Uganda’s small stock market, a 12-year-old reared in the shadow of its much bigger and older Kenyan brother, is banking on crude oil and electronic trading to help it do some catching up this year.
London-listed Tullow Oil PLC, an oil and gas company with sizeable African assets, is expected to cross-list soon on both the Ugandan and Ghanaian stock exchanges, adding to the growing investment interest in the two countries’ fledgling oil industries.
“The talk is that the cross-listing here will be in April,” Kenneth Kitariko, chief executive officer of the African Alliance brokerage firm in Kampala, told local business reporters during a Thomson Reuters Foundation course in early March. Since the company is to act as brokers for Tullow in Uganda, Kitariko should be well-informed about the likely date.
With Tullow’s market capitalisation in March standing at more than 11 billion sterling on the London Stock Exchange, the company will dwarf all its new partners combined on the Uganda Securities Exchange (USE). Only 11 stocks are listed, with a total market value equivalent to just 2.8 billion sterling. The six Ugandan companies quoted account for only 30 per cent of the total. The remainder are cross-listed from the much bigger Nairobi Stock Exchange (NSE).
Years of political upheaval, coups and civil war – personified by Idi Amin’s notorious reign of fear – halted Uganda’s economic development. The relative political and economic policy stability since President Yoweri Museveni took power in 1986 have changed all that. Growth has averaged 7.0 per cent since 2000 – well above the African average – and the discovery of commercial hydrocarbon deposits in the West is proving a draw for foreign investors.
The Uganda Investment Authority expects the oil sector to be in pole position in the expected foreign investment of $3.0 billion this year.
Now the pressure is on to get the country’s capital markets up to speed. One big step, again due to happen this year, will be the switch from old-fashioned trading on the USE with paper certificates to the electronic version known as the Central Depository System.
“A lot of external investors stay away because of that inability to trade quickly. The process currently takes up to five days after the trade day,” said Kitariko of African Alliance, one of only 10 brokers on the USE.
“The existence of the depository system will be key -- you can buy shares this morning and sell them this afternoon. When they introduced it in Kenya, trading went up 40 percent,” he said.
Simon Rutega, USE chief executive, told the group he hoped the changeover to automated trading would be completed in the next few months, enabling the Kampala exchange to link up with other markets in the East Africa region.
Uganda’s growing band of business and financial reporters are having to raise their game to keep up with the pace of change in the economy and the demands of a more discerning public. The World Bank’s local programme to expand financial markets provided funding for the TRF’s workshop on Writing Business News, facilitated by Nick Kotch and David White and organised by USE.
The changes afoot in Kampala are part of a bigger picture in East Africa where natural geography as well as a shared colonial history all argue in favour of regional integration within an East African Community. Quietly and slowly, with regular pauses because of political shocks and rivalries, the building blocks of economic and monetary union are being laid between Kenya, Tanzania and Uganda, alongside newcomers Rwanda and Burundi.
Under the umbrella of the East African Securities Exchanges Association (EASEA), stock exchanges want to promote simultaneous public issues of securities to attract capital into the region.
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