It's unwise to sabotage NIC’s offer

Jan 10, 2010

THE National Insurance Corporation (NIC) initial public offer (IPO) was launched recently. This followed a prolonged exercise with issues unique to it envisaged to take centre stage.

EXECUTIVE TALK

By Jim Mugunga


THE National Insurance Corporation (NIC) initial public offer (IPO) was launched recently. This followed a prolonged exercise with issues unique to it envisaged to take centre stage.

In this case, the Makerere University’s (Mak) deposit administration plan (DAP).
On June 2, 2005, the Government divested 60% of its shareholding in NIC to Industrial and General Insurance of Nigeria and reserved the remaining 40% shares to be sold to the public through an IPO.

The plan was to realise the NIC-IPO within two years from June 2005. By October 2006, the Privatisation Unit had commenced the IPO preparatory activities.

However, these were stalled by the global financial meltdown which affected the roll-out timetable. In the last quarter of 2009, the Government was again ready to launch the IPO, but the dispute between NIC and Mak on the DAP resurfaced.

Mak plans to exit from the deposit scheme, a move NIC does not oppose. The insurer, however, has pointed out to Mak that the DAP is governed by a binding contract which both NIC and Mak are signatories to and need to be observed.

This business contract has various clauses that provide for, among others, mechanisms of determining balances and, or account reconciliation process in the event termination of the scheme occurs.

The two parties are yet to conclude the reconciliation process and discussions are ongoing. So far, both have agreed to an actuarial to come up with the final figures of the DAP balances within the confines of the relevant agreement.

As has been the case in the past, the responsibility to prepare the prospectus rests with the Government which in this case is offering its shares to the public.

The Privatisation Unit, on behalf of the Government, contracts specialised transaction advisory services namely; lawyers, reporting accountants, public relations, sponsoring brokers and receiving bankers who make various technical input into the prospectus in accordance with guidelines set by the Capital Markets Authority (CMA).

The Uganda Securities Exchange and in the case of NIC, the Uganda Insurance Commission were consulted regularly along the way to ensure adherence to guidelines before a ‘No Objection’ and final clearance to launch the IPO is given.

There is hence no role for either Mak or any other NIC client to participate in the preparation of the prospectus, which is after-all certified on behalf of all stakeholders by the official regulator, CMA.

The firm interfaces with its clients and the regulator has in place an elaborate system which allows the public and special interest groups to make petitions where unsatisfied.

It is not the first time an IPO has attracted interest. The New Vision IPO had its own share of negative messages with non- progressive forces claiming the investors would be giving free money to a government-owned paper, while BAT had to contend with the no-smoking campaigners.

In all these instances, the various stakeholders agreed that the IPO is a viable process that empowers Ugandans, grows best business practices, creates a savings and investment culture and deepens our capital markets. They agreed to push forward and the IPOs were oversubscribed.

If Uganda is to progress and compete with the rest in regional as well as the international market, it is very important that tools like the IPOs that make us comparable with the best are not unnecessarily sabotaged.

Ugandans are well informed on the good associated with trading in securities and are capable of separating chuff from facts. It is for this reason that the NIC IPO should be categorised as business-as-usual. Investors should not miss out on the opportunity the subsidised offers presents.

The writer is a Senior Public Relations Officer, Privatisation Unit

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