The Capital Markets Authority (CMA), together with the Ministry of Finance, Planning and Economic Development are profiling state enterprises to identify which qualify listed on the stock market. This is aimed at ensuring that the capital market contributes more to Uganda’s economic ambitions by providing the much-needed long-term and patient economy, while easing the strain on the budget.
Uganda Securities Exchange, Uganda’s only functional stock exchange, has 19 listed companies, 9 of which are cross-listings from Nairobi Stock Exchange. They have raised over two trillion shillings since the stock market was formalised 30 years ago with CMA’s creation.
However, the amount is considered low compared to the size of the economy which is now estimated at about 73 billion dollars (about 250 trillion shillings.
Speaking at an event to mars30 years of CMA, Josephine Okui Ossiya the CEO of CEO said that capital markets have a big role to play in mobilizing the required financial resources required to meet government’s Tenfold Growth Strategy to move the GDP to 500 billion dollars by 2040. She says this will mean moving the growth of the capital market faster by casting the net wide to attract more companies including government-owned enterprises.
Ossiya says the most readily available capital sources are commercial banks and yet these can only finance short and mid-term projects from which can pay back the loans in a short time. This means that more longer-term sources of capital are needed to finance long-term development projects like roads, rail, electricity stations, among others.
She noted that while savings by the different schemes including collective investment schemes and pension plans have hit 45 trillion shillings, most of them are investing in mid- and short-term products like government treasury bonds and bills, and not in infrastructure.
With the traditional sources of long-term capital, especially foreign development aid, becoming scarcer, Ossiya says capital market has to be strengthened to fill the gap.
Of the 45 trillion shillings in Assets Under Management by pension schemes, the National Social Security Fund (NSSF) accounts for about 32 trillion, while collective investment schemes and retirement benefit schemes are now more than 7 trillion, with more held by insurance companies.
NSSF Managing Director, Patrick Ayota, criticised the government’s continued borrowing from the public through bonds and bills at such attractive interest rates above 15 percent and up to almost 17 percent for longer-term bonds, which, according to him, discourages any investments into the capital markets which offer lower returns.
He urged the financial industry to get a position and press the government to revise this policy and instead go for borrowing options that will also boost and protect capital markets, adding that as an agency looking to maximise returns for savers, NSSF will always go for the bills and bonds for as long as they are available…
The Ministry of Finance, Planning and Economic Development, says it is looking for ways to ensure that the capital market grows faster, including with efforts that will ensure more listings.
Joseph Enyimu, Commissioner in the Economic Development Policy and Research Department, says the ministry will help CMA raise the ability of private companies to raise capital from the stock market, especially through bonds and listing.
Other approaches include public private partnerships, the Islamic (Sukuk) and green bonds and to finance infrastructure to attract investment from the pension funds into infrastructure projects.
Saul Sseremba, the CMA Board Chairman, says that while over the years there have been several developments in stock market, including the total value of the shares listed (total market capitalisation) rising to 22 trillion, this is still too low compared to the size of the economy.
He says that this means the market has on average, grown at a slower pace than desired. He charged CMA and the government with ensuring that in the next phase the growth in the different areas must be faster, especially now that there is technology-URN. Give us feedback on this story through our email: kamwokyatimes@gmail.com
