East Africa: Kenyans Dominate Uganda’s Stock Market

Kenyan nationals are reported to have dominated Uganda’s stock market with eight of the sixteen listed companies in Uganda Security Exchange (USE) coming from Kenya and nearly half of the total shares sold in the country’s stock market belonging to Kenyans.

An official from USE told East African Business Week that only 28,000 out of an estimated 36 million Ugandans hold shares in the country’s stock market, a majority of whom being foreign nationals leaving within the country.

The Manager Trading at Uganda Securities Exchange, Andrew Mwima, attributed this lackluster participation of Ugandans on the stock market to limited knowledge about the opportunities that business people, companies and investors can harness in the stock market.

Mwima said the stock market provides a credible platform for raising capital; through the issuance of appropriate debt, equity and other instruments to the investing public.

This way, the exchange provides essential facilities for the private sector and government to raise money for business expansion and enables the public to own shares in companies listed on the exchange.

He said instead of relying on banks as the only source of business capital, the stock market is one such alternative. Mwima said unfortunately no one is running to them.

Citing Stanbic Bank Uganda as the only company that benefited from such capital, Mwima said, the bank was able raise capital amounting to Ushs30bn in treasury bills sales in 2012 and other companies could as well benefit from such available mechanisms if they joined the stock market.

According to the Capital Markets Authority’s Strategic Plan 2016/17-2020/21, it highlights that not many Ugandans can afford to invest directly in the capital markets because of the low levels of income.

It highlight’s further that a majority of Ugandan businesses are micro, small and medium enterprises (MSMEs) which do not have the capacity to access the capital markets at an affordable cost.

The Strategic Plan underscores that a typical Ugandan business in most cases is looking for growth capital of not more than Ushs1 billion. Experience in the Ugandan market shows that raising less than Ushs5 billion in the capital markets will be very costly compared to accessing the same amount from the banking and micro-finance sectors and that these limitations to notwithstanding, medium and small scale enterprises still need to access long-term capital from the capital markets.

One way of making this possible, the strategic plan suggests, is for banks, micro-finance institutions and other financial institutions to access finance from the capital markets to on-lend to the MSMEs at more affordable rates. Since most of these institutions are regulated entities who are better suited to stand the rigors of raising funds in the capital markets.

Source: East African Business Week.