Boost the stock exchange

Jul 09, 2004

LATER THIS month the Government will offer almost 20% of its shares to the public in the dfcu Group ahead of a listing on the Uganda Securities Exchange (USE) next month.

LATER THIS month the Government will offer almost 20% of its shares to the public in the dfcu Group ahead of a listing on the Uganda Securities Exchange (USE) next month.

In addition, there is a possibility that the World Bank’s private sector lending arm the International Finance Corporation (IFC) will offload its 21% interest in dfcu in the near future.

This is good news on several fronts. Not only will the sale of shares swell government coffers but also the offer will allow Ugandans share in the fortunes of a profit making concern.

But most importantly listing of one more company on the USE will boost the country’s image as an investment destination.

Currently only five companies are listed on the six-year old USE. As a result the turnover on the exchange is low. With more companies listed it is expected that trading will increase.

Before private investors can decide to invest in a country they examine all the available information.

A vibrant stock exchange is an independent and more credible mirror of the business environment of a country than any amount of propaganda the government can churn out.

For instance to list on the exchange companies have to go through a rigorous evaluation based on internationally understandable standards. So the more the companies on the exchange the more the perception is that the business climate is predictable and comprehensible to external observers.

Africa is treated as leper by international capital because of the high-perceived risk to investment a result of political instability and rampant corruption.

So to boost the perception that this country represents a safe pair of hands, the government should show more commitment to privatizing via the USE.

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