KAMPALA, March 12 (Reuters) - The slow reduction in Uganda's inflation and a
spate of graft scandals that have rocked President Yoweri Museveni's
administration may provoke a resurgence of violent opposition-led
anti-government protests over the cost of living.
Kizza Besigye, the east African country's main opposition leader, is still
keen on galvanising his supporters to resume protests and has said his main
objective is to topple Museveni's leadership using Arab spring-style people
Here are some of the risk factors ahead:
PROTESTS, INFLATION, CORRUPTION
Once a close ally of Museveni, Besigye has since last year championed a
series of "walk to work" protests to highlight the high cost of living and
what he says is the president's mismanagement of the economy.
The east African country's security officials have accused the three-time
presidential contender of seeking to sow lawlessness and exploit it to
topple the government.
Last month, after multiple confrontations with the police, the opposition
managed to hold a series of rallies in the central and western regions to
mobilise their supporters to embrace a campaign of civil defiance.
"We want to first hold countrywide sensitisation activities so that our
people understand exactly what it is we're up," said Anne Mugisha, deputy
foreign secretary for the main opposition party Forum for Democratic Change
"Once our people grasp our key message and objective of regime change then
we'll go for street action. Expect drama very soon."
Analysts say although Ugandans appear to have wearied of fruitless
opposition efforts to wrest power from Museveni, failure to substantially
tame consumer prices and escalating graft could fuel mass support for a new
wave of protests.
After hitting an 18-year high of 30.4 percent in October, Uganda's
year-on-year inflation slowed for a fourth time in February to 25.4 percent.
The resignation of two ministers over corruption allegations last month has
highlighted the spread of graft and rankled with Ugandans struggling to
access basic public services such as education and health.
Opposition officials say the latest resignations, bringing the number of
senior government officials who have quit over graft in less than six months
to six, depict decadence and are a further reason why their regime-change
call should be embraced.
Any resumption of violent protests, which peaked in April and May last year,
could hurt the economy and rattle foreign investors in a country soon to be
an oil producer.
What to watch:
- Besigye. Can he manage to mobilise a mass movement determined enough to
confront no-nonsense security forces and launch sustained civil disobedience
- Corruption. Escalating graft could affect inflows of foreign investment,
hampering a key source of hard currency.
On the other hand a determined effort to root out corruption could alienate
Museveni's key allies who have long benefited from impunity, creating new
- Inflation. Will it decline as fast as the central bank expects and take
some of the sting out of protests?
A bill calling for harsh penalties against homosexuals has been reintroduced
in parliament and is in the committee stage. The original bill called for
the death penalty for repeat offenders, though this clause, and calls for
life imprisonment too, are widely expected to be dropped.
If any draconian anti-gay legislation is passed, it could prompt some
international donors to cut aid, a key source of funding for the east
African country's budget.
OIL, TAX DISPUTES
Uganda's plans to become a top-50 oil producer are now back on track after
Tullow Oil said it had signed a delayed deal bringing with China's CNOOC and
France's Total in to develop the country's oil resources.
Finalisation of the deal will kick off a $10 billion investment project
involving a new refinery and other key infrastructure to enable commercial
British oil explorer Heritage Oil said in November it would launch an appeal
against a Ugandan tribunal which has ruled the company is liable to pay $404
million in capital gains tax, prolonging a row over the tax bill.
Last month, Uganda's Energy Ministry tabled a long-awaited law to regulate
the upstream sector of the oil industry.
What to watch:
- Delays. As Uganda and oil firms embark on the development phase,
disagreements over policy issues are likely to emerge, which could further
push back the start of crude production.
- Tax disputes. If tax issues are not solved quickly and amicably, Uganda
may gain a reputation as a risky bet for foreign investors.
- Start of oil production. Oil revenues are expected to allow the government
to sharply escalate public spending and soak up some of the flak over poor
service delivery that has led to the frequent popular protests.
Somalia's al Shabaab Islamist rebels have threatened more attacks similar to
the twin suicide-bomb blasts in Kampala that killed 79 people in July 2010.
The insurgents have vowed to target Uganda and Burundi until they withdraw
their peacekeeping troops from Somalia.
What to watch:
- Progress in the offensive against al Shabaab.
- Another attack in Uganda could deter foreign investment inflows, weaken
the shilling, disrupt business and hurt tourism. (Editing by David Clarke)
March 12 (Reuters) - The likely prosecution of two leading presidential
contenders by The Hague court over crimes against humanity is the main
factor to watch in Kenya ahead of looming elections, whose date is still a
subject of controversy.
This all comes at a time Kenya is mired in a potentially protracted war
against al Qaeda-linked militants in neighbouring Somalia and the economy is
straining under the twin burdens of high inflation and interest rates.
The Hague-based International Criminal Court (ICC) on March 9 rejected
appeals by four Kenyans who were indicted in January for crimes against
humanity during violence that followed a disputed election in 2007 and
killed more than 1,220 people.
Among the four are Uhuru Kenyatta and William Ruto, former finance and
higher education ministers, who are challenging for the presidency in
elections due by March 2013.
The rejection of their appeals is likely to dent Kenyatta's and Ruto's joint
bid for the presidency, analysts said.
The four suspects' only hope to avoid trial is if the ICC grants their
appeal to bar the war crimes court from prosecuting them on the grounds that
it has no jurisdiction over the cases.
Kenya has twice failed in attempts to have the trials transferred to
Nairobi. The attorney general has set up a team of lawyers to advise on how
Nairobi can launch a fresh appeal at the ICC to have the four tried locally.
Rights groups have also asked the High Court to stop the duo from running to
replace President Mwai Kibaki, who is barred by law from seeking a third
term, on the grounds that the ICC charges would them ineligible for public
Kenyatta, who resigned from his cabinet post as a result of the ICC charges,
and Ruto, who had quit earlier, insist they will run, a move that has
polarised political opinion in Kenya.
If they stand trial, they will be required to appear in court constantly,
making it impractical for them to run election campaigns over a period of
months, and also run for office.
The two are united in their bid to block their political nemesis, Prime
Minister Raila Odinga, from becoming president. The cabinet is split in its
support for the opposing candidates.
Odinga's lead in opinion polls in the race to the country's helm has been
slipping, and he is also facing a stiff challenge from within his party for
the right to be its flag-bearer.
Analysts say that chances for the 50-year-old Kenyatta, the son of Kenya's
founding father Jomo Kenyatta, with a fortune estimated by Forbes magazine
at half a billion dollars, would be seriously damaged if he were to stand
However, his alliance with Ruto appears to have given him a fresh wind, at
least in his own community. Close allies of the two say Kenyatta is likely
to be the alliance's flag-bearer.
What to watch:
- Kenyan court rulings on their eligibility to run.
- Kenyan appeals against the ICC's jurisdiction.
- If Kenyatta and Ruto are on trial when elections are held, or are barred
from running, they may back someone else. Who would they chose, and on what
- Will the ICC issue arrest warrants? It has said it would if the suspects
stoke tribal tensions through their speeches.
- Any tribally inspired violence in potential hotspots
- Kenya is an ICC signatory, but has been very critical of the war crimes
court and supportive of the Sudanese president avoiding an ICC arrest
warrant. Will Nairobi continue cooperating with the ICC if the appeals by
the suspects fail?
- Failure to cooperate with the ICC would concern foreign investors and
Western governments who want Kenya to combat impunity ahead of the next
The High Court surprised Kenyans by ruling in January that the next
elections should be held in March 2013, and not this August as stipulated by
the constitution, unless the ruling coalition collapsed, forcing a poll
within 60 days.
Kibaki said on March 9 he favours elections in March while Odinga prefers
the polls to be held in December this year.
Their opposing views are likely to further widen the split in their already
brittle coalition and cause anxiety among Kenyans over whether their
coalition will stick together or not.
Polls show a majority of Kenyans still favour elections this year. They are
keen to vote out some legislators they consider them lazy, corrupt and
greedy, and say the lawmakers, among the best-paid in the world, have done
little to develop the country.
The elections will come under intense scrutiny because they will be the
first since the disputed 2007 vote.
What to watch:
- It is not clear if Kibaki is ready to dissolve the coalition government
this year as per Odinga's wishes, which could potentially usher in another
- Will Odinga ignite the coalition's collapse so that elections can be held
at a time that could favour him?
INTEREST RATE CAP
A proposed law to cap interest rates has emerged as a risk for the banking
sector. Chief executives whose banks have reported bumper earnings for last
year, mainly driven by interest income, say the caps would limit credit
Parliament is set to debate the motion brought by a legislator who is
seeking a law to set the minimum deposit rate at 70 percent of the central
bank rate and cap lending rates at no more than 400 basis points above the
The proposal has some popular support, and businesses and officials have
long complained of high commercial lending rates, which they say hinder
Analysts say other lawmakers could latch onto the issue especially in the
runup to an election. In Uganda there have already been strikes over the
high cost of credit.
Aggressive monetary tightening since October to curb double-digit inflation
and buoy a local currency that fell to a record low of 107 to the dollar led
commercial banks to raise lending rates to about 25 percent from 15 percent
in two months.
Robinson Githae, acting finance minister, says he is keen to avoid a cap on
rates, and wants banks to trim lending rates to protect the growing middle
class, one of the drivers of growth through higher consumption and
This is unlikely to happen unless the central bank embarks on an easing
cycle. The bank kept the benchmark lending rate at 18 percent this month, to
consolidate the gains that have seen the local currency recover and keep a
lid on inflation.
What to watch:
- Will the proposed law be passed by parliament? Policymakers want to avoid
such a move, but must find a way of easing public frustration and taming
inflation at the same time.
- What would be the reaction of Kenya's lenders and the West? The
International Monetary Fund opposes the proposed caps, saying they could
lead to a credit squeeze.
Kenya sent troops into Somalia last October to crush al Shabaab, accusing
the militant network of attacks on its security forces, aid workers and
tourists inside Kenya. For now, the incursion still has wide backing among
There were two grenade attacks in Nairobi shortly after the initial
incursion and a string of deadly roadside bomb, small arms and grenade
strikes in the northeast of the country not far the Somali border.
After months of relative calm in Nairobi, a grenade was tossed into a busy
bus station on March 11. The death toll had climbed to six by the next
morning with 68 still in hospital, according to the Red Cross.
What to watch:
- Kenya is coming under the African Union peacekeeping force AMISOM, whose
mandate expires on Oct. 31, but is likely to be extended. When will Kenya
start receiving AMISOM funds to maintain the operation and take some
pressure off its budget?
- Any attacks by al Shabaab in the capital or key tourist sites. They could
erode backing for the incursion, deter tourists and hurt the economy.
(Editing by David Clarke)
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Received on Tue Mar 13 2012 - 11:27:26 EDT