A Vibrant Stock Market May Help To Reduce Scramble For Land In Uganda

A friend of mine recently quipped that a farmer with a thousand heads of cattle cannot easily access a bank loan in Uganda, if he or she does not have a land title to their name. There is truth to this.

Land is at the centre of many transactions and businesses in the country. It is at the heart of many wills of those that have passed on and left their estates for inheritance. Land is also a key driver of local conflict. Terms like land-grabbing are now commonly used in mainstream media, and the pressure for people to own land is on the increase.

Land and wealth in Uganda are nearly synonymous, so to speak. Competition for its ownership is thus understandable. One wonders what will become of this situation in the next 50 years, given the fast rate at which the country’s population is growing. If everyone aspires to own as much of the land as possible, which seems to be the case, it will make land-related complications not small.

Currently, when an ordinary Ugandan elite talks of their investment accomplishments, they are likely to find themselves restricted to telling how much land they own, and where it is located. It is no problem of their own. It is due to environmental conditioning and is circumstantial.

The investment market is not vibrant, hence the population does not easily find investment alternatives that are not land based. As such, they either have to find land and construct buildings or use it for farming; with the latter vocation not yet impressively embraced by the elite class.

An alternative such as a vibrant stock market would go a long way in demystifying the disproportionate craving for land ownership in Uganda. It would, for example, provide the population with an option for maximising returns on savings, as opposed to placing the savings in banks at sometimes low rates of return. Stock exchanges can deliver higher profits and present wide opportunities and flexibility in vibrant markets.

There is formal oversight over investments, which is a key driver in the decision process of investors choosing where to place their financial resources. A stable stock market offers a level of comfort, even for the risk averse members of society, especially since it involves experts to facilitate decision-making and mobility of capital reallocations for investing parties.

Individuals will be assured that monies put into the market will have a high chance of returning value to them, and indeed to their dependents should the said individuals pass on. Formal oversight over investments gives relative assurances of continuity and survival of assets and this helps to bolster investor confidence.

In terms of cash flow guarantees, this form of investment could actually offer more reliable alternatives than land. This is because to realise returns on land in form of rent, the cost of construction is so high that sometimes one may envisage the returns only being viable for the subsequent inheritors of properties and not the actual investors.

It might require consistent promotion from the government, for the stock market to register the implied impact. It is logical to envisage that some of the citizens that would have insisted on procuring land for themselves and for their descendants to inheit might divest into owning part of the public companies that will be listed.

Business and finance expert, Samuel K Sejjaaka, actually noted about 10 years ago, that although private sector firms have been slow in deciding to list on stock exchanges in underdeveloped economies, where initial public offers have been carried out, the offers were commonly oversubscribed. It is thus possible to have an interested population, if other limitations get addressed.

In the absence of vibrancy in the stock market though, owners of these financial resources are left with narrower choices, and in Uganda’s case, land becomes the “bait”. If it is possible that the value of land will appreciate at a rate faster than most other available options of investment, including the offers in interest on savings from financial institutions, then the population will scramble for land.

It may not matter whether the rewards from land, without selling, do not match the capital base. Even if rent from landed properties is low in comparison to the purchase and construction prices involved, people might still invest in land ownership, for lack of viable options.

The above scenario would remain as the main cause for the scramble for land, fueling potential escalation of land wrangles. These wrangles are likely to be worse for our children and their followers than we are witnessing in our time although the situation is already bad enough as it is.

Raymond may be contacted on rmugisha@afriaccent.com