Uganda’s political risk rating eases despite rising regional tensions

January 14, 2025 in Investment by Editor

BMI says the M23 rebel group will remain active given failed attempts at talks between Rwanda and the DRC will ensure the continued activity of the M23 rebel group preventing the Congolese army from focusing solely on the ADF.

BMI, a Fitch Solutions company, but whose research findings do not necessarily influence Fitch Ratings Credit Ratings, has recently given Uganda a score of 65.6 out of 100 in its composite Political Risk Index for January 2025. Higher score implies higher risk.

The latest figure is slightly above the regional average of 64.3 and down from 65.9 in December 2024 but below the recent peak of 66.4 in October 2024. BMI says, ‘We believe that security risks in Uganda will persist in 2025, despite a recent drop in fatalities resulting from the actions of the Allied Democratic Forces (ADF), an Islamist militant group active in the Democratic Republic of the Congo (DRC)’s North Kivu province’.

‘According to data from The Armed Conflict Location & Event Data Project, ADF activity has not caused any fatalities in Uganda since May 2024, mirroring a reduction in the DRC over the first half (H2) of 2024. This has contributed to a modest decline in the Security Risk component of our Political Risk Index (scores out of 100; higher score implies higher risk), which has fallen from a peak of 57.5 in November to 56.7 in January.

Even so, we hold the view that risks of renewed ADF incursions into Ugandan territory will continue in 2025, for two primary reasons: First, the M23 rebel group will remain active given failed attempts at talks between Rwanda and the DRC will ensure the continued activity of the M23 rebel group preventing the Congolese army from focusing solely on the ADF.

In December 2024, proposed talks between Kigali and Kinshasa failed to start after the Rwandan President Paul Kagame insisted that his Congolese counterpart, President Félix Tshisekedi, talk directly to M23 rebels. Tshisekedi was not prepared to do so, given his belief that the rebels are directly supported by Rwanda, a claim largely backed by the international community.

Secondly, allegations of Ugandan support for M23 will strain Uganda-DRC relations, hampering cooperation efforts. The June publication of a UN report, which stated that the Ugandan government is providing logistical support to the M23 rebels has upped tensions.

BMI says, ‘While Kampala has denied such claims, we believe that this is likely to strain cooperative efforts by Ugandan and Congolese forces to tackle the ADF insurgency’.

Meanwhile, despite a decline in protest activity in H2 2024, we note that other governance challenges are on the rise as tensions escalate between the government and opposition groups.

In mid-2024, unrest picked up as anti-government protests in Kenya in response to that country’s 2024 Finance Bill sparked similar activity in Uganda, although this was primarily fuelled by elevated perceptions of corruption. However, institutional intolerance towards protest activity prevented a significant escalation, with incidences tapering off in the final months of 2024.

While opposition groups have gained ground in recent elections, the National Resistance Movement’s dominance of the state apparatus will provide it with substantial incumbency advantages, especially as the party has been in power since 1986.

Popular support for certain policies (including the controversial Anti-Homosexuality Act), alongside broad economic stability, has likely contributed to an increase in people believing that the country is headed in the ‘right direction’, as per a recent survey by Afrobarometer, a pan-African research network.

BMI says, ‘While not our core view, there is a small chance that President Museveni may not be the NRM’s candidate in the 2026 election. On Election Day, Museveni will be 81 years old, and concerns regarding his eventual succession have increased in recent years. No such plan has been publicly announced and his sudden departure could prompt a factional struggle within the NRM, undermining Uganda’s long-standing governing stability’.