President Yoweri Museveni signs the anti-gay law at State House,
Entebbe, in March. The attractions of Uganda include a likely seven per
cent growth path and as with many other frontier markets, a young and
growing population, rising middle class and consumer demand and high
returns on domestic debt.
By Carolyn Cohn Reuters
In Summary
Fuzzy guidelines on ethical investing and
donors’ timid response to Uganda’s new anti-gay law have reassured fund
managers and private equity firms about continuing to invest in the
newly oil-rich country, despite worldwide criticism.
Business leader Richard Branson was among those to
object when the east African country signed legislation this year which
strengthened punishments for anyone caught having gay sex, imposing
jail terms of up to life for “aggravated homosexuality” — including sex
with a minor or while HIV-positive. It also criminalised lesbianism.
The law — slightly watered down from original
plans a few years ago that included the death penalty for those
considered worst offenders — drew criticism from western governments
too.
The White House said it was reviewing its relationship with Uganda’s
government. Branson, the billionaire founder of the Virgin Group
conglomerate, said he had been seriously considering investing in Uganda
but would not now do so.
“I find the imposition of the new anti-gay laws in
Uganda very sad and damaging to the country’s reputation and
prospects,” Branson said in e-mail comments to Reuters. “The new laws
will put people off and we will not be setting up new business in Uganda
while they exist.”
Discrimination
But so far, the new law has resulted in the
redirection of just $118 million or so in aid, unlikely to make a big
dent in the country’s budget. And guidelines on socially responsible
investing do not necessarily cover discrimination by sexuality.
Zain Latif, founder of investment holding company
TLG Capital, which invests in frontier market companies, has two ongoing
projects in Uganda.
“There has been a lot more talk than action,”
Latif said, pointing to a relatively muted reaction to the law in
Uganda’s exchange rate. “With Africa you have a lot of noise — if you
focus on why we are investing in Africa, that has not really changed.”
The attractions of Uganda include a likely seven
per cent growth path, according to the World Bank, and as with many
other frontier markets, a young and growing population, rising middle
class and consumer demand and high returns on domestic debt.
Uganda has not drawn as many foreign investors as
other sub-Saharan African economies such as Nigeria or Kenya. Its small
stock market is not part of the benchmark MSCI frontiers index, and
foreigners are estimated to own less than 10 per cent of its domestic
bond market.
But the discovery of oil in Uganda in the past few
years has contributed to a 40 per cent jump in foreign direct
investment to east Africa in 2012, to more than $6 billion. Private
equity firms see potential for juicy returns.
The government estimates reserves at 3.5 billion
barrels and this year signed a deal with three oil firms, Britain’s
Tullow, France’s Total and China’s CNOOC to get the oil out of the
ground. Five consortia and Japan’s Marubeni are currently bidding for a
$2.5 billion refinery project.
Homosexuality is taboo in almost all African
countries and illegal in 37, including Uganda, where rights groups say
gay people have long risked jail. Fear of violence, imprisonment and
loss of jobs means few gays in Africa come out.
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