Major business events that made 2015 a year to remember

In October 2015, Imperial Bank Uganda was put on sale by Bank of Uganda, after its largest shareholder Imperial Bank of Kenya was closed over questionable business dealings 

In Summary

2015 was characterised by company lay-offs, major chief executive appointments, mergers and acquisitions, among others. Mark Keith Muhumuza takes you through the major happenings that made 2015 a unique year.

The pre-election cycle and strong dollar have been the dominant feature of most businesses since the start of the year. The speculation on how the two will play into the performance of businesses continues to indicate a negative outlook. During the year, however, there was another development, which partly reflects a tough business environment and businesses simply failing to stand the test of time.

Oil companies made news this year when all the three operators, China National Offshore Oil Corporation (CNOOC), Total and Tullow laid off workers. The timing of the layoffs was mainly contributed by two factors: the falling global oil prices and limited activity at the various oil fields. Global oil prices continued dropping in 2015 and by mid-December, the prices had hit a low last seen 11 years ago. With low global oil prices, at least, Tullow noted it had to downsize. In fact, the oil company laid-off in excess of 100 employers this year.
Interestingly, Total E&P’s first exit was the general manager, who had only been in Uganda for six months. He left partly because he was expected to lead the company into oil production, but Total is yet to receive oil production licences. About 30 plus staff, mainly field operators who had completed their tasks at the exploration phase, were laid off during the year.
CNOOC also laid off an “undisclosed” number of staff members during the year.
The government had revealed that by the end of 2015, licences would be issued.

Russian firm named preferred bidder for oil refinery

A consortium led by a Russian firm, RT Global Resources, was picked as the preferred bidder for the construction of the $3b oil refinery. The firm was picked ahead of a consortium led by South Korea’s SK Energy. The ministry of Energy, together with an independent consultant, is still negotiating with RT Global Resources on the financial model for the oil refinery. The initial plan by the government is for the preferred bidder to take at least 60 per cent share of the refinery. The other 40 per cent is for the Uganda government and other East African countries. Again, the government had made some commitment that this deal would be concluded by the end of 2015. The government’s insistence on an oil refinery is because it is believed to create more value and returns for the country.

Vodafone makes entry, Africell lays-off 56

Vodafone, in February 2015, officially launched its voice and data services in the country, becoming the sixth player in the telecommunications market. The entry of Vodafone came at a time when the market was dominated by two players, MTN, and Airtel. At the time, Tage Rasmussen, the acting chief executive officer, told Daily Monitor that “Vodafone doesn’t run away in any of the countries we operate. We are always in this for the long haul. The investors may change, but the Vodafone brand will always exist.”
Vodafone uses the “0723”, says it is focusing on the provision of internet packages. Recently, they have been marketing their voice service with a tariff as low as Shs3 per second.
As Vodafone was making its entry with relative ease, Africell was restructuring the business it acquired from Orange. Africell had acquired Orange in November 2014 and by March 2015, they opted to lay-off at least 56 people in the company. The company issued termination letters to 59 members of staff in a move it then described as one that would allocate “proper resources into improving operational activities.”
Despite the outcry from the laid-off staff, Mohammad Ghaddar, the chief operating officer Africell Uganda said Orange wanted out because it could not sustain the repeated losses.

Kenyatta’s Brookside acquires Fresh Diary
In April 2015, East Africa’s largest milk producers acquired Sameer Agriculture Livestock Limited (SALL), the makers of Fresh Diary and Daima at Shs3.2b. SALL, which came onto the Uganda scene during the privatisation era of the 1990’s, had only just secured a 40-year lease from the Uganda Government when it eventually ceded its rights to the Kenyatta family business, Brookside.

Prudential acquires Goldstar Assurance

Businessman, Sudhir Ruperelia cashed in on a business transaction with one of the largest insurance companies, Prudential PLC. In July 2015, Prudential Plc acquired Goldstar Life Assurance of Uganda for an undisclosed fee. Uganda became Prudential’s third African insurance market, following the entries into Ghana and Kenya in 2014.

In May 2015, one of Uganda’s finest executives passed on. Ivan Kyayonka was, at the time, the chairman National Social Security Fund (NSSF) when he suffered a stroke and died. He had been board chairman of NSSF for three years and is known for his astute business mind, which, in part, was seen when the Fund acquired shares in power distributor Umeme. He is, however, best known for his 31 years at fuel company, Shell (now Vivo Energy).

UTL swims closer to the sharks
Uganda Telecom survived having its licence withdrawn by the Uganda Communications Commission (UCC) after its financials indicated that the business may not be sustainable going forward. In five-page document issued by the UCC, the regulator highlighted six areas where UTL was falling short of requirements. The largest concern was that its Shs366b liability, outstripping its total asset base of Shs220b. The largest liability is a Shs160b debt.
“The commission reviewed the UTL’s external audit reports for the period 2011-2013 and noted with concern that UTL is consistently making losses and is on the brink of financial collapse,” read the notice in part in April 2015. In July 2015, an emergency meeting by the largest shareholder in the company, LAP Green, Libyan government officials, President Yoweri Museveni and ministry of finance officials agreed on a rescue plan for the telecom. The shareholders approved cash injection of about $65m (Shs217b) by the end of September 2015.

Airport upgrade begins, BA exits as Etihad launches flights

A $200m (Shs700b) upgrade of Entebbe Airport started in August 2015; eight months after the Civil Aviation Authority unveiled a National Civil Aviation Master plan. The first phase of the upgrade is the expansion of the cargo centre at the airport. The expansion project is being financed using a loan from the Chinese government through their Export and Import bank (EXIM). Construction of a new passenger terminal is expected to start in 2016.
But even as Entebbe Airport is expanded, one of the longest serving airlines in Uganda, British Airways (BA) exited the market in September 2015. 24 years later, BA decided to halt the Uganda route after failure to turn it into a profit making venture.
“Unfortunately, we have concluded that at the present time our services to Entebbe are not commercially viable,” BA said in a statement at the time.
Prior BA’s exit announcement, United Arab Emirates (UAE) national carrier, Etihad Airways launched flights into Uganda in May 2015. Etihad Airways launched four times a week flights connecting people to its hub in Abu Dhabi, the capital of UAE.