African Capital Markets News » Uganda

East African investors opening accounts at Nairobi Stock Exchange

Tom Minney — Wed, 04 Jan 2012 11:41:29 +0000

Although the number of investors from other East African countries opening trading accounts at Kenya’s Nairobi Stock Exchange (www.nse.co.ke) is still very small, it is growing more consistently in the last 2 years than other categories of investors. According to data to 30 Sept released by Kenya’s Capital Market Authority (www.cma.or.ke), East African individual investors opened 97 securities accounts at Kenya’s Central Depository and Settlement Corporation (www.cdsckenya.com). This compares to 92 accounts opened in the full year 2010 and 79 in 2009.
By comparison Kenyan individual investors only opened 27,669 accounts in the 9 months to September 2011, compared to 120,756 accounts opened in 2010 and 52,836 in 2009. Kenyan equity trading has remained subdued as investors say high interest rates make them choose government debt securities over equities.
One potential reason for the East African interest, according to an article in the East African , is that Ugandans are opening trading accounts at the NSE in anticipation of the IPO of electricity distributor Umeme (www.umeme.co.ug) scheduled for 2012. Umeme is expected to cross-list at the NSE and the Ugandan Securities Exchange (www.use.or.ug). Some investors open multiple accounts ahead of a potentially “hot” initial public offering (IPO) of shares, where they hope to sell their initial allocation quickly and make a quick profit, as this is likely to maximise their share of allocation if the IPO is oversubscribed.
Trading experience shows that cross-listed East African shares such as Centum, Kenya Airways, Jubilee Insurance, trade more on the NSE compared with the Dar es Salaam Stock Exchange (www.dse.co.tz) and USE. The increased liquidity in Nairobi means that East Africans are better off having a trading account at the NSE. The paper comments that Rwandans, Tanzanians and Ugandans are probably realising this fact and also taking positions ahead of the listing of some of their firms on the NSE by opening more CDS accounts in Nairobi: “Investors will go the extra mile to open and operate, as proxies, CDS accounts in the names of their relatives or friends who know nothing on trading in shares. Expect an influx of Rwandese, Tanzanians and Ugandans at the NSE in 2012.”

Kenyan IPO only 60% subscribed but regional plans go ahead

Tom Minney — Thu, 25 Aug 2011 19:23:50 +0000

Kenya’s financial services holding company British-American Investments Company Ltd.(www.british-american.co.ke) issued a statement on 23 August outlining that its initial public offering (IPO) had only attracted 60.09% of the targeted KSh5.85 billion ($63million). The company owns 2 insurance firms and an asset manager and said it will reconsider its plans, which had included real estate and regional expansion, including in South Sudan.
The listing was previously detailed on this site here.
The company successful raised KSh3.5bn by selling 390.6m shares at KSh9.00 each. It meets the minimum 50% requirement in its prospectus to go ahead and with 28,000 shareholders is permitted to list on the Nairobi Stock Exchange main board. The shares are due to start trading on the Nairobi bourse on September 2.
According to stockbroking analysts, foreigners were largely absent due to risk aversion and worries about the Kenyan economy. Reuters quotes George Bodo, a research analyst at ApexAfrica. “The timing of the IPO came … when the global markets were risk averse and foreign investors were cutting risky positions internationally.” International problems include the US economy and the eurozone debt crisis. “It was unfortunate that the US debt crisis escalated right in the middle of the offer period, causing loss of appetite amongst institutional investors especially those outside Kenya,” said Group chairman Nicholas Ashford- Hodges, according to a report in “Business Daily” newspaper.
Foreign investors normally account for 70% of action on the NSE, but Reuters says they are less active and this has been made worse as the Kenyan currency declines against world currencies.
Local retail investors recorded the highest participation, taking up 70.9% including a 142% oversubscription of the 195m shares offered to them; qualified institutional investors hung back and took up 23.7%, just over a third of their 240.5m shares allocation; employees, agents and individual life policyholders snapped up 5.2% and foreign investors were almost absent, taking up only 0.3% of the offer, less than 1% of the 195mn shares reserved for them.
Analysts said the poor macroeconomic environment in Kenya did not augur well and inflation in Kenya hit 15.53% in July, driven by food and fuel prices. Rising interest rates have dissuaded many investors from seeking funds from banks to invest in shares and banks were also not willing to take shares as collateral. Gregory Waweru, an analyst at Kestrel Capital, was reported as saying: “There was competition for funds due to tight liquidity in the market.” Many investors have not yet realized substantail returns from East Africa’s biggest IPO which was Safaricom’s listing in 2008.
British American had planned to spend KSh2.5bn on property development and group managing director Benson Wairegi said in a statement: “The property development initiative where the bulk of the funds were targeted will be reviewed with a view to scaling it down.”
The company was also to set aside KSh1bn for regional expansion and KSh1.28 bn to expand its Kenyan operations, including the asset management business and to launch new funds for Kenyans in the diaspora as well as local and international investors and to comply with a proposed law for real estate investment trusts.
Mr Wairegi said the company may consider using bank loans to finance other planned projects: “The group has no other gearing despite the very strong balance sheet, which has become even stronger with the raising of KSh3.5bn. We shall, therefore, be able to easily leverage to implement all the profitable projects that have been lined up,” according to a report in “Business Daily”.
British American launched a Ugandan subsidiary in July and at the time the chairman said next stop would be to open offices in Rwanda, Tanzania and South Sudan.

Private equity and lenders hop aboard $287m Kenya-Uganda railway

Tom Minney — Tue, 02 Aug 2011 22:27:10 +0000

The International Finance Corporation (www.ifc.org) and 6 leading international finance institutions provided $164 million in financing to Rift Valley Railways International (www.riftvalleyrailways.com) to rehabilitate the Kenya-Uganda railway today (2 August). The aim is to boost cross-border trade and investment in East Africa. Other key shareholders are Kenya’s TransCentury, which listed on the Nairobi Stock Exchange on 14 July, and Uganda’s Bomi Holdings Ltd, reportedly owned by Charles Mbire. The financing is part of a $287m capital expenditure programme to improve the operating company’s infrastructure and rolling stock.
Other institutions participating in the package include: African Development Bank ($40m), Germany’s KfW Bankengruppe ($32m), Dutch Development Bank FMO ($20m), Kenya’s Equity Bank ($20m), Cordiant’s Infrastructure Crisis Fund ($20m) and the Belgian Investment Company for Developing Countries ($10m). The balance of the funding for the $287 million capital expenditure programme is being contributed by shareholders and generated through operations.
IFC is the largest financier to Rift Valley Railways and provides a $32m loan, of which $10m is already disbursed, and an additional $10m in equity to be committed. RVRI is a portfolio company of Citadel Capital, an Egypt-based private equity firm with $8.7 billion in investments across 14 countries in Africa.
The Kenya-Uganda railway line (apparently formerly nicknamed the “Lunatic Express”) has a track length of 2,350 kilometres with several branches extending from Mombasa, through Nairobi and right across key parts of Uganda. The rolling stock is 219 locomotives and 7,500 railroad cars. Brown Ondego, Group Chief Executive Officer of RVRI, said in a press release: “Our rehabilitation programme has already delivered impressive early results. Net “ton kilometres” were up 9% in the first half of 2011, compared with the same period last year, while turnaround times — a key measure of asset utilization — on the strategic Mombasa-Kampala route dropped 27% in the same period. Year-on-year, we have also seen a 30% drop in accidents per train kilometre.”
Karim Sadek, Managing Director at Citadel Capital, said: “This financing package is the backbone for an ambitious 5-year rehabilitation programme that will see Rift Valley Railways International make a quantum leap in operating standards as it addresses safety issues, completes due maintenance to improve reliability and hauling capacity, improves service to passengers, and captures long-term gains through investments in information technology.”
IFC has been key in encouraging private investment in the Kenya-Uganda railway since the consortium won the private management contract in 2005. After the project’s initial sponsor left, IFC led the restructuring of the shareholder group that resulted in the entry of new project sponsors and investors.
Jean Philippe Prosper, IFC Director for East Africa, said: “IFC has provided leadership and dedicated significant resources to encourage the turnaround of the Kenya-Uganda rail project. We are committed to the success of this railway as part of a broader effort to encourage private investment in infrastructure that promotes regional integration and social and economic development in Kenya, Uganda, and the surrounding region.”
Transport prices in East Africa are among the highest in the world, largely due to heavy reliance on trucking. A lack of operating capacity has resulted in rail capturing less than 10% of East Africa’s transport market. An efficient rail network has the capacity to reduce East African transport costs by as much as a third, since rail transport is more efficient to operate and in fuel.
IFC is a member of the World Bank Group and the largest global development institution focused exclusively on the private sector. In the fiscal year 2011, amid economic uncertainty across the globe, IFC said it boosted investments to an all-time high of nearly $19bn.

British American Investment launches Kenya IPO

Tom Minney — Fri, 15 Jul 2011 09:00:10 +0000

British American Investment Company (Kenya) Ltd (www.british-american.co.ke) launched its initial public offer (IPO) on 12 July, aiming to list on the Nairobi Stock Exchange. It aims to raise KES 5.58 billion (US$62.2 million) for expansion in the offer which is open until 5 August.
British American is issuing 650 m new ordinary shares at KES9 each. East African retail investors and foreign investors have each been allocated 30% of the shares, institutional investors 37% and employees, agents and individual life policy holders get the remaining 3%.
The offer was launched by Prime Minister Raila Odinga. He urged more people to use insurance products, and said market penetration is only 2.3% of GDP, according to Kenyan Broadcasting Corporation. The Standard newspaper reports him saying “I would like to take this opportunity to assure investors that Kenya is on a renewal path.”

Expansion: “missing middle” and new products
According to a report in Kenya’s Business Daily newspaper, of the money raised KES1 bn will be used for new investments and entry into the regional market while KES 1.3 bn would be used to grow its Kenyan insurance businesses and to expand its asset management business, including launching new funds for Kenyans in the diaspora as well as local and international investors.
The company will use KES2.5 bn to set up real estate investment trusts when the proposed law comes into effect and to develop property investments, including commercial buildings and housing units. KES750 m is to offset a loan from Commercial Bank of Africa (CBA) and KES 300 m is for offer expenses.
The paper reports British American’s chairman Nicholas Ashford-Hodges saying funds raised would be used to boost the company’s operations in Kenya and expand to regional markets: “This IPO will give British American an opportunity to increase the scope of its operations and widen its footprint.”
The company hopes to seize emerging opportunities through innovative products such as micro-insurance and bank-assurance. According to the Standard, managing director Benson Wairegi said the company is developing more products for the retail market and small and medium-sized businesses: “We seek to fundamentally redefine the scale and scope of the insurance sector in Kenya and the wider region. Our established model of scale, reach and multi-layered selling will also be extended to the retail market and SMEs in the wider geographical region.”

Regional expansion – Uganda, Tanzania, South Sudan, Rwanda
On 7 July, BAT launched an insurance services business in Uganda through a subsidiary, Britam Insurance Company (Uganda) Limited, which has a capital of UGX5.6 bn ($2.2m). It also aims to open offices in Tanzania, Rwanda, and Southern Sudan.

Profit turnaround
British American is also the holding company of British American Insurance Company (Kenya) Ltd and British American Asset Managers Ltd (BAAM).
The market capitalization of the new company will be KES19.4bn ($216.3m), the highest among listed insurance firms. CfC Insurance Holdings, which was listed by introduction in April, was valued at KES6.85bn as at the close of trading yesterday, Jubilee Holdings Ltd at KES8.86bn, and Pan African Insurance at KES1.92bn, according to the paper.
Business Daily reports that British American Group posted KES2.7 bn in profits after tax last year, up from KES421 mn loss in 2009. The company made KES4.68 bn (KES 196m in 2009) in investment income and KES220 m (KES 32 m) in other income.

Indian telco to leave E African market – cites slow Govt approvals

Tom Minney — Wed, 15 Jun 2011 07:20:25 +0000

Indian steel-to-outsourcing conglomerate Essar has cancelled deals to buy telecoms operators in Uganda and Congo and is putting its Kenyan operations, under the Yu brand, up for sale. It no longer views telecom as core or strategic, according to a report this morning 14 June in India’s Economic Times newspaper and in March agreed to sell its 33% stake in Vodafone Essar, India’s third-largest telecom operator (after Bharti Airtel and Reliance Communications), to UK’s Vodafone.
The arrival of India’s Bharti Airtel in Kenya, after it acquired Zain in mid 2010, had sparked a price war that fundamentally changed the attraction and investability of telecommunications in Kenya. Bharti operates in 19 countries in Africa and Asia and has 200 mn customers.
Essar had agreed in November 2009 with Warid, part of UAE’s diversified Dhabi group, that Essar would buy a majority stake in Warid Telecom’s operations in Uganda and Republic of Congo (“Congo Brazzaville”), with a reported enterprise value of $318 million. This deal fell through because required approvals were not received and the paper reported a statement from Essar on 14 June: “It was mutually decided between the partners – Essar and Warid Group – not to proceed with the deal closure as certain condition precedents pertaining to government clearance were not met.”
The assets are to be returned to Warid, and it is not clear how much they will pay Essar back.
The paper says Essar had bought the Kenyan telco for about $150 mn and invested a further $100 mn and is looking for a price of about $300 mn. Bharti had apparently said it is busy consolidating its Zain acquisition and other buyers are not interested. The paper said it was the third largest operator, competing with Safaricom, Orange which is part of France Telecom and Bharti Airtel.

Uganda Securities Exchange extends trading to 5 days

Tom Minney — Mon, 07 Mar 2011 13:08:40 +0000

The Uganda Securities Exchange (www.use.or.ug) has today (7 March) extended its trading to 5 days a week, up from 3 days.
USE Chief Executive Joseph Kitamirike said at a press conference on 4 March that it would help meet local and international demand. It will also match trading on other East African exchanges such as Dar Es Salaam and Nairobi, as the exchanges harmonize in terms of an East African common market.
The Daily Monitor newspaper reports him as saying: “This development will offer investors maximum opportunity to execute investment decisions and respond promptly to market changes.”
He earlier told the paper reasons for the extension were: increasing demand for company shares, regional integration and the desire to make trading easier: “It’s just to give an opportunity for people to trade. People sometimes make their decisions on Tuesday but they have to wait until Thursday to trade. We cannot keep our market closed on days when we can be trading across the border. If your market is closed and the other markets are open then investors who come through your market don’t have access to others.”
There are 14 companies listed for trading on the USE, including 6 cross-listing with the Nairobi Stock Exchange.
Another cross listing being processed is for UK’s Tullow Oil PLC (www.tullowoil.com), which operates Uganda’s three oil blocks. African Alliance is the adviser but the listing application was held up over a tax dispute on Tullow’s $1.45 billion purchase of 50% interests in exploration blocks formerly owned Heritage Oil PLC stakes completed last July. This dispute is reportedly close to conclusion.

East Africa securities training for thousands

Tom Minney — Thu, 16 Dec 2010 22:21:17 +0000

The International Finance Corporation (www.ifc.org), a member of the World Bank Group (www.worldbank.org), and East Africa’s Securities Industry Training Institute (SITI), based at the Uganda Securities Exchange (www.use.or.ug) have signed an agreement to broaden training. This will boost opportunities for market participants, regulators and others in East Africa’s capital markets sector, with the aim of strengthening and supporting the growth of securities markets in the region.
SITI will be licensed to use IFC-developed securities markets training material for the next 10 years to train and certify thousands of securities market participants in Kenya, Rwanda, Tanzania, and Uganda. The material is developed by the Efficient Securities Markets Institutional Development (ESMID) Programme, a joint project by the Swedish International Development Cooperation Agency (www.sida.se), which provided $5.5 million, the IFC and the World Bank.
IFC Principal Investment Officer Aida Kimemia said in a press release: “Supporting the development of securities markets is a priority for IFC in Africa. This agreement will make available world-class training materials to thousands of people in East Africa, improving their skills and knowledge and giving them the tools that will support broad economic growth in the region.”
Joseph S. Kitamirike, Chairman SITI board and CEO, Uganda Securities Exchange, said: “We at SITI are very pleased to have cooperated with IFC to develop the training materials. We know that they are cutting edge and will help us develop the personnel we need to grow the securities markets in East Africa. On the strength of this successful cooperation with IFC, we are confident we will undertake more activities of this nature that will ensure proper market development.”
The ESMID programme aims to help develop well-functioning securities markets in Africa, with a goal of supporting key economic and social development needs with high developmental impact, such as infrastructure, housing, and microfinance. Despite efforts over the last 12 months this blog has been unable to contact the East Africa office directly to find out more, as the officers do not seem to reply to emails or phone messages.
Its funded programmes are to help simplify regulations and procedures for issuing and trading bonds; strengthen market infrastructure; build capacity of market participants; facilitate the regionalization of securities markets; and support demonstration transactions. In East Africa, it reportedly works with central banks, securities regulators, stock exchanges, and market participants, such as brokers, dealers, investment banks, and institutional investors. It also works in Nigeria, according to the website.
The ESMID-developed training material consists of 3 courses and 5 seminars: Fundamentals Securities Course; Securities Certification Course; Officers and Directors Course; Bond Trading Seminar; Corporate Finance Seminar; Corporate Governance Seminar; Bond Underwriting Seminar; and Portfolio Management Seminar.
The courses, which will be required for licensing of market intermediaries, have already benefitted more than 700 course participants in East Africa.
The IFC, a member of the World Bank Group, is the largest development institution focused on the private sector in developing countries. It says “our new investments climbed to a record $18 billion in fiscal 2010.”

New chairman for Uganda Securities Exchange

Tom Minney — Tue, 09 Nov 2010 13:34:13 +0000

Mr Charles Mbiire, the chairman of MTN and Invesco Uganda, has been appointed the new chairman of the governing council of the Uganda Securities Exchange (www.use.or.ug). According to a report in the Daily Monitor (www.monitor.co.ug) newspaper, he was elected at the the USE’s 99th Governing Council meeting on 3 November.
The paper cites USE’s CEO Joseph Kitamirike as saying: “Mr Mbiire brings a wealth of experience to USE owing to his standing in local, regional, and international business and policy advocacy arenas… He emphasised the pivotal role of the Exchange in the financial sector and the wider economy.” He also called for opening investment opportunities to Zambia.
The previous chairman was Samwiri Njuki, a director of Equity Stock Brokers and chairman of KCB Uganda. The Exchange has 13 listed and cross-listed companies.

Rencap has expansion plans

Tom Minney — Thu, 07 Oct 2010 16:47:38 +0000

Renaissance Capital (www.rencap.com), the Russian emerging-markets bank with operations in Africa, plans to expand next year into Egypt and at least 3 other African countries, according to a 5 October interview published on Bloomberg. Rencap says on its website that its core businesses areas are Mergers & Acquisitions, equity and debt capital markets, securities sales and trading, research, and derivatives. It says it is building “market-leading practices across emerging markets globally in metals & mining, oil & gas and agriculture.”.
Clifford Sacks, CEO of the South African unit and head of Pan-African Equities, told Bloomberg from Johannesburg the bank may buy or start a brokerage in Egypt that would also cover Morocco and Tunisia. Hasnen Varawalla, global head of corporate finance, added that it also plans to move into Angola, Uganda and Rwanda. Rencap is bsed in Moscow, and currently operates in African nations including Ghana, Kenya, Nigeria, South Africa Zambia and Zimbabwe. Bloomberg quotes Varawalla: “Each of these countries will see a huge development in their capital markets. We are looking to expand into another 5 or 6 countries in Africa.”
The bank is half-owned by billionaire Mikhail Prokhorov. It started its African business in 2007. According to Bloomberg last year it participated in 24 transactions across 13 African countries, including the $955 million sale of Central African Mining & Exploration Co. to Eurasian Natural Resources Corp. Africa accounts for a quarter of RenCap’s investment-banking business. Varawalla told Bloomberg that Non-Russian activities will generate more than 50% of revenue within 2 to 3 years.
In July, it paid ZAR207 million (then US$27.3 million) to acquire BJM Securities, the brokerage business of South Africa’s Barnard Jacobs Mellet (BJM) Group. A press release by Rencap describes BJM: “Founded in 1985, BJM Securities is the leading independent full service broker-dealer in South Africa. The firm is known for its outstanding research franchise, having been ranked No.1 in South African research surveys.
The Firm entered South Africa in February 2010 and appointed Clifford Sacks. The press release quotes him: “The combination of a leading independent brokerage in South Africa with award-winning research franchise and Renaissance Capital’s unparalleled expertise in capital markets and M&A, complemented by our unique access to global emerging markets creates a powerful platform across research, sales and trading in Africa’s largest economy.”

Standard Bank to lend $100 mln to farmers in 4 African countries

Tom Minney — Sun, 29 Aug 2010 17:00:15 +0000

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.