Uganda’s anti-homosexuality law threatens its economic expansion

According to Maplecroft’s latest country risk report for Uganda, rising international condemnation of Uganda’s new anti-homosexuality law means the country’s aid budget will likely be hit, which in turn may lead to anti-western sentiments and accusations of interference. The report says Uganda has experienced a robust economic expansion in the past five years. “The country continues to offer a relatively liberal economic climate, which has supported growth in financial services and other sectors. Attracting foreign investment has been a key priority for the government, and there are no restrictions on the remittance of profits,” according to Maplecroft. A privatisation programme has seen the state divest from public enterprises and progressively withdraw from direct involvement in business. Nevertheless, underdeveloped infrastructure, a shortage of highly skilled workers, high levels of bureaucracy and a complex framework for governing land rights will remain challenging issues for investors.hideSUCCESSION Uganda has been largely successful at maintaining political stability under the rule of President Yoweri Museveni. However, political tensions are growing over the succession process to President Museveni. Leading figures within the National Resistance Movement are already manoeuvring for position. For instance, the recently approved anti-homosexuality law was pushed forward by parliamentary speaker Rebecca Kadaga, a leading candidate to succeed President Museveni. The law has already resulted in international notoriety and several donor governments have signalled that they intend to suspend aid payments to the Ugandan government, a move that could seriously impact the country’s macroeconomic position. Meanwhile, Maplecroft’s Country Risk Report for Zimbabwe warns President Robert Mugabe is unlikely to remain in office for another full five-year term due to his advanced age of 90 and concerns over his health. Uncertainty over President Mugabe’s succession is likely to trigger intense power struggles within ZANU-PF and it is likely that the transition of power will be chaotic, heightening political uncertainty for investors. Hostile domestic investment policies seriously undermine the business environment in Zimbabwe. In particular, the Indigenisation Act, which stipulates 51% of shares in all companies operating in Zimbabwe must be owned by black Zimbabweans, constitutes the key risk faced by investors and poses a mounting threat to western businesses. After commercial agriculture and mining, the banking sector has become the latest target for indigenisation. Although enforcement has remained uneven, the government is likely to accelerate the implementation of the indigenisation programme in the coming years. Maplecroft’s Country Risk Report for DR Congo warns underdeveloped regulation, endemic corruption and extremely poor physical infrastructure all contribute to a highly unpredictable business environment in DR Congo. Moreover, persistent insecurity affecting part of the country will likely dampen investor confidence and delay much needed infrastructure upgrades. In particular, inadequate power supply will continue to constrain output. Investors therefore face a highly unstable environment, with major shortcomings likely to persist for the foreseeable future. Yet the economy continues to experience high rates of growth, with the International Monetary Fund (IMF) forecasting real GDP to grow by 10.4% in 2014. However, the country’s reliance on the mining sector exposes the economy to macroeconomic volatility. Indeed, production levels and the government’s fiscal position both remain highly vulnerable to volatile global commodities prices. Furthermore, widespread poverty continues to present businesses with challenges in accessing skilled labour, while also hindering the growth of consumer markets. Finally, Maplecroft has released a human rights and social development report to provide investors with an in-depth analysis of the socioeconomic landscape in Ghana. According to the report, Ghana eclipses most African countries in terms of governance, democratic norms and respect for the rule of law. Improvements to the governance framework have resulted in a reduction in poverty and increased economic opportunities. Ghana is one of the few countries to be on-track to achieve most of its Millennium Development Goals. However, a lack of vocational training and technological readiness prevent the country from realising its full potential. VULNERABILITY The benefits of rapid economic growth have largely failed to reach the north of Ghana, which continues to suffer from structural economic disadvantages. The north has historically been neglected by the government and incidences of poverty remain stubbornly high. Growth in agriculture is of central importance to ensure socioeconomic development, yet government resources are commonly allocated to extractive industries. Despite a stated commitment to supporting agriculture, the sector appears to have received just 2% of government spending under the 2013 budget. Over-dependence on primary commodity exports makes Ghana’s economic performance vulnerable to external price and demand shocks and will impact the realisation of socioeconomic rights in the long-term.

Uganda’s anti-homosexuality law threatens its economic expansion

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