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Uganda: Securities Exchange in Record Growth
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The Monitor (Kampala)
INTERVIEW
29 April 2008
Posted to the web 29 April 2008
Mbatau wa Ngai
Uganda Securities Exchange has recorded impressive growth over the past few years. Mbatau wa Ngai talked to Mr Simon Rutega, the chief executive officer of Uganda Securities Exchange (USE). Excepts:
Could you give us a bit about your background and how you came to launch the Uganda Securities Exchange in 1998?
USE became operational in 1998 after obtaining a license from the Capital Markets Authority.
The Capital Market Authority (CMA) became operational under an Act of Parliament passed in 1996. The development and success of USE has been a team effort supported by the government through privatisation, Bank of Uganda, CMA, Member firms and the Governing Council and staff of the exchange.
What do you consider the USE highlights over the past 10 years?
The first I believe is that Uganda now has a solid foundation where issuers (Government, Local Government and corporate entities) can raise medium long term domestic finance for productive enterprise from the public markets. This can be effected through equity, bond and derivative financial products.
We now have listed Government Bonds effective 2004, corporate bonds effective 1998 and listed equities effective 2000.
The last equity product issue raised potentially over $120 million. The domestic capital markets in Uganda can now potentially raise millions of dollars from a position of zero dollars in 1998.
This is significant progress and these are the seeds of a domestic financial market, where dependence on external donors and finance can potentially be reduced in future. Of second importance, is the mobilisation of stakeholders.
We have over 50,000 direct investors and hundreds of thousands more indirectly invested in our listed entities. This is a step toward consolidating the middle class in our society to a desired society of owners of financial assets.
It is only through ownership of assets that one can maximize economic growth and prosper. Through investing in financial assets the public is able to learn how to save, obtain a good rate of return, share the risk and learn how entities are effectively managed through corporate actions such as dividend payments, right issues, bonus issue etc.
The third is our efforts as capital market players to promote regionalisation. Investors in East Africa can now invest across borders in equity issues as is evidenced by the case of Stanbic Bank and Safricom shares.
The fourth is the promotion of a secondary market i.e. the entry and exit of investors in the market what is known as liquidity.
How do these highlights reflect the growth of the Ugandan economy during the same period?
During the period we have been fortunate that the correct economic policies have been pursued by the government. Our business can only prosper with sound macro economic policies, privatisation and economic growth.
Could you give some of the benefits of investing through the USE as opposed to the traditional method of investing in land for speculative purposes?
Investing through USE is an additional avenue for investment. One can invest in real estate, land, and financial products listed on the exchange.
How well is the USE linked to the regional and international stock exchanges?
USE is very interested in linking our market with the region. We are awaiting the passage of the SCD legislation to migrate from a manual to an electronic system and looking at the potential of linking up with regional capital markets.
How do those linkages benefit the Ugandan investor?
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These linkages will benefit Ugandan investors be giving them more options to invest. The principle primary rule about investment is diversification of risk.
What does Uganda have to do to realise its economic potential in the short and medium term?
Uganda over the past years has exhibited a track record of economic growth. However, this has to be consolidated and systems have to become more efficient. In my financial language my observation is that the deals take to long to close
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