Time to radically strengthen Uganda’s Capital Markets

Monday April 22 2019

  Stephen Asiimwe

Stephen Asiimwe  

By Stephen Asiimwe

The departure of African Alliance, a major player in the African stockbrokerage industry from the Ugandan brokerage business, is a major blow to Uganda’s Capital markets. As reported by various media outlets, African Alliance has exited the brokerage business in Uganda due to lack of profitability as explained by its Uganda CEO Kenneth Kitariko.

This departure is a big blow to the Ugandan investment industry. It is a good indicator of the weakness of our capital markets and urgent need to boost our capital markets.
The real modernisation of Uganda will be driven predominantly through the Capital Markets. Weak capital markets equal a weak economy and a weak job market. This calls for a realistic way ahead to radically strengthen Uganda’s Capital Markets.

Firstly, existing listed companies should be encouraged to have dual listings on the popular international exchanges through depository receipts. For example, the oil company, Total, is listed on the French exchange with its shares concurrently listed through depository receipts on other stock exchanges like the US exchanges. The same should apply to dfcu, NIC and others. Unless we push companies to pursue this agenda, the Uganda capital markets and the listed companies will continue to limit their financial potential.

Secondly, a lot of local unlisted businesses need to seriously consider listing some of their shares on the exchange.

There is a lot of opportunity for these companies to expand with this capital and expand their businesses.

There are also financial disciplines and targets that come with being on the exchange that owners and employees will appreciate over time. We should consider having an affiliated market like London’s AIM (Alternative Investment Market) if the companies are not ‘big enough’. This can be owned by the Uganda Securities Exchange (USE) just like AIM is owned by the London Stock Exchange Group.


Further more, we should borrow a leaf from the Chinese capital markets and consider listing ‘B-shares’ where the investments are traded in foreign currency (US Dollar).

This would target investment from foreign investors. More to that, foreign listed companies with exposure to Uganda should be encouraged to have listings on the Ugandan Stock Exchange (USE). This is currently being pushed in the Telecoms industry as part of renewing their licences.

In addition, we should attract major global stockbrokerage players like TdWaterhouse, to have the various capital market investments (Ugandan equities, treasury bills, corporate bonds, etc) on their platforms.

An investor in Europe should find it as easy to trade a security like they do for Singapore investments. At the minute, it’s still operationally weak to invest in Ugandan equities & bonds. It should be as easy as sending remittances with your mobile.

Further more, company financial information on platforms like Bloomberg, which is the main source of investment information, is extremely limited. This coupled with the operational challenges of buying/selling the investments limits the desirability of investing in Ugandan capital markets.

If it is operationally made easy to buy/sell Ugandan capital market investments, the inflows would be larger. You would be tapping into both institutional investors (investment funds, etc) and numerous individual investors. This will make our capital markets even more liquid ie easy to buy and sell the investments with settlements of proceeds taking place within two to three days.

Annually, the Ugandan Diaspora sends more than $1 billion in remittances. That is the equivalent of building the US Bank Stadium (The American Football Superbowl hosting stadium of the Minnesota Vikings) each year. Some and more of that Diaspora capital would find its way into the capital markets.

We need to tap into the Ugandan investment community abroad more aggressively. There is a huge number of Ugandan nationals working for investment companies and service providers across the globe. This is a severely untapped knowledge bank.

In conclusion, without wanting to sound like a politician, for further modernisation of Uganda, our answer is in radically strengthening the capital markets.

Mr Asiimwe has worked for various
investment companies and service providers in Luxembourg. Stephen.asiimwe@klok.lu