Uganda slammed on minority shareholders
Nov 07, 2014
The World Bank’s Doing Business 2015 report has slammed Uganda’s capital markets for not doing enough to protect minority shareholders, making the country less competitive in the race to attract investments.
By Samuel Sanya
The World Bank’s Doing Business 2015 report has slammed Uganda’s capital markets for not doing enough to protect minority shareholders, making the country less competitive in the race to attract investments.
While Uganda’s overall Ease of Doing Business rank went up two spots to the 150th most competitive of 189 global economies, the country lost ground in the protection of minority shareholders, falling to 118th from 108th.
Survey information collected from corporate lawyers about securities regulations, company laws and court rules of evidence and procedure, shows that on a scale of one to 10, corporate disclosure is at only three points.
In other sub-categories in the protection of minority shareholders, the country scored five points for extent of director liability, 4.8 for strength of minority investor protection, five for extent of conflict of interest regulation and 2.5 points on strength of corporate governance.
On corporate transparency, the country scored five, and scored 4.5 on extent of shareholder governance.
The only subcategories where Uganda scored above average, was on the ease of shareholder suits at seven and extent of shareholder rights at six.
The report notes that currently, the country is not using an external body to review transactions of listed companies, neither are the details published for public scrutiny. It adds that the compensation of individual managers is meant to be published, but currently, this is not happening.
Also needed are policies or laws barring subsidiaries from owning shares in the parent company and the inclusion of independent board members.
Regionally, Uganda is behind Burundi at 94th in terms of protecting minority shareholders, but ahead of Rwanda, which is at 117; Kenya 122 and Tanzania 141.
“Protecting minority investors matters for the ability of companies to raise the capital they need to grow, innovate, diversify and compete,” the report says.
Stephen Kaboyo of the Alpha Capital Partners was critical of the World Bank’s one-sizefits- all approach, saying it is understandable that at less than 20 years, Uganda’s capital markets may not be as developed as those in the Western world.
“The basics like legal frameworks are in place. If we benchmark ourselves against western markets, there are probably some things we need to improve. This is a continuous process,” he explained.
Meanwhile, the Uganda Securities Exchange has relocated to the UAP Nakawa Business Park and was unable to generate a market report for Tuesday November 4 by press time.
However, Dan Edoma, a securities trader with African Alliance Uganda, noted that demand on the Umeme counter has gone up due to an impending book closure on December 1.
“Investors know that whoever buys Umeme shares now is eligible for a dividend and this has driven up demand. We expect demand to remain up until December,” he explained.
Edoma added that Stanbic remains the most liquid counter thus attracting a lot of demand. On October 31, Umeme was trading at sh510 per share and Stanbic at sh34 per share.