Let’s see shares as business

Regional companies a reaping benefits listing on the stock exchange and it is time for local companies to get on the gravy train. Joseph Kitamirike, Chief Executive Officer of the Uganda Securities Exchange (USE), tells The Independent’s Haggai Matsiko to that going public is an entry onto the regional and African market that Ugandan companies should not miss.


Recently Centum cross-listed on the Uganda Securities Exchange and UAP launched a brokerage business. These are both Kenyan firms. What is driving this regional interest in Uganda’s securities market?
Well, I think we are an attractive market over all, not just in securities. Uganda is a good place to do business. But mostly the securities market in Uganda is young and growing and offering the best returns in Africa, going by the figures of 2010; and money follows good returns. So a company like Centum has made two decisions: One, to bring their securities in Uganda, and two, to build a business in Uganda. As a company they are going to benefit. But they want to share that benefit also with a new set of shareholders who will buy into their company here in Uganda. In order to tap into Uganda’s growing securities business, expert firms are locating in Uganda one by one. There are others that are coming because the opportunity in securities is finally evident.

Why did you increase the number of trading days?
It is because of that same positive story. Last year on average we traded one hundred million shillings per day. This year we have started on a much higher note; yesterday [Feb 11, 2011] we for instance traded Shs 1.4 billion. This trend indicates that business is growing on the stock exchange. The market is becoming more active, there are more securities issued, and investors are participating more actively than they were last year. So we need to expand the time that the trading floor is open for investors to trade. Secondly we are part of a regional market that is integrating. We are close to Kenya, Tanzania and Rwanda, but especially to Nairobi which trades five days, two sessions a day. We need to be open so that investors can trade on our floor and that of our regional allies at the same time.

What companies are set to list?
We cannot disclose those as they are still preparing themselves for listing, but we are guiding them. What we can say is that we expect at least two major listings this year, maybe three, on the equity side, and several on the debt side.

Most recent listings have been foreign, especially Kenyan companies, cross-listing to the USE. 

Why aren’t local firms listing?
Cross-listings mean that these companies are already listed on certain stock exchanges, so they have the experience of operating on a stock exchange. Fortunately the rules of these exchanges are quite similar to ours, so if you qualify to list on these exchanges you also qualify here. Secondly, most companies that are listed in Nairobi have business here, with stakeholders, customers and associates, so it is logical for them to extend into a market where they are already established. The difference between the companies that are cross-listing and local companies which have never listed anywhere is that our companies have to go through a rigorous process of being prepared for their first listing. For a company to qualify to list there are many things that they need to adjust; they have to change their board of directors, their accounting system, operating systems, risk management systems, etc. It’s quite extensive and often too complex for most companies to want to undertake.

The CEOs of Centum and UAP, while launching on the Ugandan market, said that they wanted to use Uganda as their entry into the East African region. What is so special about Uganda?
Well, I think they meant that Uganda is well located to serve the markets of Sudan, Burundi, DR Congo and northern Tanzania. So if you want to access these territories, you need to have a beachhead in Uganda. But these companies’ strategy is an African strategy, not just a regional one.

What incentives do we need to see more local companies list?
The biggest challenges cited by operators of businesses in Uganda are two - taxation and access to capital. Listing itself provides new access to capital different from traditional sources. On the question of tax, URA [Uganda Revenue Authority] will tell you that companies are defaulting on taxes, but companies will tell you that taxes are too high. So maybe firms are defaulting because taxes are where they are. In terms of incentives, the first step might be to lower the tariffs, and second, to offer amnesty to companies that have defaulted on taxes in the past in exchange for their listing. That way we would be solving two problems – tax defaults and access to capital. Once a company is listed it will fall under a strict regulatory regime and will be unlikely to default again.

Is it true that a single currency for the whole East African region will drive more interest in securities?
The currency on its own, no. It might contribute, because right now there is a challenge when it comes to buying securities in another market as you have to convert your money to another currency and deal with the foreign exchange risks involved. But the interest in securities is something that must be developed. Somebody has to see securities as a business, as a place where you can earn a living. Until we begin to see that, the interest will not reach the level that is desired.