#OutToLunch Potential areas to invest during this period of inflation

#OutToLunch Potential areas to invest during this period of inflation

By Denis Jjuuko

Somebody whose 2022 resolution is to start constructing a house asked me last week whether she should commence or not. She already has a plot of land in greater Kampala. So far, she has saved about Shs40 million, she said, but the price of cement has increased by at least 14.2% over the last two or so months while some steel bars have gone up by as much as 26.2% for some brands. She wanted to know whether to hold on and build at another time — during a deflation period.

The problem is that nobody can predict with certainty when prices will go back to normal. It may be next week or next year or it may never happen. In Uganda, prices rarely go down. So what does somebody who have cash on them do since the ministry of finance has said that it will “monitor the situation and respond whenever necessary”? The government says we shouldn’t panic as long as inflation is contained at 5% (currently, they say it is at 3.2%).

Uncertainties, like for this lady, keep people on the edge wondering what they should do with their money. One of my aunts, a seasoned entrepreneur always tells me that “money today is better than money tomorrow” in reference to inflation. There are businesses and/or investments that withstand inflation and that is where we could be looking. If the lady who asked me keeps her Shs40m kitty in the bank waiting for the right time to start her construction project, the money will most likely lose value. So, what she could do with Shs40m today, may not be able to achieve it at this time next year (money today is better than money tomorrow).Here we look at businesses and/or investments that one could look at during this period of inflation.

*Real estate*

Real estate is one of the businesses that are known to withstand inflation globally because prices always match prevailing conditions. Rent income usually goes up during inflation but so are the values of properties. Because property values are usually rising to match inflation, if your plan was to invest in real estate, this is a good time. As prices of commodities and services go up, so will some people feel the pressure to sell some of their real estate holdings thereby making it a good time to buy. Also, I see many adverts in newspapers of bank foreclosures. But for this to work, you must be a long-term investor.

*Commodities*

As prices of commodities (sugar, soap, cooking oil, agricultural products etc.) go up, they provide a good investment opportunity given their ability to beat inflation. An investor can buy at high price and sell at a higher price factoring in inflation. However, this is a business for those who have appetite for high risk because they are the most volatile. Prices of commodities are the best indicators of inflation and therefore prices can crash as fast as they rose signaling an end to an inflation period. Invest with caution.

*Technology*

We are entering the fourth industry revolution (4IR) where technology is disrupting all sorts of industries. Of recent, there is a lot of interest in African tech startups by venture capitalists and this could be an area where to invest during inflation. Like we saw during the Covid-19 lockdowns, technology companies simply grew turning hitherto unknowns like Zoom into global behemoths. The world will continue to rely on technology for almost everything regardless of inflation. Long term investors could take a look at technology businesses.

*Short term bonds*

If you want to protect your money in the short term and you aren’t into other investments, you may go for bonds as long as they are yielding more than the inflation rate. The short-term ones are better because they give you an option to sit out and monitor the inflation as you make a decision on where to invest. This also protects your money from losing value as you plan where to invest during this period of inflation. But most importantly, if inflation escalates, you can get the money out unlike in long term bonds of for example 15 years and invest it elsewhere.

*Gold*

Uganda’s biggest foreign exchange earner is gold bringing in US$1.7 billion. Many countries hold gold reserves as a hedge against inflation. So since, it seems, there is a lot of gold in Uganda, this is a sector you could invest in. However, in Uganda, you are most likely going to find a conman dealing in gold than anything else. So be cautious on what gold you are buying to avoid buying fake stuff presented as a precious product.

The writer is a communication and visibility consultant. djjuuko@gmail.com

Related

Out to Lunch

#OutToLunch: Favourable interest rates are good for everyone, not just government blueprint for politicians and entrepreneurs building churches

#OutToLunch: A blueprint for politicians and entrepreneurs building churches By Denis Jjuuko When it comes to religion, many times politicians, billionaire entrepreneurs, the middle class and other classes agree. At least on building magnificent houses of God. Across Uganda, many people have contributed or even single handedly built these houses of God. Fancy to a fault, majestically standing on hills with spires that compete with those seen in Hollywood movies. Many of these worship centres, particularly those single handedly built by one person or a family with their friends, are usually located in rural areas where the funders were born, walked barefoot to school before migrating to Kampala to find fortune and fame. The floors are of Italian or Spanish marble, porcelain or at worst polished terrazzo. Stained glasses with the beautiful image of the Virgin Mary complete the curvy life size windows. The pews are of the hardest wood. The world’s best sound engineers come in to install the public address system. The house of God must be fancy. Once construction is complete, they call in their Kampala friends for the grand opening. The clergy lines up at the foot of the building to welcome them. The parking lot is full of the most expensive SUVs. The parishioners walk in every prayer day fearful of stepping on the floors, sometimes so shiny that they see their own body reflections. Their best clothes can’t even be used to clean the pews. They can scratch them. For a moment, the poor are in heaven before returning to their houses where floors are screeded with cow dung. There is nothing wrong with people using their fortune and connections to build grand churches or mosques. It is their money; their appreciation of what God has helped them achieve. They no longer have some of these other problems so they can “give back” to God. The problem is whether the grandeur church is what the community really needs. Shouldn’t politicians, the rich and famous first do a needs assessment? Usually, besides the magnificent house of God stands a school with a falling roof or whose walls are being held in place by crooked timber poles. Windows are just wide openings where mild steel frames would do. Inside some of the classrooms, are anthills. Pupils sit on logs and like their homes, the cow dung is the main material used for floor screeding. Teachers look like they last had a decent meal on Christmas day. The health centre is miles away and poorly equipped. The only hope for survival whenever they fall sick is through prayer in the church built for them by the only person who was lucky enough to survive the biting poverty. Yet the funders go to India or Kenya or Germany whenever they feel any discomfort. And are not afraid to give testimony that last time they fell sick, they traveled to Europe for better management and while there, they were thankful to God for their life hence the magnificent church building. Yet the blueprint for an impactful church exists. In most cases wherever the Catholics built a church, they built a school as well and almost everywhere they set up their regional headquarters (read a diocese), they built a functional hospital. They knew that you can’t pastor the dead! They also knew that an educated population is good for them and their beliefs. Some people call it sustainability and perhaps that is why they have existed for millennia. You saw how they put on a show at Pope Francis’ funeral. Why can’t politicians and billionaire businessmen do the same? If you have Shs6 billion (nearly US$2 million) like we heard of the Ssembabule church or the one in Mitooma, why not build a church of Shs2 billion, a school of Shs2 billion and a healthy centre of Shs2 billion? You could also may be build all those with about 70% of the kitty and create an endowment fund with the remaining 30%. The annual interest from the fund could be used to operate the school and the hospital. If 30% of Shs6b is invested say in a long-term treasury bond, it could give a net return of approximately Shs255m per a year or Shs21.3m per a month, enough to subsidize a rural school and health facility. Alternatively, an income generating project could be established alongside the church building. A factory to add value for the parishioners. It could be a dairy plant or a coffee factory depending on the area. A scholarship for the needy bright students could be another alternative. That way people wouldn’t have to meet their creator ahead of time. The writer is a communication and visibility consultant. djjuuko@gmail.com

Read More »
Out to Lunch

#OutToLunch: Favourable interest rates are good for everyone, not just government only we could learn from Pope Francis

#OutToLunch: If only we could learn from Pope Francis By Denis Jjuuko The death of Pope Francis came a little bit as a surprise. He had been seen publicly on Easter Sunday, another surprise, blessing the faithful from the balcony that overlooks St Peter’s Square. Even though he was visibly weak, it seemed he was on the road to recovery after spending more than a month in hospital being treated of double pneumonia. He was 88 years old. Pope Francis is the third pope to die in the last 20 years following John Paul II in April 2005 and Benedict XVI in December 2022 even though he (Benedict) had long resigned from this position due to ill health. That decision of Benedict to resign allowed Francis to assume office in March 2013. Less than two years after his election, Pope Francis made the long trip to Uganda, becoming the third pope to do so largely thanks to the Uganda martyrs. And like most of the papal visits especially to countries like ours, everything comes to a standstill. Roads are paved, buildings are rehabilitated and grass is planted, public holidays granted and that wasn’t any different in 2015. People traveled from far and near to attend the mass that he led. Even our politicians who usually don’t see eye to eye were seen shaking hands at the Uganda Martyrs Shrine in Namugongo. One wished the pope visited every day! Those who met the Pope either in Uganda, the Vatican or elsewhere all talk about his humility. As he departed Uganda, a photo is shared of him climbing the steps to his Shephard One aircraft at Entebbe International Airport. He was walking alone, one hand sometimes holding his papal soutane, and another carrying a black bag, perhaps with personal belongings. He could have had as many aides as he wished. He was the leader of more than a billion Catholics but he lived simply and perhaps sending a message to nobodies that they too can be humble. Many ministers in Uganda never carry their handbags, there is always somebody at hand to do so. He refused to move in expensive limos or SUVs while visiting Kampala preferring a simple black Kia hatchback. Again, in a country where every public official craves for the most powerful vehicles. He lived simply and probably wanted us to learn something. Servant leadership. Showing off was not his way of life. He also understood that the Catholic Church needed reforms in a world that is rapidly changing. It may not have made him a lot of friends within the conservatives but leadership is about making key decisions including those that are unpopular. That way he endeared many to the church. He wanted a world where peace existed. He prayed for peace and welcomed everyone including many that he probably didn’t agree with. Perhaps if they listened to him, the world would have been different. There would be less destruction. We can all live together. He kissed the feet of warrying parties and urged them to embrace peace. Those whose feet he kissed only shook hands for a day and some are at each other’s throats again. He must have died wondering what needed to be done to stop the wars and killings that go on unabated sometimes fighting for no particular reasons apart from the egos of leaders and wealth that they would still leave on earth. Pope Francis still sent a message to those who deprive wealth of others by stating in his will his desire for a simple burial without the ornaments and all stuff that his position could afford. If he didn’t enjoy a luxurious lifestyle when alive, it would mean nothing to his body. There is a lot that we can learn from Pope Francis. His humility, ability to embrace everyone and putting others first even when it came at a personal cost. He didn’t adhere to the advice of his doctors for complete rest. He kept on meeting people and drove through the crowd in his papal mobile on Easter Sunday. And if leaders can take his example, the world would be a better place. Peaceful and resources shared with everyone. The writer is a communication and visibility consultant. djjuuko@gmail.com

Read More »