Archive for the 'Uganda' Category
February 21st, 2010 by Tom Minney
The Uganda Securities Exchange (www.use.or.ug) was set to open the Securities Central Depository at the end of last week. The SCD is an electronic system of keeping traded shares records at the stock market in a single location and would end the issuing of paper certificates as evidence of ownership.
According to the Monitor newspaper (www.monitor.co.ug), the SCD was to “go live” on 18 February, quoting Ms Harriet Kiwanuka, the head of trade, research and market development, USE. The move will prepare the USE for electronic trading of shares and is another step towards link-up in the regional markets, including the advanced Nairobi Stock Exchange.
Stockbrokers are set to ask owners of the paper certificates to return them in exchange of electronic transaction accounts, similar to bank accounts.
Ms Kiwanuka is reported as saying both new paper certificates and electronic accounts will be issued until the USE adopts electronic record keeping and trading.
Mr Peter Okoed, the senior portfolio planner at stockbroker Dyer & Blair (www.dyerandblair.com), is reported in Monitor as saying that the SCD will make the exchange attractive to foreign investors who are usually discouraged to invest by the communication that it takes for them to receive their share certificates.
With this system, investors will only trade their shares after getting electronic accounts.
February 5th, 2010 by Tom Minney
The closure today (5 February at 5pm local time) of the share offer of Uganda’s National Insurance Corporation Limited (www.nic.co.ug) is likely to result in a rush for shares. It is the first listing on the Uganda Securities Exchange (www.use.or.ug) since 2006 and the amount on offer is small, totalling 161,552,000 ordinary shares – 40% of the issued share capital – at a price of Uganda Shilling (UGX) 45 or 2 US cents per share.
The total amount is UGX7.3 billion (US$3.7 mln).
The sale of shares is by the Government of Uganda, which says the price is subsidized. Ugandans get priority and the minimum purchase is 2,000 shares.
According to the NIC website: “This IPO marks yet another milestone in the deliberate use of the divestiture process in Uganda as a core catalyst for the development of the capital markets in the country.
“The Government of Uganda has to-date privatized 6 of Uganda’s successful public companies by way of IPOs. The companies namely are; – Uganda Clays Limited (UCL), British American Tobacco Uganda Limited (BATU), Bank of Baroda (U) Limited (BOBU), DFCU Limited, New Vision Printing and Publishing Company Limited (NVL), and Stanbic Bank Uganda Limited (SBU).”
4% of the issued shares has been reserved for the permanent employees of NIC at the IPO price.
In June 2005 the Government had sold 60% of the shareholding in NIC to Industrial and General Insurance Company Limited (lGI) of Nigeria (www.iginigeria.com), a leading West African insurance company, after a bidding process. NIC was set up in 1964 by Act of Parliament.
According to a report in The East African, Joseph Kibuuka, a research and market development officer at Crested Stocks and Securities, says: “This IPO is not the most exciting we have had. But the market was hungry for something to reignite it and NIC has provided that.”
One question mark in investors’ minds had been outstanding debts of UGX17.7 billion accrued in handling Makerere University’s Deposit Administration Plan – a staff retirement scheme – between 1996 and 2005.
January 25th, 2010 by Tom Minney
A new fund is making good progress in raising up to US$55 million to be invested in business start-ups and small and medium enterprises in Kenya, Rwanda, Uganda, and Tanzania. The Fanisi Venture Capital Fund was set up with help from Norwegian Investment Fund for Developing Countries (Norfund) and incorporated in Luxembourg. Norfund is also an investor and a shareholder in the management company, Fanisi Capital Ltd.,,which is majority owned by Nairobi-based Amani Capital Ltd.
Fanisi has raised $40 mln in commitments and expects to reach its goal in the next 12 months. On 22 January, the Internatonal Finance Corporation (www.ifc.org), part of the World Bank group, announced it will invest $7.5 mln.
According to an IFC press release: “The fund plans to make investments between $500,000 and $3 million in a variety of sectors, ranging from manufacturing to technology, helping smaller enterprises and start-ups get the capital they need to create and expand businesses. It also will set up a business services support facility to help pipeline companies overcome technical and governance limitations, pre- and post-investment.”
It quotes Ayisi Makatiani, head of the fund’s investment team and CEO of the fund nabager: “IFC’s early and continued support to the Fanisi team has been extremely helpful, especially for a local and first-time fund management platform.”
IFC’s Gender Programme has agreed to support the business services facility, and IFC’s Rwanda Enterprise Development Programme will provide training support to the fund’s portfolio companies.
Haydee Celaya, IFC Director for Private Equity and Investment Funds, said, “IFC is investing in this local private equity fund that focuses in growing SMEs and startups at a critical time, when the region needs long-term financial and advisory support. The investment also will help build local fund management capacity.”
IFC is currently seeking a capital increase to strengthen its ability to create opportunity for the poor in developing countries—including by investing in private equity funds that target small enterprises in developing markets. Smaller enterprises are responsible for much of the job creation in the East African region.
January 4th, 2010 by Tom Minney
An initial public offering (IPO) for Uganda’s National Insurance Corporation (NIC www.nic.co.ug) will be launched on 14 January and close on 5 February, according to a report on the Business Daily website (www.businessdailyafrica.com).
Mr Hassan Mohammed, outgoing joint managing director of Dyer and Blair Investment Bank (www.dyerandblair.com), was reported as saying the listing on the Uganda Securities Exchange (www.use.or.ug) will be on 25 March, after a share allotment on 9 March. Mr Japheth Kato, executive director of Uganda’s Capital Markets Authority, is said to have been satisfied with the preparations, including the prospectus.
It will be another step forward for the USE which has dynamic management but a relatively small economy. The bourse has 11 listed firms, compared to 55 listings on the Nairobi Stock Exchange and 15 on the Dar Es Salaam bourse, nearly half of them in recent years. Uganda Clays and New Vision Printing and Publishing Company were listed on the USE in 2008. Kenyans have also invested in recent IPOs, including Stanbic Uganda.
Other IPOs expected in Uganda in the coming months or years include Sheraton Hotel, Kinyara Sugar Works, Barclays Bank Uganda and Kakira Sugar Works, says the newspaper.
Kenyan companies including Kenya Airways, East Africa Breweries, Kenya Commercial Bank and Jubilee Holdings are cross-listed on all three exchanges while Equity Bank is listed in Uganda and Nairobi.
NIC is 45 years old and Uganda’s biggest underwriter. On offer is 40% of the share capital (amounting to 161.6 million shares), priced a USh45 per share (US$0.02/ 2 cents). In 2005, the Government of Uganda sold a 60% stake to Industrial and General Insurance Company Limited of Nigeria.
The listing has been delayed for 3 years due to disputes with the staff association of Makerere University over a pensions fund managed by NIC. This has not yet been fully resolved, according to the report.
The Government has been working with the Uganda Insurers Association to increase insurance penetration which is behind other countries. It has been receiving dividends from NIC. but says it is selling its stake in order to boost development of Uganda’s capital market.
December 17th, 2009 by Tom Minney
The curriculum of the Securities Industry Training Institute (SITI) has been launched in Kampala, Uganda. Its establishment in September and development have been funded by International Finance Corporation, the private sector investment arm of the World Bank, as part of its Efficient Securities Markets Institutional Development programme (www.ifc.org).
SITI aims to standardize training on a wide range of programmes on capital markets and investments, corporate finance, asset management, entrepreneurship, corporate governance and other related fields of study. Eventually, all brokers, fund managers and investment advisors will require certificates to operate.
Simon Rutega, CEO of the Uganda Securities Exchange (www.use.or.ug), launched the institute and says it will serve the East Africa trading market that is gradually being integrated. He is Chairman of the Board of SITI East Africa and other members are reportedly Rose Mambo (CDSC Kenya), Jonathan Njau (chief executive of the Dar-es-Salaam Stock Exchange), Robert Mathu (executive director of the Rwanda Capital Market Advisory Council) and Peter Mwangi (chief executive of the Nairobi Stock Exchange).
Future training programmes include training for board members of USE in February, and training for the media. Rutega reportedly said: “The intention is to have as many people trained as possible. The point there is also the integrity and standardization of the market.”
The institutions – Uganda, Nairobi and Dar es Salaam securities exchanges and Rwanda’s Capital Markets Authority agreed a standardized curriculum which will be administered by SITI.
According to Rwanda’s New Times newspaper, CMAC Operations Manager Celeste Rwabukumba says all practitioners will be required to have training by SITI to learn the rules and regulations of the industry: “This is a good development which will give market actors the understanding of the regional market, experience, how the business operates as well as the harmonization of the regional stock markets.” Rwanda has seven registered stock brokers companies which focus mainly on corporate finance, stock brokerage and advisory services among others.
According to the report, only Tanzania in the region has a certification programme.
December 9th, 2009 by Tom Minney
The Uganda Securities Exchange (www.use.or.ug) is seeking innovative steps to make its market more relevant to the development needs of the local economy by relaxing listing rules to allow smaller and medium-size enterprises.
According to local media, Simon Rutega, USE Chief Executive Officer, told a workshop on the new rules that the exchange would cut eligibility requirements but maintain governance and reporting rules: “It is very important that while we relax some requirements, we maintain the corporate governance rules and audited accounts to give prospective investors comfort that it is a good investment,” he is reported to have said.
The USE had conducted a study with UMACIS Consulting to understand why local companies had not taken advantage of the alternative investment market listing rules that have been in place since 1993. The alternative investment market is aimed at institutional investors and high-value retail investors (termed “sophisticated investors”) to buy a stake, unlike with the main market which is open to the general public.
According to the reports, the alternative market listing rules require companies to have issued and paid-up capital of at least UgSh200m ($107,000) and net assets valued at UgSh400m. Compared to the main board requirement of 5 years of audited accounts, smaller companies need 2 years. The companies need a minimum 100 shareholders. Senior management should be qualified and have no criminal record.
Out of 41 companies that participated in the study, apparently 7 expressed interest to list and Mr Rutega reportedly says: “If we can get one or two to list next year, that will be good.” The bourse will give training and technical expertise to the identified firms
The study found that smaller companies feared listing would erode family control and their eventual survival. The report says this is based on the misconception that sustaining family control is the most efficient way of assuring enterprise growth and expansion beyond the lifetime of the founding entrepreneur. One of the biggest challenges for small and medium enterprises is that they do not follow good governance practices, the study found. There is often no clear separation between the role of the board chairman and the managing director, one of the USE’s listing criteria.
The study apparently recommended the participation of institutional investors as key to kick-starting this alternative market segment, noting that: “Uganda’s institutional investors are still risk-averse and have tended to limit their financing to low-risk activities such as real estate.”
October 11th, 2009 by Tom Minney
Absa Capital (www.absacapital.com), the investment banking arm of Absa Group, plans to work in a range of African debt markets, particularly in countries where its parent, Barclays, is active. Standard Bank has so far been the leader into Africa. The new Chief Executive, Stephen van Coller, who took over from John Vitalo from 1 October, was reported as having told Reuters the group would hope to increase revenues by up to 50%-60% over the next 3 years through more African business.
Van Coller is reported as saying: “We’ve seen debt capital markets starting to open up in Botswana, Kenya, Tanzania and Nigeria. There’s actually been quite a lot of interest because the yields are quite good and I think people are seeing emerging markets as handling the recession better.” He said there is growing foreign demand for emerging market sovereign debt, particularly in Nigeria, Ghana, Kenya and Tanzania. Botswana has strong demand for debt and other products but analysts say more products are needed on the market before there can be enough liquidity.
Kenya’s Safaricom mobile phone company (www.safaricom.co.ke) on 7 October announced a KSh 5 billion (US$67 mln) bond, pegged to Central Bank of Kenya rates. It is the first tranche of a KSh 12 bln programme approved by the Capital Markets Authority (CMA). The offer, aimed at institutional clients, closes on 29 October.
Safaricom Chief Executive Officer Michael Joseph is reported by local media as saying: “The conditions and pricing are right and we are confident the market will endorse our overall strategy by taking it up. Safaricom will be using the funding for general corporate capital purposes, including the rollout of some critical projects.” He said it would increase capacity, build a better network and expand to other areas that are yet to be accessed especially the north eastern part of the country.
Arrangers are Barclays Bank of Kenya (with Absa Capital), CFC Stanbic Bank and CFC Stanbic Financial Services. The joint sponsoring stockbrokers are CFC Stanbic Financial Services and Kestrel Capital (East Africa) Limited. The five year bond has a fixed component offering 12.25%, compared to 9.50% on the 5-year treasury bond, and a floating component offering 1.85 percentage points above the 182-day treasury bill, according to Business Daily (www.businessdailyafrica.com). The minimum subscription is KSh1 million. In 2008, Safaricom’s Initial Public Offer attracted 866,000 applicants, and the minimum share uptake was KSh10,000.
Nampower (www.nampower.com.na), the Namibian Government-owned electricity provider, plans to issue a ZAR 250m bond in November 2009 to raise capital in order to help it bridge the looming gap to supply enough power for growing demand. The company is reported as planning to boost cash reserves and strengthen its generation capacity and transmission network so as to avoid power supply disruptions next year. IN March 2009 ratings agency Fitch gave Nampower a BBB- long-term foreign currency rating and national long-term A- rating as monopoly provider.
Nampower already has a bond (NMP20) listed on the NSX, with a coupon of 9.35% and maturity in 2020.
Power shortages are becoming common in the southern end of Africa, and Namibia faces difficulties to buy sustainable imports from South Africa. However it is building an interconnector through the NorthEast Caprivi Strip to import an agreed 150MW from Zimbabwe, and agreements are also signed with ZESCO of Zambia (100MW), Mozambique (40MW) and it is in discussion with Democratic Republic of Congo’s SNEL to import 50MW. The Southern African Power Pool has led to strategic planning and connections.
In Uganda, the PTA Bank has extended the deadline to 12 October for its UgSh 40 billion ($21 million) bond issue, apparently to meet demand. Kenya Electricity Generating Company (Kengen) is reported on Reuters to have said it has received applications worth over KSh 25.2 bln for its KSh15 bln 10-year bond. However, it has regulatory approval to absorb an extra KSh 10 bln, in what is known as a “greenshoe” option. Earlier Kengen said it had enough projects to use the extra funds.
October 6th, 2009 by Tom Minney
Bond issues are cropping up across Africa, and investor interest could be keen for selected issues, as seen by the US$1.5 billion orderbook for the African Development Bank global bond. New bonds include Kenya’s Kengen issue for more power generation which closed on 29 September, and bank issues in Nigeria and Uganda.
The Preferential Trade Area Bank, according to its website www.ptabank.org, has issued a Uganda Shs 40 billion bond (US$21 million) to be listed on the Uganda Securities Exchange (www.use.or.ug), after approval from the exchange and the Capital Markets Authority. The offer was to close on 2 October. The Bank will use the proceeds to finance project activities in Uganda requiring local currency.
Stanbic Bank is arranger and lead placing agent and African Alliance Uganda Limited is sponsoring broker and co-placing agent. The duration is medium term and the bond offers both a fixed and floating rate.
The PTA Bank is rated long-term BB- and short-term B by Fitch, while Global Credit Rating gave it A1 local currency short-term, AA local currency long-term and a BB long term rating.
The Bank has also issued bonds worth $25 mln in Kenya, listed on the Nairobi Stock Exchange. in 1999 The PTA Bank issued a 5-year UgShs15 bln local currency bond which was fully redeemed on its maturity in 2004. Bank President, Dr. Michael Gondwe, says: “We believe in deepening the stock markets of the countries that we operate in through issuance of such instruments.”
The Bank has financed $116 mln in trade and project activities in Uganda. In particular it has supported Uganda’s coffee and cotton exports, first through its Structured Pre-Shipment Financing Facility and later by directly financing exporters. Its authorized capital is $2 bln and subscribed capital is $1.18 bln, according to the bank’s website. Net interest income rose to $15.2 bln last year, up 20% on the previous year. Profits were $12.5 mln at the end of 2008, up 87% on the previous year’s $6.6 mln.
Nigeria’s United Bank for Africa Plc (http://www.ubaghana.com) aims to issue raise N500 billion ($3.4 bln) in tranches through a combination of bonds with a 7-year duration and ordinary shares, according to its website. The bank was scheduled to hold an Extraordinary General Meeting of shareholders in Abuja on 2 October for their endorsement and had previously notified the Nigerian Stock Exchange.
Group Chief Finance Officer, Mr. Victor Osadolor, says proceeds will go into opportunistic acquisitions, funding infrastructure and the consolidation of the bank’s channel and IT infrastructure. The bank says it has over 7 mln customers across 750 branches in 19 African countries, as well as presence in New York, London and Paris.
September 14th, 2009 by Tom Minney
The Uganda Securities Exchange (www.use.or.ug) is set to introduce electronic trading before the end of 2009 and an East African common stock market to be launched in January 2010, says a report in East African Business Week (www.busiweek.com) newspaper. The report cites a speech by Japheth Katto, the Chief Executive Officer of the Ugandan Capital Markets Authority, saying that eventually investors will be able to buy shares in any listed company of the Member States.
Uganda passed a Securities Central Depository Act early in 2009. A report in the New Vision newspaper (www.newvision.co.ug) says that the USE is set to change rules and start to move from paper certificates and manual clearance and settlement of transactions to electronic settlements and investor receipts from October. Hardware and software have been tested, and electronic trading has been anticipated since earlier this year.
“Electronic trading on Ugandan’s stock market will be good for regional integration because it will be possible to have one East African stock market,” Katto is reported to have said.
The Nairobi Stock Exchange started electronic trading four years ago. The USE still faces usual challenges of African securities markets, including: low levels of domestic savings (reportedly 15% in Uganda); low awareness; thin supply of new equities; an underdeveloped pension sector which has not been liberalized; underdeveloped life insurance sector; and the current global financial crisis.
However, the regional integration project seems to be gaining momentum, including a customs union protocol. The Monitor newspaper (www.monitor.co.ug) reports that the East African Community Secretariat (www.eac.int) is holding consultations in the five partner states from 7-25 September on an East African Monetary Union (EAMU). They consultations target stakeholders such as: ministries of finance, EAC, trade, planning, etc; central banks, regulators; bureaus of statistics; bankers associations; academia; parliamentarians; the private sector and civil society. It is supported by the European Central Bank (www.ecb.int).
According to reports, the launching date for the political federation is set at 1 January 2010. After the customs union, the EAC will progress to a common market and harmonizing labour policies and legislation.
August 22nd, 2009 by Tom Minney
Tanzania seems to be warming to the idea of linking the East African stock exchanges, in what could eventually be the development of a major regional market.
According to local media reports, Acting CEO of the Dar es Salaam Stock Exchange Mary Mniwasa said it is ready to join a software called Smart Order Router which links the securities exchanges of the East African Community member states. She is reported to have said the system will allow a stockbroker from the DSE, the Nairobi Stock Exchange and the Uganda Securities Exchange to see the markets and trade across borders without physically contacting a local market stockbroker.
The report quotes Simon Rutega, CEO of the USE, as saying Uganda fully supports the proposed integration of stock markets in east Africa. They have started using Central Depository Securities for holding securities and assisting in settlement.
The DSE and USE have long been dogged by lack of liquidity and outside investor interest. The newspaper cites a study by Codogan Financial & Associates, funded by the Efficient Securities Markets Institutional Development Initiative of the International Finance Corporation, part of the World Bank group. According to this, there are simply too few institutions and individuals who wish to invest in East Africa. The objective of the EAC stockmarkets integration is to enable consolidated EAC capital to flow and participants to operate freely across borders
The integration is being guided by an East African Securities Exchange Association, comprising the chief executives of the four exchanges – Dar, Nairobi, Uganda and Rwanda’s recently formed Over-The-Counter market. The original timetable was set in 2008 when the association resolved that a single clearing and settlement infrastructure was to be implemented within 3-6 months after January 2009. Senior members of the NSE are doubtful on progress.
One of the initiatives of the association is to integrate trading, clearing and settlement infrastructures within the EAC to facilitate a faster trading system within the bloc.
Tanzania has previously barred non-citizens from participating in initial public offers, such as when a 21% stake in the National Microfinance Bank was floated last year. In March 2008, it blocked its citizens from participating in the Safaricom IPO in Kenya.