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Uganda: Where to Put Your Money
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The Monitor (Kampala)
OPINION
25 November 2007
Posted to the web 26 November 2007
James Abola
Kampala
Many readers have often times asked me to write about business and investment opportunities in Uganda. There are two reasons why I have often found this question curious.
First is that to a great extent success in most businesses and investments depends on information - the person who gets and reacts to information early has a higher chance of winning. Information that is shared in a newspaper is public and attracts more people to any business or investment opportunity.
The second reason is that many business or investment opportunities are actually very much in the open, sitting right on the nose of the investor but for some strange reason, people continue to miss them.
The following are what I consider to be the three leading investment opportunities in Uganda as we move towards the last month of 2007.
If you are the type of person who is constrained by time or distance because you are holding a fulltime job or living in a distant place, then the place for you is the Uganda Securities Exchange (USE). What the USE offers to the investor is mainly shares and unit trusts.
Transacting in shares does not require a lot of time or effort. Whether you have lots of money or little money, you can participate.
If you can afford to rent a house for Shs100,000 per month, then you have no excuse for not buying shares. For a passive investor who puts down money and waits to pick a return in the range of 20 percent to 30 percent per annum is excellent.
The news is that last year, the USE did about 87 percent and this year, it is likely to be even much higher. I need to make two closing points about shares:
a) Shares are not recommended for short term investments or speculations but if you are in for three to five years, it will always be a good investment.
b) Like any other investment, you make money when you buy and not when you sell.
The housing industry has for years offered great opportunities to investors, and it is still going hot. However, you need to be clear about what you want to offer and where.
A recent national housing survey estimated the housing deficit in Uganda to be about 550,000 units. Macroeconomists say there is a difference between effective demand and simply wanting something. It is fair to ask how many people wanting housing units can actually afford to either buy or rent. An important addition to the housing industry is the entry of more mortgage providers in the market.
The opportunity in housing is wide ranging including owning a real estate agency, manufacturing and selling construction materials, having a building construction business, or owning houses. When it comes to owning houses, you want to know whether you want to build for sale or for rent. While the areas in and around Kampala still lead in demand for housing, there are opportunities up country too especially in the "oil zone" and in the areas recovering from conflict.
Anybody interested in cashing in on the housing demand ought to realise that there are various segments in the market. If you want to make money from rentals, generally it should be a one or two bedroom unit.
Rental units with more than two bedrooms have to be in more upscale locations. There is also a small but growing market of people looking to purchase houses in more upscale locations. There are risks though, including problems with fake land titles, fake building materials, shoddy contractors and in some cases over priced properties.
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The third sector that offers large scale investment opportunities is road construction and maintenance. There was a time when Ugandan roads had lots of potholes. Now if you asked me, it is a case of roads running through potholes.
Take this pothole near the Mulago roundabout in Kampala, it was filled in late August 2007 and was back before Independence Day. If you came up with a system of building and maintaining roads that is guaranteed to keep potholes away for five years, I can assure you that the public will hold a demonstration to ensure that the central and local government authorities give you contracts and pay!
Mr Abola is a business and finance consultant.
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