BOOK REVIEW: FROM NONCONSUMERS TO NATION BUILDERS: HOW MARKETS, NOT AID, SPARK PROSPERITY

BOOK REVIEW: THE PROSPERITY PARADOX

AUTHORS: Clayton Christensen, Efosa Ojom and Karen Dillon

 

I have long thought that for development to happen, governments must first invest in people—improving the human resource through education and health, then provide infrastructure, both hard like roads, power and ports, and soft like laws, governance and institutions, to create an enabling environment for private sector growth. Do those two things well, I believed, and voila! development would follow.

The Prosperity Paradox by Clayton Christensen, with Efosa Ojomo and Karen Dillon, doesn’t completely tear down that logic, but it does shift the order of operations in a way that is hard to ignore. The book argues that market-creating innovations are often the spark that triggers everything else, not the prize waiting at the end.

Christensen introduces the idea of nonconsumption

—people who would benefit from a product or service but can’t access it because it’s too expensive, too complicated, or simply unavailable. Nonconsumers, he says, are not just a business opportunity; they are the largest pool of latent economic growth. The most transformative entrepreneurs don’t fight over the existing, saturated market—they figure out how to serve the nonconsumer...

Celtel – the current day Airtel in Uganda, is a perfect example. In the late 1990s, mobile phones in Africa were toys for the elite—expensive, difficult to obtain, and often unreliable. Mo Ibrahim saw the real market in the millions who had never made a phone call. Instead of chasing high-end postpaid customers, Celtel introduced prepaid models that worked with the irregular incomes of cash-based economies, expanded coverage to rural and peri-urban areas, and offered pricing that put mobile communication within reach for the first time.

The results were transformative. Farmers could check market prices before setting out, cutting days of unnecessary travel. Families scattered across countries could reconnect without costly journeys. Traders could coordinate supply chains across regions. And perhaps most importantly, the physical infrastructure followed the market, not the other way around—cell towers rose in previously ignored areas, roads were built to access them, and power lines extended to keep them running. Celtel didn’t wait for the perfect environment; it created one by making the market too valuable to ignore.

The book’s most provocative take is on corruption.

We tend to treat it as the main obstacle to growth, but Christensen calls it a symptom of poverty. In environments with few legitimate opportunities, bending the rules can feel like the only viable path to advancement. Market-creating innovations change that calculation. When profitable, legitimate opportunities expand, the rewards for honest participation start to outweigh the spoils of graft. In Celtel’s case, its economic importance meant policymakers were pressured—both by public demand and by the potential tax revenues—to keep the sector healthy. In other words, the market itself created a constituency for better governance.

At the heart of this process are entrepreneurs—local problem-solvers who live the realities they’re trying to change. They understand the constraints their customers face, from cultural habits to unreliable infrastructure, and they design around them. They don’t wait for governments to roll out every piece of infrastructure; they build markets that make governments and investors step in to support them. Mo Ibrahim’s success didn’t come from lobbying for a better investment climate—it came from embedding himself in a market so valuable that the investment climate had to adapt to keep it alive.

Christensen’s point is not to dismiss the role of government in education, health, or infrastructure. These remain essential to long-term development. But the book flips the script, showing how market creation can provide the resources, incentives, and political will to expand these public goods. In the authors’ telling, markets generate the tax base that funds public investment and the demand that compels infrastructure rollout. It’s a feedback loop—strong markets create stronger states, which in turn can nurture more market creation.

For policymakers, the lesson is to stop waiting for perfect conditions before encouraging entrepreneurship. Instead, find and back the innovators tackling nonconsumption head-on.

For investors, it’s a reminder that the highest returns, both financial and social, often come from markets others can’t see yet, the ones dismissed as too poor or too risky. And for those of us used to the old sequence of development, it’s a challenge to think differently. Sometimes the road to prosperity doesn’t start with a school or a power line, but with a phone in the hands of someone who never thought they’d own one—and from that single connection, an economy begins to bloom.

UMEME’S PAYDAY AND THE MONTH THE MARKET WOKE UP

If there was a single spark that lit up the Uganda Securities Exchange (USE) in July, it was Umeme’s long-awaited dividend. After months in the regulatory shadows, the utility’s return to active trading — and with a payout in hand — turned what might have been a sleepy month into one of the most animated trading stretches this year.

Investors piled in. By the time the month was done, turnover had nearly doubled from June to UGX 10.78 billion. Almost half of that was Umeme alone, the other half largely swallowed up by MTN Uganda, which was riding a different kind of news — the planned structural separation of its mobile money arm. Between the two, they accounted for a staggering 96.7 percent of market turnover. It was as if the rest of the market existed mostly to keep the ticker moving.

The mood was helped along by a macroeconomic backdrop that, while far from perfect, was reassuring enough for investors to take positions.

 Inflation eased to 4.1 percent, the shilling stayed firm with a 2.61 percent year-to-date gain against the dollar, and Treasury yields slid across most maturities. Even the slightly softer Purchasing Managers Index reading of 53.6 — down from June’s 55.6 — still marked the sixth month of private sector expansion.

But back on the trading floor, it was all about liquidity and where it was flowing. 

Volumes traded jumped 70 percent to 44.3 million shares, the number of deals leapt 38 percent, and the All Share Index was up 5.43 percent, fuelled by strong gains in EABL, QCIL, BOBU, NMG and KA. There were losers too — UCL, MTN, NIC and Centum — but their declines barely dented the overall market lift.

Fixed income traders were quietly active as well, with government bond yields easing at the short and medium end of the curve. Three-year paper dropped to 15.50 percent, and the five-year slipped to 16.13 percent, as inflation expectations settled.

Beyond the numbers, the month carried the sense of a market still too dependent on a handful of big names to keep the scoreboard respectable. Blue chips like Umeme and MTN can stir up liquidity, but they also expose the market’s narrowness — if they sneeze, turnover catches a cold.

For July, though, investors who backed Umeme walked away smiling, dividend in hand, capital gains in pocket, and the satisfaction of seeing the counter back in play. In a market where patience is often stretched thin, that’s a reminder of why long-term holders keep faith. For the rest, it’s another signal that while the USE can spring to life on the back of a big corporate event, it will need a broader base of active counters if the current optimism is to survive the next dry spell.

THE QUIET RISE OF THE UGANDAN RETAIL INVESTOR

It’s not the sort of headline that makes the front page, but it should.

The Uganda Securities Exchange (USE) recently reported the rise in retail investor participation. In the first half of this year,

Ugandan individuals accounted for 23 percent of market turnover, up from a paltry five percent just a year ago.

Local companies have followed suit, now contributing 28 percent, nearly double last year’s share. In a market long dominated by foreign institutional investors, this is no small shift—and it’s more than just a feel-good statistic.

Local participation matters because it helps smooth out market volatility.

Foreign investors, valuable as they are for depth and liquidity, tend to head for the hills at the first whiff of trouble—whether it’s a wayward post on X, a traffic jam on Entebbe Road, or the perennial jitters of election season. Ugandan investors, by contrast, tend to hold on through the noise, driven by long-term opportunity and better understanding of the local risk, rather than the day’s headlines. And for many, participation in the local capital markets is proving one of the quickest ways to start climbing the asset ladder.

It’s a story Jack could have told us years ago.

He decided early on that he didn’t have the time—or frankly the patience for a side hustle. His job didn’t allow afternoons at the farm, haggling in the market, or chasing after errant boda riders to pay back a “loan.” Instead, he began quietly accumulating shares on the USE. Sometimes with salary loans, other times through disciplined monthly purchases, he kept at it for two decades.

Today, his portfolio has delivered double-digit returns in most years, whether in dividend yields or price appreciation. Over time, he’s added bonds, private equity in a handful of SMEs, and even some forex exposure. But the lion’s share of his wealth sits in USE-listed companies. His route to financial independence is not only legitimate, it’s public and open to anyone willing to try.

Jack’s conviction is showing up in the broader numbers.

The USE All Share Index (ALSI) rose 25.14 percent in the first half of 2025, while the Local Company Index (LCI) surged 30.42 percent, lifted by blue-chip counters like MTN Uganda, Umeme, Stanbic, QCIL, and Bank of Baroda.

Market capitalisation climbed nearly 28.5 percent to sh28 trillion ($7.5b). Trading volumes jumped 68.6 percent to 446.7 million shares, even if turnover only crept up 0.49 percent to sh38.4 billion.

The bond market is also finding its feet.

The alternative bond trading platform saw sh34.23 billion in trades up  

three fold, with nearly half of that in secondary activity. Even the commodities exchange, still small, has signed up over 6,000 farmers and traded 16 metric tonnes, showing ambition to link agriculture with capital markets...

Part of this momentum comes from reforms by the Capital Markets Authority (CMA).

The new Regulatory Sandbox Guidelines give innovators space to test capital-raising products under CMA supervision—potentially unlocking funding for SMEs and key sectors like manufacturing and tourism. Updated Collective Investment Scheme regulations now govern an industry managing sh4.6 trillion, while the proposed CIS Compensation Fund will give retail investors an extra safety net.

Perhaps the most practical development for the average investor is the launch of the Capital Markets Handbook. For years, the USE and CMA have struggled against a knowledge gap—too many Ugandans simply don’t know how to start, what to buy, or how to measure progress. The handbook addresses that, part textbook, part rights manual, part how-to guide for navigating Uganda’s capital markets.

Not everything is perfect. Turnover remains concentrated—MTN alone accounted for 59 percent of trading in H1 2025. And events like Umeme’s planned exit or MTN’s restructuring of its mobile money business could shake confidence if not handled well. The CMA’s close monitoring of these issues is reassuring, but concentration risk remains a structural hurdle.

Still, for the growing band of retail investors, these are good problems to have—problems of scale, growth, and maturity. Jack will tell you the hardest part of investing isn’t picking the right shares, it’s sticking to the plan when everyone else is chasing the next quick return.

Jack’s story is no fluke. It’s part of a quiet revolution. Ugandans shifting from consumption to ownership, from cash under the mattress to equity in productive enterprises.

MTN H1: A TAX BIT IN OTHERWISE HEALTHY MEAL

There’s an old Kampala saying that when you kill a chicken for lunch, you don’t complain about the feathers – they come with the territory. 

MTN Uganda’s H1 2025 results carry that same flavour. On the plate, the company served up solid revenue growth, fatter margins, and stronger cash flows. But on the side was an unavoidable helping of feathers – a Ush 110.9 billion tax settlement with the Uganda Revenue Authority that shaved nearly 10 percent off the bottom line.

Strip out that once-off tax bite, and the picture changes entirely. Adjusted profit after tax jumped 27.8 percent to Ush 377.9 billion, showing that the core engine is humming smoothly. Service revenue grew 13.3 percent to Ush 1.71 trillion, and the mix keeps shifting away from old-school voice towards the higher-growth data and fintech segments. Data revenue surged 31.3 percent on the back of affordable bundles, device financing schemes, and aggressive 4G/5G rollout. Fintech – mostly MoMo – grew 18.6 percent, as transaction values hit Ush 89.3 trillion, pushing its share of service revenue to just over 30 percent.

"Voice, once the bread and butter, is now the side dish – still the single biggest contributor at 36.9 percent of service revenue, but with growth stuck at 0.4 percent  thanks to lower mobile termination rates. The real story is in data traffic, up 42.6 percent, and in fintech’s growing menu of advanced services like MoMo Advance and the Virtual Card partnership with Mastercard.

Costs? Contained. EBITDA rose 17.8 percent to Ush 924.2 billion, with the margin swelling to 53.7 percent – helped by an Expense Efficiency Program that saved Ush 39.3 billion and a calm inflation backdrop. Net debt is down 12.7 percent to Ush 1.3 trillion, leverage is a comfortable 0.7x EBITDA, and capex spending held steady, focused on densifying the network, extending fibre, and expanding population coverage to 88.2 percent for 4G and 19 percent for 5G.

"Shareholders are being rewarded with a Ush 10.0 per share interim dividend – Ush 223.9 billion in total – to be paid in September. And there’s a strategic kicker: shareholders have approved the structural separation of the fintech arm, MTN Mobile Money (U) Limited, which could unlock fresh value once regulators sign off.

For the second half, MTN still aims for “upper-teens” service revenue growth, EBITDA margins above 50 percent, and capex intensity in the low teens. Risks remain – the US dollar’s behaviour, geopolitical rumblings – but with diversified revenues, market muscle, and a tight grip on costs, MTN is still cooking with gas.

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MTN Uganda H1 2025 Financial Highlights

Metric	H1 2025 (Ush bn)	H1 2024 (Ush bn)	YoY Change
Total Revenue	1,722.0	1,522.7	+13.1%
Service Revenue	1,705.0	1,505.4	+13.3%
- Data Revenue	490.2	373.3	+31.3%
- Voice Revenue	629.0	626.7	+0.4%
- Fintech Revenue	524.6	442.3	+18.6%
EBITDA	924.2	784.7	+17.8%
EBITDA Margin	53.7%	51.5%	+2.2 pp
EBIT	664.6	545.6	+21.8%
Profit Before Tax	543.8	424.5	+28.1%
Profit After Tax	267.0	295.7	-9.7%
Adjusted PAT*	377.9	295.7	+27.8%
Capex (ex-leases)	219.7	219.0	+0.3%
Net Debt	1,300.0	1,490.0	-12.7%
Leverage (Net Debt/EBITDA)	0.7x	0.9x	—

*Excludes Ush 110.9 bn once-off tax settlement.

DIASPORA CASH OUR UNTAPPED RESOURCE

Every year, billions of shillings pour into Uganda quietly, steadily, lovingly—from all corners of the globe. Somewhere between sh4 trillion and sh5 trillion a year, depending on who’s counting and when.

Behind each dollar is a person: a nurse in London, a security guard in Doha, a software engineer in Johannesburg. And behind each of them is a story—a story of sacrifice, long hours, missed weddings and funerals, all driven by that deeply Ugandan impulse to “send something home.”

So when Julius Kakeeto, Chairman of the Uganda Bankers’ Association (UBA), stepped up at the 8th Annual Bankers Conference last week and posed the question—how do we move from simply receiving remittances to using them to build the country? He wasn’t talking theory. He was talking about one of the most underused, underestimated engines of development in Uganda today: diaspora money.

We’re already halfway there. The diaspora is sending the money. More than our FDI, sometimes more than our official aid. But most of it is being consumed. School fees, rent, food, the occasional plot. Necessary things, yes—but things that do not compound. Money that does not multiply.

And then there’s the real estate drama. It’s one thing to spend diaspora money. It’s another to waste it. Over the years, stories have multiplied of diaspora buyers sending cash for property, only to end up with cracked walls, poor finishes, and houses built on swamp land.

Kakeeto, also the CEO of PostBank, whose Wendi mobile wallet is well positioned to help in mopping up diaspora funds, was refreshingly candid about this, acknowledging the concerns of diaspora clients and promising action—longer liability periods for developers, stronger oversight, and better customer support from banks. Good steps, all of them.

But the real opportunity lies in treating the diaspora not just as consumers but as investors. Countries like India, Ethiopia, and Kenya have all raised money through diaspora bonds to fund national development. Uganda can do the same—issue a properly structured, transparent bond offering modest, tax-free returns and use it to build agro-industrial parks, solar plants, roads, even hospitals. A “My Country My Bond” type of thing. One where people invest not just for profit, but out of pride.

The challenge? You can take the man out of the village, but you can’t take the village out of the man. Many of our people abroad—especially in the Middle East—still send their money home with a cousin or through mobile money. They’ve heard too many horror stories to trust new schemes. Some don’t even know what a bond is. Like their cousins back home, they may not take up the offer—not for lack of interest, but for lack of knowledge.

This is where we need a serious, coordinated financial literacy campaign. Not a one-off webinar. A real effort. Multi-platform. Continuous. Diaspora-targeted.

And let’s not stop at remittances. If we can get the diaspora to trust the economy, to believe in the stability of our policies and the seriousness of our governance, then their role becomes even more powerful...

Diaspora Ugandans can attract foreign direct investment. They can introduce Ugandan entrepreneurs to capital abroad. They can pitch Uganda in investment boardrooms in London, Nairobi, and New York. If they believe in the story, they will sell it better than any agency ever could.

But belief needs evidence. That means fixing the broken things: corruption that derails projects, policies that change without warning, land conflicts that take years to resolve. It means building credible institutions and upholding them. It means not treating every diaspora dollar as bait to be chewed and spat out by crooked middlemen.

It also means making formal remittance channels cheaper, faster, and safer. A big chunk of remittances still comes in through informal means—money in pockets, mobile money workarounds, unlicensed agents. If banks want a bigger share of this pie, they need to partner smartly with fintechs, mobile operators, and international remittance companies. Build trust. Lower fees. Offer value.

And please, let’s stop treating the diaspora like one uniform group. They’re not. There’s the delivery driver in Dubai. The nurse in Texas. The systems analyst in Nairobi. They all have different incomes, different goals, different levels of exposure and risk tolerance. A one-size-fits-all approach won’t work. The diaspora bond we pitch to someone in Canada won’t be the same one that appeals to someone in Muscat. Segment. Tailor. Respect their diversity.

Kakeeto closed his speech with a metaphor that stuck: “No matter how long the river flows, it never forgets its source.” That’s the diaspora. A river of goodwill. Of sacrifice. Of steady, quiet love. It hasn’t forgotten us. But if we want this river to keep flowing—and to flow with purpose—we must honour its source. Not just with warm words and welcome slogans, but with strategy, integrity, and structure.