Umeme’s exit leaves Uganda’s stock market in the dark

Unless its board, management, and shareholders pull a rabbit out of the hat at its Annual General Meeting that has been postponed from May 22 this month to a date not later than August 15, 2025, Umeme seems set to bow out and its exit could leave a crater-sized hole at the Uganda Securities Exchange (USE).

Investors saw this coming. Many clutched their shares, hoping for a generous buyout. Trading slowed, speculation soared, and the USE hit pause, suspending the counter for 44 days to May 14.
Now, with Umeme powering down, the question is: What is next for Uganda’s stock market? If current trends are any indication, the outlook is not rosy.

Umeme dominated the local exchange from the moment it listed, leading turnover year after year. The only blip? 2018, when President Museveni publicly criticized its concession, giving Stanbic a brief moment in the sun.
Otherwise, Umeme was the market’s heartbeat because it had lots of tradable shares.

While most firms list a modest 20 percent of their equity, limiting real market action, Umeme flipped the script by offering everything —1.62 billion shares and a hefty portion of them to retail investors who usually move markets.
Now, attention turns to a date not later than August 15, 2025 when its shareholders meet to decide whether to re-invest or delist. The likely outcome? Delisting, followed by a buyout payout and final dividends.

But there is a wildcard: the company could reinvest the substantial cash it is sitting on.
By dm Money’s estimates, Umeme has about Shs1.2 trillion—Shs609 billion in retained earnings, Shs460 billion in buyout value (still under negotiation), and Shs160 billion in projected 2024 profits.

Impact on Exchange
Official figures from the USE show a notable dip in 2025 quarter one trading activity, and the culprit is clear: Umeme’s fading footprint.
“The concession’s expiry led many investors to pull back, waiting for a dividend payout or buyout. This cautious pause has dampened trading volumes,” says USE chief executive officer Paul Bwiso.

The numbers are dramatic. In the first quarter of 2024, Umeme alone contributed Shs21.1 billion to market turnover or the total value of shares traded. This year? Just Shs2.5 billion—an 87.6 percent drop.
And it is understandable. Over the past decade, Umeme was not just active—it was dominant, responsible for 57 percent of total market turnover on an annual average.

Liquidity event
Should the power distributor delist, expect a major liquidity quake. The timing could not be more critical: this is the same year MTN, in its prospectus, flagged its plan to spin off Mobile Money (MoMo), its fintech arm, from the listed holding.

Speculation about Umeme’s future—and the potential windfall or fallout of holding its shares—has been simmering since at least quarter three last year. Data from 2025 quarter one confirms something is brewing beneath the surface.
In terms of macroeconomics, it was a calm period: inflation held steady, the shilling firmed up slightly, and interest rates remained unchanged. Predictable weather usually boosts business sentiment. But on the stock market, the signals were mixed.

The good news? Market capitalisation rose 31.1 percent to Shs14.457 trillion, signalling growing investor confidence, fuelled by stronger corporate earnings, rising share prices, and juicy dividends.
The not-so-good news? The value of traded shares dropped 29.35 percent to Shs16.9 billion, despite a 22.87 percent increase in shares traded—122.5 million across 2,165 deals. More activity, less cash moving.

Local sparks came from MTN, QCIL, Bank of Baroda, and Stanbic. On the cross-listed side, banks rebounded, lifting indices: the Local Index rose 31.17 percent, and the All Share Index gained 21.6 percent.
Despite the price cheer, the value of tradable still lags. In the first quarter of 2024, it was Shs24 billion; this year? Shs17 billion. A steep drop that suggests not everyone is buying.

But Umeme’s shareholder base is not retail-heavy. It is packed with big players: National Social Security Fund (NSSF), private equity firms, and high-net-worth individuals—investors who reinvest quickly.
Umeme’s dividend yield has long hovered around 16 percent, making reallocating capital into similarly yielding stocks, like MTN, Airtel, QCIL, Stanbic, or Baroda, a natural move.

But there is a catch: free float or what they call the portion of a company's shares that are readily available for public trading.
Most of these aforementioned companies have listed less than 30 percent of their equity. That means liquidity is thin, and getting in requires paying a premium.

“The domestic exchange is illiquid compared to others in the region like the Nairobi’s Exchange,” says Simon Mwebaze, the chief executive of Cornerstone Asset Managers.
“To buy in, you often pay more because sellers are few. That results in high trade values but low deal volumes, inflating valuations without active trading.”

In theory, these stocks aforementioned could absorb Umeme’s liquidity vacuum. But Mwebaze warns against wishful thinking.
“Take the Shs200 billion expected from the Umeme buyout to local investors,” he says.
“If even a chunk tries to re-enter the market, we have a problem. Quarterly turnover averages Shs19 billion. At that pace, filling a Shs200 billion order could take a year—unless we see new Initial Public Offers (IPOs) or secondary offers.”

Possible solutions
The USE is all too familiar with this challenge—and it is not just sitting idle. One potential solution? A regional Exchange-Traded Fund (ETF) built around the East Africa Top 20 Index—a cross-border basket featuring the five biggest listed firms from Uganda, Kenya, Tanzania, and Rwanda.

It is a bold move: rather than treating the region as fragmented national markets, the aim is to unite them as a single investment destination.
The goal? To create an ETF that gives investors exposure to East Africa’s top blue chips—banks, telcos, agro-giants, pharmaceuticals, and construction firms—neatly packaged into one tradable product.

To qualify, a company must be at least one year listed, pays dividends, and among the top five by market cap in its country. The result? A daily-tracked index which is currently with a combined market cap of $16.9 billion by April 10.
“This index shows that our top 20 companies carry weight,” says Bwiso. “By tracking it in both local currencies and the dollar, it makes regional market dynamics clearer for investors.”

Born out of the East African Securities Exchange Association, the ETF’s ambition is global. “Once live,” Bwiso explains, “investors can access top regional stocks without hopping from exchange to exchange.”
For Uganda, the top five, excluding BAT Uganda, are its most traded. Being part of the index could shine a spotlight on these counters and attract more foreign capital. But what about the stocks left behind?

But firms such as New Vision, Uganda Clays, and National Insurance Corporation have not wowed the market and their exclusion from the index could push them further into obscurity. Bwiso’s take? Cold, hard merit.
“If your stock performs well, you make it to the index. If not, you are out,” he says. “That is how we drive performance. If you report dividends and stay attractive, investors follow,” Bwiso notes.

This visibility and performance benchmarking could push listed firms to up their game: better operations, stronger profits, and bigger returns. After all, making the index isn’t just a trophy—it’s a magnet for liquidity.
Mwebaze sees this as just the beginning. “As the index matures, say five years from now, we could start conversations for an EAC40—not just focused on size, but on tradability and free float,” he says.

That would open the door for investor favourites that may not have the biggest market caps but boost active trading, fuelling broader participation, more visibility, and deeper pockets.

An ETF, by definition, bundles shares into a single tradeable unit. A sponsor buys the stocks, packages them, and lists that bundle.
Unlike collective investment schemes, ETFs are traded on the exchange, reflecting real-time market activity while offering dividend payouts from the underlying shares.
“The trade-off,” Mwebaze adds, “is pricing. But the upside? Diversified investment assets.”

Commodities exchange
The domestic exchange is making another big bet—commodities.
Imagine a stock market for grain, coffee, cocoa, and even gold. Instead of trading shares, you are trading produce—graded, priced, and stored in certified warehouses. It's a fresh asset class that could transform how capital flows into Uganda’s agriculture sector.

Banks like DFCU and Uganda Development Bank are already circling, eyeing the chance to fund farmers upfront, especially with the security of the warehouse receipt system. If it all clicks, millers, traders, banks, and even the government stand to benefit.
“If we get this right,” Bwiso says, “we solve one of the country’s biggest issues—grain quality. Uganda is a food basket. If we protect that food, extend its shelf life, and ensure fair pricing, we build a sustainable, scalable market.”

Currently, the Exchange is focusing on grain—laying the groundwork—before it expands to Uganda’s broader commodity range: coffee, tea, cocoa, cotton, and precious metals like gold.

“This could be the next frontier for the capital exiting Umeme,” says Mwebaze. He is not alone. Investors and speculators are closely watching, especially those looking for new tools to hedge or diversify.

Why? Commodities, especially gold, have become a natural hedge post-Covid-19. Trading these assets is not just about the long-term—it is about exploiting short-term market cycles driven by weather, supply, and global demand.

Picture a firm buying Shs40 billion in coffee contracts during harvest lows and flipping them at Shs60 billion during the next export boom. Uganda’s seasonal cycles create short- to medium-term trading windows, and the exchange wants in. But for now, it is a step-by-step process.
“We are still early in the game,” Bwiso admits. “Currently, it is about getting grain right—working with warehouses, financiers, and farmers to ensure timely delivery and quality storage.”

The promise? An inclusive exchange where smallholder farmers from afar can plug into the same system that attracts institutional capital from Kampala or Nairobi, and both walk away with profits.

Regulatory reforms
One of Uganda’s biggest bottlenecks in capital markets is Securities lending—or, more accurately, the lack of it.
Currently, institutional giants like NSSF, pension schemes, insurance firms, and private equity houses are unable to lend their securities to traders who could inject life into the market by flipping them for a premium.
But progress is being made.

“We’re working on it,” says a source familiar with the matter. “Once it is sorted, the floodgates will open. New products, new strategies, and more liquidity.”

Here is why it matters: securities lending unlocks a whole ecosystem of modern capital market tools—from margin trading to derivatives.

At its core, securities lending allows you to bet on future prices without owning the stock. For example, say you believe Stanbic’s share price will hit Shs36 in five months. You enter a contract today. If the price hits, you win; if not, the other party does. 

That difference becomes the payoff.
In essence, you have just created a derivative. It is like insurance – here is a buyer, a seller, a contract, and a lot of risk to manage. But it is a double-edged sword.
While derivatives are useful hedging tools—smart ways to protect against volatility—they can be dangerous when abused. “If you go in wholesale and misjudge the market, you could wipe out billions overnight,” the analyst adds.

Short selling, where traders profit from a stock’s decline, is another key piece of the puzzle. Though controversial, listed firms usually resist it—it is a major driver of activity in mature markets. And you can’t engage in short selling without securities lending and derivatives.
This is the reason why beating forex markets is so hard. The environment changes too fast. You can win today and lose tomorrow because of things out of your control.

In that chaos, derivatives act like a seatbelt. They help hedge your bets, so even if you don’t make a killing, you avoid a catastrophe.
The challenge, however, is regulation. Capital markets operate under strict rules for a reason—because more likely than not, someone’s retirement is on the line.
“You don’t want to risk the pension of a 68-year-old teacher just because you think you can time the market,” one source at the USE says.

“That is why big funds tend to stick with government securities—they are predictable and reliable,” they add.
But there is a cost to that safety. Overexposure to one asset class makes the system fragile. Look at what happened in Ghana, interest rates crashed, the currency tanked—people lost a fortune. All because everyone was parked in one basket.