Archive for the 'Uganda' Category

Rise of pension giants set to transform investment in Africa

New giants are arising in African investments – the domestic pension funds. In Nigeria the National Pensions Commission (PenCom) estimated registered pensions to be worth US$14bn in June 2011, with asset values up by 8% in three months; Namibia’s Government Institutions Pension Fund alone is worth some $6bn; South Africa’s pension funds grew at a compound annual growth rate of 14.3% in US dollar terms over 10 years to December 2010, including over 28% in 2010 and Tanzania’s pension industry was audited at $2.1bn for 2010, and growing by 25% a year.

The number of pensioners is set to soar, according to United Nations figures, as the number of people over 60 years in Africa will rise from 55m in 2010 to 213m by 2050, compared to 236m Europeans over 60 years old by 2050. Current pension funds cover only 5%-10% of Africans ranging from 3% in Niger but it used to be 80% in North African countries such as Egypt, Libya and Tunisia. Pensions are not available at all in some countries.

Regulatory reforms are driving the growth of African pensions. Recent reformers include Cote d’Ivoire, Gabon, Kenya, Nigeria, Senegal and Uganda. Ghana created a National Pensions Authority with a 2010 act. Reform in Kenya, including investment guidelines and a new regulator, resulted in strong growth and good investment returns. Tanzania passed the Social Security Regulatory Act in 2008. The rising pension industry is likely to boost fund management and equity industries, exits for private equity and even to fill some of the $45bn annual funding gap for infrastructure. For instance, In January 2012, Tanzania’s National Social Security Fund signed an agreement to finance 60% of the $137m cost of building Kigamboni Bridge. South Africa’s $130bn Government Employees Pension Fund is a major investor in the Pan-African Infrastructure Development Fund which raised $625m in 2007 and is targeting $1bn on its second offering.

For more details on Africa’s pension industry, please check my article published in The Africa Report magazine and website, here is the link and for brief profiles of 6 giant African funds, check here.

Umeme power company IPO share offer: UPDATE AND CORRECTION

The Initial Public Offer by power company Umeme ( in Uganda closed on 7 November. Results will be known before the listing scheduled for 30 November, but the company had sought to raise UGX171 billion ($65.8 million) by offering 622m shares in an offer that opened on 15 October. Meanwhile, Ugandan parliamentarians have called for a statement by the Finance Minister Maria Kiwanuka, according to a press report on the Observer website, with inquiries into tax and accounting for assets. Some MPs are calling for the listing to be delayed for fuller study of an energy sector report.

As the offer was closing, a report in The Independent cited corporate advisor William Nyakatura of African Alliance Brokers, said there has been a big turn up of applications from around the region. Umeme Managing Director Charles Chapman said that the portion of the IPO reserved for international share investors was sold up by the end of October, and where the company collected US$31million: “In the retail category, we received strong participation from the rural areas and Kampala and other urban areas.” Chapman also said that the offer has received significant participation from the regional market, especially Kenya, where the offer is made to institutional investors. Stanbic Bank and African Alliance were sponsors.

Ugandan investors had been offered the Eyongeza incentive scheme offering a bonus share for every 10 shares they bought, and all customers of the distribution firm were invited to buy. A day before closing it was announced that the International Finance Corporation, a part of the World Bank group, would also buy shares in the IPO. The IFC first mentioned funding Umeme in 2009 on its website. Umeme staff have been given 10,000 shares each as a morale booster, according to local reports, with increases if they keep their shares for 3 years.

Umeme was 100% owned by private equity firm Actis since 2009 and is a regulated electricity distribution company in Uganda, supplying over 460,000 customers by the end of 2011, up from nearly 355,000 in 2009, according to our earlier story. They are mainly located in the semi-urban strip from Entebbe through Kampala to Jinja. In March 2005, Umeme was awarded a 20-year concession to manage and operate the assets of Uganda Electricity Distribution Company (UEDCL) as part of broader privatization of power in Uganda, including unbundling transmission, distribution and generation, and awarding concessions to operate existing generation plant. This article on The Observer website ( gives background on some of the individuals and companies involved in the power sector in Uganda.

According to the Actis website: “Since Actis took over the ownership of Umeme following a privatisation process in 2005, the company went through a transformation phase, ramping up capital expenditure, improving the quality of management, formalising procedures, introducing a culture of safety throughout the organisation, and educating the population (mainly children) on the benefits and risks of electricity. By the end of 2010, Umeme had replaced over 120,000 rotten poles as part of its refurbishment programme. Safety is the top priority. The network restoration plans are on target and are due for completion by the end of 2012. Public, employee and contractor safety have improved, but public fatalities continue to occur, primarily because people come into contact with live conductors associated with pockets of the network yet to be refurbished. Umeme, guided by Actis, continues to make a significant effort to eradicate fatalities associated with its network. Much of this progress relies on an extensive school education programme, a 24-hour safety helpline, and the prompt response of the field teams on the ground – in the past it could take up to half a day to make the area around a fallen or unstable pole safe – now the average is 30 minutes. Uganda’s continued growth is pushing up demand for electricity: today approximately 7% of the population has access to electricity. And the proportion of population that has access is growing by 9% per year. Currently, the company connects more than 40,000 new customers every year.”

Uganda’s power distributor Umeme says it plans Nairobi and Uganda IPOs this year

Uganda’s only power distributor, Umeme, said it plans to raise capital to invest in Uganda’s electricity sector through an initial public offering (IPO) on the Ugandan and Nairobi securities exchanges later in 2012. Umeme is a distribution company and is 100% owned by private equity firm Actis, according to this report on Reuters.
The news came on 6 July at the switching of 5 turbines to add 50MW to the power grid as part of the $860 million Bujagali 250MW hydropower project, one of Africa’s largest power schemes. Umeme has a 20-year electricity distribution concession. Managing director Charles Chapman says the company has opted for the IPO as electricity is now available – Uganda had been suffering power cuts before Bujagali capacity was added – and there was agreement on regulatory targets.
The company would not say how much it hopes to raise and has not finalized plans for the IPO, but Reuters suggests it could be 20% of the shares. The report quotes Chapman: “The initial public offering (IPO) will support Umeme’s capital raising initiatives to finance the continued development of the electricity distribution network, including projects such as prepayment metering and energy loss reduction. We believe that Umeme will be stronger, more transparent and accountable with the input of our customers and employees as shareholders.”
He adds that customers are up to about 460,000 in 2011 from 354,839 in 2009. After power sector unbundling, power in Uganda is generated by the Uganda Electricity Generation Company and transmitted to Umeme by the Uganda Electricity Transmission Company.
According to this blog story, Umeme has already put in its application to the Capital Markets Authority in Uganda and has appointed Stanbic Bank (Uganda) as Transaction Advisor and African Alliance (Uganda) as Sponsoring Broker. Writer Angelo Izama comments: “The company is a safe investment given its monopoly and demand from customers. Many who worry about the risks it faces will look to political risk something to which we will return. Suffice to say that a great degree of the risk will likely be offset when the company lists given the divesting of its ownership to locals.”

Great line-up for African Debt Capital Markets summit at London Stock Exchange on Monday

Xavier Rolet, Chief Executive of the London Stock Exchange, will be celebrating the rise and rise of African fixed interest on Monday 2 July, when he opens the 2nd Africa Debt Capital Markets Summit (ADCM) at the LSE. It is organized by African Banker magazine and Springwood Capital. The keynote speech is Nedbank Capital’s Mark Weston on “Spain is not Uganda”. Other sessions will cover the fast-growing appetite for African debt, progress and problems for investors into Africa’s domestic debt markets, debt as fuel for growth including building infrastructure and securitizing assets, and regualtory and risk issues about developing the market for African debt. Speakers include Fred Omach, Minister of State for Finance from Uganda, together with top speakers from the world’s leading investment banks, advisory houses, asset managers, issuers including governments, development finance institutions and advisors such as lawyers, rating agencies and other experts. It is a top conference and recommended. The conference website is here. Omar Ben Yedder of IC Publications and IC Events (African Banker, African Business, New African and other top magazines) will do the opening and closing.
Declaration: The author writes for some of these magazines as a freelance and will be moderating 2 sessions on Monday – see you there..

East African investors opening accounts at Nairobi Stock Exchange

Although the number of investors from other East African countries opening trading accounts at Kenya’s Nairobi Stock Exchange ( 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 (, East African individual investors opened 97 securities accounts at Kenya’s Central Depository and Settlement Corporation ( 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 ( scheduled for 2012. Umeme is expected to cross-list at the NSE and the Ugandan Securities Exchange ( 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 ( 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

Kenya’s financial services holding company British-American Investments Company Ltd.( 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

The International Finance Corporation ( and 6 leading international finance institutions provided $164 million in financing to Rift Valley Railways International ( 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

British American Investment Company (Kenya) Ltd ( 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

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

The Uganda Securities Exchange ( 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 (, 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.