Kampala — Joseph Kitamirike is the new boss of Uganda Securities Exchange. David Mugabe caught-up with him for an interview where he talks about the stock market in Uganda and his vision for the industry's regulation and growth. Below are the excerpts.

What will be your priority in the short term- one year from now?

The major priority of any business should be to increase the size of the business. Our business runs on shareholders who come to the market to trade and companies who come to the market to issue securities. The priority will be to find ways to grow the offering and number of participants in the market.

How do you intend to grow this?

Securities market, which is not just a stock market we trade equities, debts- which should be the most common but we have the possibilities of introducing derivatives securities which are much more complex but they are useful for more sophisticated players.

For us to expand, we need to raise the equity offering and to increase the debt offering, we have treasury bonds, bills and corporate bonds which we can increase by attracting more companies to come and list.

As you join the market, what is your opinion of the state of the market today?

It is a market whose value is increasing slowly. It is one of those African markets where we have a steady increase in growth. It might not be growing as fast as most people would like but we are on a positive trend.

But we have not reached the levels at which some of the securities were trading, say two years ago but if the trend holds we will probably get there.

But it is a kind of market where we don't have enough volumes traded which is typical of a young market where quite a large section of the securities available people buy to hold so they don't come back to the market. But as we increase the offering we should be able to overcome that.

Do you think the five year strategic plan drawn up by the previous administration has merit?

Fortunately, I have come at a good time when the exchange needs to look at the question of strategy again to make sure that we march the planned activities and we are keyed into the whole economic and development plan of the country.

But none of the activities in the previous plan were irrelevant but it is just the timing questions and the new activities that are coming in.

Can you give me a sneak pip into what this strategy will look like?

The strategy has to be relevant and achievable and you have to take into account the environment-local, regional, African and global. On the East African stage, there is the changes in regulation and efforts to build the regional exchange.

Secondly we now have a common market but what do we do as an exchange to see that the common market leaves itself out through the exchange. Exciting days ahead because we think there is a lot coming through the exchange. The offerings will broaden and will enable you and me to have more options.

Exciting days, do you have any notifications for any listings in the nearby future?

Not that I can talk about but there will be a number of listings in the coming few months.

I see opportunity for us to start buying and selling debt. Right now the market is active in equity. The debt component of the market is not too active but within the next six to twelve months, we think that component will be activated sufficiently for people to start to understand debt well. That is exciting because the debt market is bigger than the equity market.

I don't know what contract you have but what is your long term objective for this market?

Well first of all, even if it was a one year contract, I would give you a long term objective for the market. We must do whatever we can to ensure that it succeeds continually. The market therefore must continually enable the pooling of investments so that we create and operate larger and larger companies that will eventually cross the borders into other countries probably even beyond the borders of Africa because they are able to raise capital and do big things.

It is possible. I would like Ugandan companies to begin to see the opportunities to grow beyond the borders and into the region. As long as you have the right skills and you are able to raise capital

How are you going to woo new companies to list on the exchange from the corporates to the small and medium sized enterprises, it has been a very slow process?

That process differs from company to company. We have a list of requirements which companies have to comply with. How then you tackle the problem of entry? It is to help one company solve what it does not have. But it is not impossible.

But how do you think we can practically have more companies list on the exchange away from government divestiture?

We have PSFU which has mechanisms to develop its members. We shall partner with their members to help with issues of governance, capitalisation, book keeping and staffing. Once they qualify we will discuss with the owner whether they want to list or not and for me that is the last stage. We have started to discuss with PSFU.

How do you intend to move the integration process of the bourses forward at the East African level?

There is what we call regionalisation strategy. Probably the individual exchanges need to develop and get to par in terms of trading systems, operations and infrastructure. It is not an easy thing to achieve.

One of the challenges may be that Nairobi is about 50 plus years old, Uganda is 13 years old so we have to make a leap in order to reach them.

To operate a united exchange, that is accessible from all the countries, there has to be a set of rules that applies across all the territories and to develop a set of rules takes time.

How far has the process of the SCD immobilisation of shares gone?

The response is good. We are able to convert about 200-300 a week. It is not as fast as we would want it to be but it is a lot faster than in other countries. But we would want to accelerate it to ensure we are not trading in two systems.

This is about the fourth month, can you say 70% of the people have made the switch?

Say 70% of people who are active participants (who buy and sell) in the market are on the system.

But there is another group that may take a little longer because they buy and hold.

How far away are we from having a fully automated trading platform?

Even that has to go in stages. There is a cost issue and secondly we have created the depository. Once that is done, the next question is settlements and once we are able to do that electronically then we can do fully fledged trading in the automated ground. We would like to have finished that within the next two years if the constraints allow.

How much does it cost to set up this system?

It depends on what you buy. It could costs you well over $1m to build that system.

There is the issue of setting the safeguards for the market once full automated trading begins, how are you prepared to safeguard the public from fraudulent dealers?

To the extent that we are aware of the risk we will build a system that closes that risk out. Our awareness comes from how we know this market and how we relate to the other markets. We can learn from Kenya which have had their issues but we can learn from other markets as well.