.

Justice David Wangutusi of Commercial Court in August 2019 this week dismissed a case in which BoU claimed that Ruparelia and his Meera Investments Ltd fleeced his own Crane Bank Ltd (now in receivership) of UGX397 billion.

In his 22-page ruling that was delivered by the court’s deputy registrar, Mr Festo Nsenga, Justice Wangutusi noted that at the time BoU and Crane Bank (in receivership) filed the suit against Mr Ruparelia and his Meera Investments in January 2017, Crane Bank was a non-existing entity, having been terminated when the Central Bank sold its assets to DFCU Bank in October 2016.

The judge ruled that this rendered Crane Bank in receivership incapable of suing or being sued since there would be no assets to be claimed for.

Court noted that the public notice made it clear that BoU as the receiver had done an evaluation of the respondent (Crane Bank in receivership) and arranged for the purchase of its assets and assumption of its liabilities by another financial institution.

“In his [BoU] notice, he specifically stated that the liabilities of the respondent had been transferred to DFCU Bank Ltd and that because DFCU Bank had taken over the liabilities, it would, by way of consideration, be paid by conveying to it the respondent’s assets,” the judge ruled.

Bank of Uganda, through their new attorney Dr. Joseph Byamugisha of Byamugisha & Co Ltd the chose to file an appeal.

SSOURCE: PMLDaily

Energy Transition Plays Role In Driving FIDs Across Africa

Hosted by Africa Oil & Power and the African Energy Chamber, the ‘Closing Deals: Advancing FID During COVID-19’ webinar addressed the prioritization of energy projects in an environment of limited capital investment; Natural gas developments are facing fewer delays in FID than oil exploration and production projects.

‘Closing Deals: Advancing FID During COVID-19,’ a public webinar held on Thursday, explored the future of deal-making and African energy financing in the short- and long-term, following the unprecedented impact of COVID-19 on the sector.

As operators continue to face uncertainty and a low-price oil environment, a range of survival strategies have been employed in the short term, including halting non-essential activities; adopting furlough or layoff strategies; slowing output; refining sales and purchase agreements and utilizing financial hedging instruments to market crude.

In the long term, however, COVID-19 will necessitate a reassessment of project development plans, many of which carry operating costs incompatible with a $40-barrel price.

“We are in unchartered waters. The IMF is estimating a 3% reduction in global GDP for 2020. The effect is almost triple to that of the 2008 financial crisis,” said Marcia Ashong, Founder and Executive Director of TheBoardroom Africa and Brace Energy.

“Africa remains largely a commodity-based economy, and raw materials make up one-third of the continent’s export income. The road to recovery will be extremely slow and arduous. The full effect of COVID-19 on our economies is not fully recognized yet. From the oil and gas perspective, it has derailed major projects. For example, the Aker decision in Ghana [to postpone FID] will postpone further work on its Pecan discovery.”

While the financial viability of oil exploration and production projects has been called into question against a low barrel price, natural gas monetization projects appear to tell another story. In February, Total announced that its Mozambique LNG project is still on track to come online before 2025.

“There has definitely been a difference between oil and gas globally. In oil, COVID-19 has impacted mobility, and demand dropped as low as 72 million barrels in April,” said Paul Eardly-Taylor, Oil & Gas Coverage, Southern Africa, Standard Bank.

“Bizarrely, in the world of liquefied natural gas (LNG), things have been a bit different. As of last week’s IA report, LNG demand was up 8.5% year-on-year globally. That is feeding through to Africa. For an African project [Total’s Mozambique LNG] to raise $15 billion in debt financing in the middle of COVID-19 is an astonishing achievement. With no material second wave occurring and from an energy perspective, the world could be right side by the end of the year. Hopefully 2021 will be Africa’s 2020.”

In terms of FIDs on the continent, only a few definitive delays have been encountered. In Mozambique, ExxonMobil has indefinitely delayed FID on its natural gas project in the Rovuma basin. In Uganda, FID taken by Total for the Tilenga project has been postponed until 2022, while initially planned for the end of 2019.

“We are seeing that if your project is squarely in the energy transition, at worst, it will be delayed by a year or so,” said Eardley-Taylor. 

Mozambique is case-in-point. ExxonMobil is even expected to go ahead next year once it has secured a cheaper EPC price. Of the projects that are traditionally funded in Africa and are in the headlights of the energy transition, to what extent can they be achievable and fundable? In Uganda, there has been a strong alignment between stakeholders and lead sponsor Total. There is every expectation that even an onshore oil project with a long ride to the coast may take FID in the coming months or year.”

The lending behavior of financial institutions will also be impacted by the environmental dynamics of projects, with access to attractive funding terms and project development support then further driving the shift to renewable energy investments.

“The African Development Bank is keen to put money toward renewable energy. Climate change has come into play as constraining financial capabilities of oil and gas companies,” said Arron Singhe, Chief Oil Sector at the African Natural Resources Centre, African Development Bank.

“COVID-19 is sending a significant message to the African oil and gas industry that the paradigm is changing. As an industry, we need to review the way in which we re-develop projects. When the fundamentals of a project are strong and the sponsors have the financial power and leverage from the market, the project has a higher chance of succeeding.

It is very important for private investors to look at the environmental situation in the project. How much of your project is contributing to preserving the environment? Beyond COVID-19, this will influence the financial flow of the oil and gas industry in Africa.”

In terms of mergers and acquisitions driven by COVID-19 as companies attempt to consolidate assets, the trend is expected to defy that of previous financial downturns.

“From 2014 onward, we saw a scramble for assets,” said Ashong. “At that stage, company valuations were at their lowest. This time, the trend is the opposite. Companies that will most likely be acquired face several more challenges beyond just acquiring cheaper assets. They have put disposal plans in place to meet cost reduction targets. There are severe constraints on capital and dwindling cash reserves are being prioritized for divided payments. Acquisition targets are also not as attractive as we wished them to be.”

Going forward, there are various financial models that can be utilized to alleviate individual risk and reduce financial exposure of companies in the face of an uncertain operating environment.

“Angola is a strong example of this, as the country essentially moved down this route two to three years ago, explicitly with the marginal field terms and gas law,” said Eardley-Taylor. “Our general understanding is that on a case-by-case basis, individual concessions have been able to amend fiscal terms. For three different concessions, Angola did a ‘blend and extend.’ By getting a longer contractual term for the concession, a percentage of equity was then given to Sonangol that it previously didn’t have.” 

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