Oil to spur capital markets - Nsamba

Oct 30, 2014

This year marks 18 years since the Capital Markets Authority (CMA) was formed.

This year marks 18 years since the Capital Markets Authority (CMA) was formed.


Samuel Sanya spoke to Charles Nsamba the acting communication and investor education manager at CMA about the progress made so far. Below are excerpts.


Q: Over the past 18 years, activity on Uganda’s Capital Markets has been on the rise with a number of IPO’s. What are we doing right?


The market has grown steadily over the period, owing to the good regulatory framework in place, among other things. However, more needs to be done to educate the public about the opportunities in the capital markets so that they can take advantage of the potential by investing and saving through the available products. CMA has embarked on this with a nationwide education campaign and the idea is to increase the number of investors from the current figure of slightly over 40,000 to more than 100,000 in the next 5-10 years.

If we can get at least three companies coming to the market annually to raise capital, either on the main investment market segment or the growth enterprise market segment, we’ll definitely start to see transformation not only in the sector, but in the economy in general.


Electronic trading is around the corner, what is the implication for the markets?


This is definitely one of the inventions we look forward to. Developed countries are already using these platforms. Electronic trading will improve efficiency of the Capital Markets, the length of time it takes sellers of shares to receive their sale proceeds should reduce from five to three or two days, we need to go electronic. Volumes are expected to rise because one of the things investors are interested in is an efficient market.


Central Bank research shows that 54% of all Ugandans now access formal financial services up from 24% in 2009. What is the implication for capital markets?


This is a good growth indicator for financial literacy in general. Ugandans need to appreciate that the financial sector goes beyond just banking. Our aim is to see more people investing in Uganda’s capital markets. Every Ugandan should invest at least 5% of their total net worth in the capital markets, over the next three years.

We are ha
ppy when we also hear of entities like KCCA looking to issue bonds; infrastructure financing has been a challenge but the market offers several options for this.


With market capitalization as a percentage of GDP standing at about 6% today, there is definitely a strong upside potential, especially with the prospects that will be driven by investments in the oil and gas, energy, roads, tourism and agriculture sectors.
 

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