With a seemingly rigid market structure and low trading volumes, several stock brokers have found their way out of the Ugandan market.

The trend, including the recent exit of Equity Stock Brokers and Baroda Capital Markets – some of the oldest brokerage firms to set up shop in this market, has seen gloomy forecasts for the brokerage business in the face of tough economic times.

Over the last 10 years, the Uganda Securities Exchange (USE) has had only two listings on the bourse; Cipla Quality Chemical Industries Limited in 2018 and MTN in 2021.

The troubles faced by USE in attracting new listings to the exchange are partly responsible for the exit of players in the market segment.

Initial Public Offerings (IPOs) are a good way to rope in first-timers into the market.

“Disruption is what is required to change the way of accessing the market,” Paul Bwiso, the chief executive officer of USE, said.

“We have seen the number of stockbrokers in the exchange reduce, but having a new broker come in is also proof that there is still value and opportunity within the capital markets.

“Of the 75,000 accounts that were opened during the MTN IPO, about 90% were using the unstructured supplementary service data, which was quite convenient,” Bwiso said during the admission of Chipper Technologies Uganda Limited as a trading participant and member of the bourse.

Industry leaders say increased use of the Internet, smartphones and mobile apps would expand this space rapidly going forward and boost trading volumes too.

Besides product innovation, modern technology is seen as another growth driver for the business.

Richard Byarugaba, the chairman board of directors at USE, said innovation was the only way to survive in the market.

“A lot of the (stock brokerage) companies that you have seen exit have been disrupted out of it,” he said.

“It’s not that they did not want to stay, they have been forced out of the market. That’s why we are seeing new companies which have newer technologies come,” he added.

DIVERSIFICATION

SBG Securities is a subsidiary of Stanbic Uganda Holdings Limited, launched in the market in 2021.

Andrew Mashanda, the chief executive of Stanbic Uganda Holdings Limited, said the outlook on the brokerage business in the market is somewhat unclear.

“The brokerage business is purely equities. If you look at the liquidity of our market, it is quite low,” he said.

“But the reality is that we have realised it (limited growth) hence the reason why we went to Capital Markets Authority (CMA) to apply for Collective Investment Scheme (CIS) licence so that we can expand our business into asset management.

“We have considerable strength in asset management across our group. We want to develop this new investment class to allow Ugandans diversify their investment across the board.

“We believe that the growth in this business is not going to be driven largely by brokerage but asset management,” he said.

CIS is an investment product that allows an investor to pool savings with other investors, creating a large pool of funds to be invested on their behalf by a professional CIS manager.

Dan Tumuramye, Chipper’s country director, said there was still a need to make trading of stocks and access a lot more convenient and accessible to Ugandans. He noted that Chipper seeks to mitigate those gaps with their platform.

“As a technology company, we think that accessibility and awareness are critical to make sure we close that gap. Mobile money wasn’t anything, but today it is in your bank.

“We have been in the business for three years and we have hit five million customers. One of the business propositions is that we would enable all Ugandans to create an investment account on the platform,” Tumuramye said.

CHANGES AT USE

Bwiso said by January 2023, investors would be able to trade bonds and treasury bills on the exchange. He said the innovation of providing products, solutions and convincing should be able to ensure market growth.

Bwiso added that the exchange is piloting a commodities exchange that should be able to attract more investors to the market.

“We are piloting the commodities exchange with a specific warehouse to reach out to farmers. This will leverage the equities too because by being able to open the securities central depository agent accounts, it creates opportunities for these farmers, but also other investors on the exchange to invest in equities, commodities, bills and bonds,” he said.