Foreign investors cash in on Shs144b from listed companies

Brokers on the trading floor at Uganda Securities Exchange. FILE PHOTO

Kampala- As the shilling continues a down spiral against the dollar, the pressure is likely to be sustained as foreign investors take out dividends.

Such disclosures on dividend payments could be traced to listed firms, which unlike private companies, publish their annual reports.

Uganda’s stock exchange in its 15-year history has eight locally listed companies. This, however, has not stopped investors making some considerable amount of money.
In 2014, seven of the eight listed companies announced net profits of Shs296b up from Shs291b in 2013 indicating a rise of 1.7 per cent.
Stanbic, Dfcu, Bank of Baroda, British American Tobacco Uganda, National Insurance Holdings and Umeme all declared dividends.

Uganda Clays posted losses and missing on the list to consider was the Vision Group. Profitable companies always want to make shareholders happy by giving them a return on their investment.

Due to the slight increment in profits, companies declared dividends worth Shs204b in 2014, up from Shs148b in 2013 reflecting a rise of 53.8 per cent.

This is attributed to companies such as British American Tobacco Uganda (Batu) and National Insurance Holdings that opted to give investors more.

Batu paid out its entire net profit of Shs36.7b to shareholders. On the other hand, despite NIC’s drop in profitability to Shs1.6b, the board opted to tap the reserves and pay investors dividends of Shs16.7b.

Uganda’s capital markets still remain underdeveloped and dominated by foreign investors.
That, in fact, explains why of all dividends declared, at least 70 per cent will be taken out of the country.

Foreign investors by end of October 2015 will take out an estimated Shs145b ($44m) in dividends, which is at 71 per cent of all declared dividends. This is a drop from the 78 per cent of all dividends paid to foreign individuals and companies in 2014.

Part of the reason behind this rise in payouts is because ownership of some of the listed companies is still largely foreign.

For instance, Standard Bank Group will earn at least Shs68b from its 80 per cent shareholding in Stanbic Bank Uganda. British American Tobacco is also set to make at least Shs26b for the majority stake it holds in BATU.

Currently, there is no cap on how much foreign ownership a company can have. The ultimate price for the economy is to pay these foreign dividends since there is demand for the dollar for conversion purposes.

According to Mr Stephen Kaboyo, the managing partner Alpha Capital Partners, some of the depreciation pressures stem from demand for dollars by companies paying dividends to investors out of Uganda.

Listed companies are only part of the equation but other companies also issue dividends. Some of the largest companies such as MTN Uganda, Nile Breweries and Coca-Cola, among others, are all foreign-owned. They pay dividends to shareholders.

Overall, foreign investors have in excess of Shs2.5t trillion placed in various listed companies.

Much more is paid out in dividends by private companies; however, they are not obliged to disclose.

On top of generating income tax from listed companies, Uganda Revenue Authority, institutes a withholding tax charge on all dividends.
Overall, listed companies paid Shs112b as income tax up from Shs90b in 2013.