USE plans to grow market by improving investor education

Jul 16, 2015

Paul Bwiso, the chief executive officer of USE, had a chat and this is what they discussed

Paul Bwiso, the chief executive officer of USE, had a chat with Samuel Sanya and below is what they discussed

You have been general manager of Dyer and Blair Investment; how has your previous position shaped your views about the securities exchange?

My exposure at Dyer and Blair Investment Bank provided me with a lot of experience in securities & wealth management. As a regional entity with a global client base, I was exposed to numerous clients and also formulated various structured financial deals to suit investors.

In an earlier media interview you said: “My plan is to correct the way we have been doing things.” What do you intend to correct? How do you intend to correct?

Securities Exchanges around the world drive economic growth by promoting savings and investment and raising capital for all classes of investors. We have not done enough to date. We intend to correct this through investor education and financial literacy of the capital markets as a source of affordable financing for medium to long term capital.

The Uganda Securities Exchange has a new competitor. Does this concern you?

What we are doing at the USE is improving service delivery to our investors and providing a larger array of products to suit different classes of investors. We are not concerned as there is so much potential in Uganda and the region for growth in the Capital Markets.

You talked about demutualising the stock exchange. Why? How will demutualising the stock exchange lead to its improvement?

Demutualisation provides numerous benefits to an exchange, such as ability to raise extra capital through self –listing, making it easier for new members to join and better governance structures.

Market capitalisation in Uganda is one of the lowest in East Africa and the GEMS market is yet to register a listing. What plans do you have to increase listings on both segments?

We have embarked on a campaign to educate and sensitise potential investors about the benefits of using the USE as a source of raising capital. We offer companies capital, but fundamentally provide companies with better corporate governance and business continuity which ensure companies are not dependant on one or a few individuals but can expand and grow into mature companies. We are working with a couple of investors to prepare them for listing on GEMS which provides fewer restrictions than the Main Market Investment Segment.

We have been promised an electronic trading system in the past, how soon will it be in place?

Electronic trading system project is in its advanced stages and should be completed in a couple of weeks but not later than the end of this month.

After spreads were cut from sh5 to sh1, brokers say the spreads need to be cut further to sh0.1, how feasible is that?

Spreads provide more investment opportunities (pricing points) resulting in higher liquidity. We have amended this with the upcoming automated trading system with a tiered trading spread depending on the price of the security one is purchasing.

Mobility of shares between Uganda and other East African countries with cross-listed stock is still a challenge. What is the way forward on this?

Shares do move from one exchange to another. Umeme has seen shares transferred to Nairobi Securities Exchange. However, it is dependent on the demand from the local bourse by foreign investors. The way forward is to ensure companies’ cross-listings provide shares to the local market to enhance liquidity.

According to the 2014/15 national budget speech, there are 40,000 registered shareholders in Uganda. The challenge for the capital markets has been attracting more Ugandans to buy, sell or even raise money. How does the USE intend to attract more investors?

Our interim plans revolve around automation; We plan to deliver services to the public by offering online/mobile trading services. Thereafter we shall market the various products we have to the investing public and potential investors who require capital.

The USE registered impressive financial performance in 2014. What were the major success factors?

The key was the large trading that took place on the Umeme counter. Umeme listed 100% of its shareholding, resulting in large trades from institutional investors. In addition, we had Umeme’s secondary offer and bonus issues by dfcu Bank and NIC Ltd. Operating costs were also managed.

What are your plans going forward?

As stated earlier, our plans are to grow the market by improving investor education, financial literacy and brand awareness. We also plan to lobby the Government to utilise the capital markets as a source of funding long-term infrastructure projects. We plan to use automation as a driver of the retail market segment by providing online/web-based trading.

Any other comments?

We advise the public to invest in the companies on the Securities Exchange to enable them achieve returns on their investment.

We offer an alternative to other forms of investment (such as property, savings and small businesses). Any company that requires cheap short or long-term capital should utilise the exchange as the benefits that are derived from being listed are immense.

 

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Capital markets a necessity for business

Capital markets seem to be the best line of investment for businesses and individuals. Paul Busharizi spoke to Keith Kalyegira, the CEO Capital Markets Authority, about what more can be done to increase interest in the field

What would be the major achievement of the Capital Markets Authority?

We have demonstrated that the capital market is an arena where funds can be raised locally be it via privatisation or for refinancing, or for capacity expansion purposes.

To date, a total of sh874b has been raised in the debt and equity capital market, through the work of the intermediaries licensed and inspected by the Capital Markets Authority. Of this, sh293b has been corporate debt (bonds) and sh584b has been equity raised.

This has been through Initial Public Offers (IPOs), which raised sh290b; rights issues where companies have turned to the capital markets to raise additional capital, have raised only sh45b and additional offers have raised sh249b. These figures are small.

At least sh3 trillion in equity and debt should be raised over the next four to five years. So, progress has been reasonably good, but not adequate.

The sign of progress will be when local private, founder managed and operated companies come forward to seek capital for further expansion and shareholder diversification (by inviting strategic partners, together with retail and institutional investors).

Ideally, capital raising in debt capital markets should be greater and more prevalent than raising equity since its benefits are more obvious and tangible for issuers of debt.

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Diversify your investments by dealing with a fund manager

By Bill Rwothungeyo

Are you saving for the future? If you are not, Annette Rumanyika-Mulira, the Managing Director of STANLIB Uganda says you should start now.

"The earlier you start saving, the less you have to save. If I start saving at the 18, and I save shlOO,OOO which I have invested wisely, by the time I am 50, I would be able to retire and ably look after myself. But if I start saving at 40, I will have to save much more to catch up with someone who started saving at 18," she says.

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