Archive for the 'Uganda' Category
August 29th, 2010 by Tom Minney
South Africa’s Standard Bank (www.standardbank.com) will provide $100 million as credit to up to 750,000 farmers in 4 African countries in the next 3 years, according to an interview given by Clive Tasker, CEO for Africa, to Reuters newsagency. The bank is to offer the credit in Uganda, Ghana, Mozambique and Tanzania to help boost agricultural production and economic growth. It is a pilot scheme agreed with some institutions and aims to boost export crops.
Reuters quotes Tasker as saying: “This scheme will disburse loans to small-holders of up to $100 million over the next 3 years and will potentially benefit up to 750,000 small-scale farmers.” He said the bank was also planning a broader financing scheme for other farmers in Africa and would consider projects that aimed at raising production of cash crops: “We are committed to financing agriculture across the full scope of the industry.”
Priority will go to growing crops such as cocoa in Ghana and cashew nuts in Mozambique. “We will help farmers with the right seeds, fertilisers, and ask them to have crop insurance to mitigate our risks,” Tasker said. He added the bank would finance farmers’ co-operatives and agro-businesses to boost trade. Increased production of crops would help African economies to grow and lift millions of people out of poverty.
Reuters reports that Africa has vast water resources and arable land but also food shortages, and says analysts partly blame this on mismanagement of funds, poor government policies and lack of support infrastructure for farmers.
Standard Bank said there was increasing global demand for African produced cocoa, coffee, tea and horticultural crops. Reuters says there is also increased investment, including equity funds seeking land deals and South African and other farmers who are investing in other African countries to grow cash crops.
June 25th, 2010 by Tom Minney
The Uganda Securities Exchange (www.use.or.ug) is aiming for a 28 June deadline to finish immobilizing the shares listed for trading, according to a statement issued by the bourse and reported in local media. Companies whose shares are being moved into electronic form include Bank of Baroda, East African Breweries, Equity Bank, Jubilee Holdings, Kenya Airways, National Insurance Corporation and British American Tobacco, reports East African Business Week (www.busiweek.com).
Investors have been gradually moving from holding paper certificates as proof of owning shares in a company to keeping them through electronic records at the Securities Central Depository (see the USE website ). Once a share is held on an electronic register, shareholders cannot use their old share certificates.
The aim is to support automated trading on the USE, which could start as soon as next January. The paper quotes a market analyst as saying: “Liquidity once again will be the issue but this is not likely to impact the market performance in the long run.” However the paper says that the immobilization, which started on 29 April with the immobilization of Stanbic shares, has led to lower trading volumes on the exchange.
The paper quotes the Manager of the Securities Central Depository, Joel Lutamaguzi, as being happy with progress: “The ultimatums have worked. I am thrilled with the response from the public and if we can get this through this process then we will be getting closer to automated trading.”
Investors are opening accounts with the Securities Central Depository Agents (SCDAs), who are mostly broker/dealers and include all the brokerage firms licensed by the Capital Markets Authority and commercial banks.
The Nairobi Stock Exchange (www.nse.co.ke/newsite/) also uses automated trading and a securities depository. Nairobi also reportedly saw lower trade volumes during immobilisation.
The USE has been trading since 2000, and its first listed company was Uganda Clays.
The New Vision newspaper interviews Harriet Kiwanuka, the USE’s research and market development manager. It quotes her as saying: “Immobilisation means shares are pooled into the system and for anybody to trade, you need to get your certificate to the SCDA who will deliver it to the USE for depositing to certify trade. Once a counter is immobilised, you cannot use a paper certificate to trade on the floor. Everything has to be entered into the system for trade to occur.
“We cannot run a parallel system of trading electronically held securities parallel to paper securities because of the risks, and reconciliation challenges involved.
“We are only trading electrically deposited securities. Anybody holding Stanbic, New Vision, DFCU, Uganda Clays and Kenya Commercial Bank certificates has to go to SCDA because these counters have been immobilised.”
She says that there has been a lot of education, but many people will only immobilize their share certificates when they decide to sell and, although there is demand, prices are lower and many sellers are not keen. However, response on immobilization has been satisfactory and she says 300 million shares have been immobilized in 1,400 new accounts. The response is across the board, with account openings by the locals, institutions and foreigners which means education efforts are paying off.
The Nairobi Stock Exchange has already immobilized shares, and faced a similar task of convincing shareholders to act, until the listing of Safaricom. Immobilization and electronic trading are part of moves towards an integrated East African securities market.
March 13th, 2010 by Tom Minney
Uganda’s National Insurance Corporation (www.nic.co.ug), was oversubscribed after Uganda Shilling (UGX) 9.5 billion (US$4.6 million came in applications when Government offered its remaining 40% stake in the company in an 161,552,000 shares totalling UGX 7.2 bln.
Shares are set to trade on the Uganda Securities Exchange (www.use.or.ug) according to a report on Reuters newsagency, quoting Jim Mugunga, communications manager for the Uganda’s Privatisation Unit.
It will be a welcome boost to the USE, which had seen foreign investors leaving in the global crisis and share prices falling. It is reportedly the first listing since 2006.
Retail investors were allotted 90% of the shares, which had been sold at “a subsidised affordable price” of UGX 45 ($0.02) each, according to the insurer’s website. per share. Another 4% of the issued shares has been reserved for the permanent employees of NIC at the IPO price.. In 2005, the Government had sold 60% of the company to Nigeria’s 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),
Reuters quotes an analyst at African Alliance brokerage (www.africanalliance.com), Keneth Kitariko, saying he expects NIC’s share price will rise modestly in the secondary market.
“We do expect some correlation between the level of oversubscription and performance in secondary market, so mostly we’ll see a share price rise but the numbers will be conservative,” he said.
Reuters says discovery of large crude oil deposits turned a spotlight on East Africa’s third-largest economy, where growth is expected to be 5% in fiscal 2009-2010 and then climb to 7% the next year.
According to the NIC website: “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).”
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.