Uganda Food and Drink Report Q1 2013

Our Africa team believes that private consumption in Uganda will continue to rebound following adverseconditions in late 2011 and early 2012, which saw inflation soar and purchasing power plummet. Due tothe improvement in food supplies (owing to much more favourable weather conditions), as well as theaggressive action by the Bank of Uganda to rein in price growth, inflation has continued to fall from itshighs of more than 30% year-on-year (y-o-y) in October 2011. While this is in line with BMIexpectations, the October 2012 figure came in even lower than we had anticipated, at only 4.5% y-o-y,compared with 5.5% in the previous month. While we expect a modest increase in inflation in the finaltwo months of 2012, our year-end forecast of 5.6% (an adjustment from our previous estimate of 6.5%) isstill well below Uganda's historical average, and especially low relative to recent highs. The lowerinflation will allow households to stretch their incomes further, and expand the amount of goods andservices they consume in real terms.

The large young population will keep private consumption supported over the longer term, as moreworkers enter the labour force, incomes rise along with a growing economy, and unemployment isreduced. While these improvements are subject to prudent policy and the successful diversification of theeconomy, we are optimistic that Uganda is on the right path.

Headline Industry Data

Per capita food consumption in local currency terms is forecast to increase by 12.0% in 2013. To2017, we forecast compound annual growth of 12.6%.

Mass grocery retail sales in local currency terms are forecast to increase by 17.2% in 2013. To2017, we forecast compound annual growth of 17.3%.