During the just ended World Economic Forum 2019 at Davos, there was unease about the global economy. The world’s business leaders agreed that economic growth is slowing down in major global markets following a downgraded economic growth to 3.5 per cent, down from 3.7 per cent. The revision was informed by escalating trade tensions, tight financial conditions, pending withdrawal of UK from the European Union and slowdown in China’s economic growth. In a telephone interview with Prosper Magazine’s Martin Luther Oketch, Deputy CEO Absa Africa Group Limited Peter Matlare highlights the impact of this on other economies including Uganda.
The global economic growth has been downgraded to 3.5 per cent from 3.7 per cent due to the tightening of global financial conditions. How will this slowdown impact on Uganda’s financial market and Africa at large?
IMF projections show that the global economy is slowing down. That has a significant impact for all our economies and financial markets not just Uganda but across Africa and the globe.
Key sessions from Davos show that you have to find a way which focuses on multilateralism.
We have got to find a way through these difficult trade war related issues that are beginning to marginally pinch global economic growth. If the economy slows down and that continues for some time, that can have impact on our economies.
Absa African Financial Market Index is a new development. What is its relevance to domestic financial markets like Uganda?
The Index tracks six different measures for the development of Africa Financial Markets infrastructure. It is aimed at developing our capital so that we can attract those foreign direct investments. That allows us to develop these to have less volatility in these markets. So this index plots the key measures that should enable your market to become a well-rounded and wider market for a range of products.
What is your view on the future of Africa’s financial markets?
The governor of the Reserve Bank of South Africa made very interesting comments in one of the discussion on financial markets. Some economies are large enough to have their own capital markets while others are not large to form their own capital markets. Therefore, they end up forming what one might call a regional capital market to allow free access to capital in a secure way. This also helps them access capital to develop their markets. So we have to look at all of these options to find ways of collaborating and cooperating to achieve the future.
African countries are still struggling with unemployment and underemployment. During one of the sessions, some African presidents were asked to share their thoughts. What are your thoughts on solving this problem?
Let me come back to the capital market index which demonstrates a range of factors for investors to put their capital into your markets.
You have to create opportunities for either domestic or international citizens to generate capital that allows investors to invest in entities that give them returns. This is because nobody is going to put his or her money in industries where there is no return.
This gives investors confidence to put their money in your market and will create employment.
Do African countries benefits from Foreign Direct Investment (FDI)?
Yes, we benefit from Foreign Direct Investment FDI. Let us remember that in many instances, we don’t have deep capital markets where we can do this ourselves. I don’t think we can grow in absence of Foreign Direct Investments in our continent. Our capital is still too shallow to enable us grow.
Absa partnered with Endiro coffee and sponsored it to serve coffee during the World Economic Forum in Davos. How has Uganda benefited from this?
We have entrepreneurs in our continent that have produced products of the highest quality. So if we take coffee from Uganda to make cappuccino it is of great significance.
By showcasing Uganda’s product at the World Economic Forum in Davos, we showed that we have high quality products in our continent. By doing this, we are supporting them and exposing them to these global markets and hopefully creating linkages for them to explore new opportunities for their products in international markets.
When we do this, we are not world class but we are world beaters. This is how we are going to sustain our economies in the longer term.
During this World Economic Forum, we had coffee from Uganda, chocolates from Ghana and tea from Kenya being served by the owners of these products.
Absa is one of the largest banks in Africa. What plans do have in Africa n market?
We are a Pan-Africa bank, a bank that wants to create opportunities and bring possibilities to life for our customers, the communities we operate in, partners, government institutions in the development of our continent and economy.
We also want to be a bank that competes globally with our customers’ partners.
Performance of UGANDA’S capital markets
Capital markets remain a relatively new phenomenon in Uganda and there is limited expertise in the market for product development. This hinders the population’s participation who also often lack the knowledge about these products.
Presenting the Absa report last week in Kampala, Barclays head of markets David Arthur Wandera said: “Uganda’s capital market is the 9th largest in the index relative to the size of its economy.
However, its market cap of 29 per cent of Gross Domestic Product is far below the Index average of 56 per cent. In addition, turnover is low and there is a lack of product diversity.
Corporate governance, protection of minority shareholders and quality financial reporting are prerequisites for capital market development.
To support price discovery, timely, accurate and relevant data must be available. International credit ratings also aid transparency.