Some markets which I would classify as “frontier” may be even too frontier to really invest in.  Uganda, for example, has only a dozen securities listed on its exchange, and typical volume is dominated largely by one of them—Stanbic Bank Uganda, whose market cap dwarfs that of any of the other country’s firms, and which made headlines earlier this year when it slashed its prime lending rate to a record low 15%, following the central bank’s own rate cut.  The firm is also intriguing, however, because it recently expanded into Kabale, a rapidly growing district (with a growing demand for financial services) in the southwest and very near the Rwandan border.  It also has an ongoing relationship with MTN Uganda, a telecom firm, to provide a Mobile Money Transfer service, which kicked off in March.

One way to get exposure to Uganda without being constrained by its exchange’s tepid liquidity, however, would be on a more macro level.  Timber plantations, for example, offer such an opportunity.  The country is in the midst of a sawn timber (two species dominate the plantation areas established to date in Uganda – namely, Pinus caribaea var. hondurensis and Eucalyptus grandis) shortage—due to a lack of planning or planting during Idi Amin’s tenure–that forestry experts opine is likely to persist for the next two decades as demand increases and the number of hectares of plantations meant for growing (as opposed to natural, or tropical high, forests, which are preserved) has only relatively recently begun to be replenished via EU support.  While there are currently around 20,000 hectares of tree plantations, it is estimated that Uganda will need at least 60-70,000 just to meet the country’s projected timber demand by 2025.  In the meantime, the shortage has had wide-ranging effects: most notably, and on a commercial level, it handicaps the country’s growing construction industry (second only to telecoms in terms of growth rate), whose response has thus far been to import from Congo and Tanzania.  But increasing transport costs and price for wood means that said reaction may not be viable in the long-run. 

Over 50% of Uganda’s timber is currently imported, and at this pace the country will be a net timber importer in the next five years.  But Uganda Tree Growers’ Association (UTGA) secretary Ms Sheila Katamara points out that Uganda is in a “strategic position” to be a regional supplier, given its vast land.  Commercial tree growing is just starting to gain a foothold, thanks to the Sawlog Production Grant Scheme (SPGS), an EU-funded initiative offering subsidies to help establish private growers.  “We already have an association of Uganda Timber Growers Association (UTGA) whose membership comprises of investors in trees and those intending to become forest lords,” said Allan Amumpe, the SPGS project manager.

Conditions for growth could hardly be more ideal.  The region is widely regarded as having better soils than most countries in Eastern and Southern Africa.  Additionally, it is a well-watered country that is richly endowed with renewable natural resources.  Finally, with a temperature range of 15-30 degrees Celsius, and an annual rainfall range of 750-2000mm, the country is highly suited for forest production. Finally, vis a vis yields (m³/ha/yr), Ugandan plantations can match, or often exceed, some of the best growth rates in the world, including those in Australia, South Africa and Tanzania.

That said, political complications arose last December that should cause investors to be cautious—namely President Yoweri Museveni’s brouhaha with the National Forest Authority (NFA), which manages 15% of Uganda’s remaining forest cover (70% is located on private land).  Museveni expressed dissatisfaction with deforestation projects that he said reeked environmental havoc.  The scuttled deals in question, however, involved an Asian sugar cane plantation company and palm oil developers, not plantation or timber production per se.

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