Talk about the feature of Uganda's Stock Markets - Aug 2013

Mr Blessing Nshaho is the CEO of Asset Business Solutions Ltd, a finance; asset management; and human resource advisory firm. He spoke to Peter Nyanzi about the business environment, investment and development prospects in Uganda.

Briefly, what is your reading of Uganda's securities and capital markets prospects?

Our capital market has developed over the years. The Capital Markets Authority (CMA) approved the setting up of the Uganda Securities Exchange (USE) in 1997 as the only approved securities exchange in Uganda. Since then, we have had 16 companies listing their shares on the USE with a total market capitalization of Shs 12.8 trillion by 2010; prior to the Umeme listing.

I can only see more listings, especially of the oil and gas companies in the near future to enable local participation in the sector. This can only be good for our capital market prospects and for the economy.

Some people say that the product portfolio on Uganda's capital market is too limited to spur the industry. What is your take on that?

Currently, ordinary shares, corporate bonds and government bonds are traded on the USE. Although, the official USE product portfolio also includes treasury bills, preference shares, commercial paper and asset backed securities.

Compared to the Nairobi Securities Exchange (NSE), which has 60 listed companies, and a market capitalization of UShs 51.3 trillion; I would say that Uganda has a decent product portfolio because Kenya, which has a more developed capital market, mainly trades the same ordinary shares, corporate bonds and government bonds on the NSE.

I believe that this question centers around the fact that Uganda mainly depends on MSMEs for its economic growth, and such players do not have the ability to raise public finance via the USE.

Now that the USE has introduced the Growth Enterprise Market Segment (GEMS) to replace the unsuccessful Alternative Investment Market that was introduced in 1993; it will enable SMEs to participate in the securities exchange. The rules under the GEMS are more reasonable for SMEs, and with the right marketing strategy and awareness campaigns, the GEMS should enable more companies to raise public finance.

What do you see as the main challenges facing the industry in Uganda compared to other markets say Kenya and South Africa?

I think low education and literacy levels of entrepreneurs and local investors are the main challenges. Kenya and South Africa have had stable and growing capital markets for a long period of time due to their high education and literacy levels. Entrepreneurs in Uganda do not understand how capital markets work and there is no government or private sector program in place to provide the required information that these entrepreneurs need.

Also, due to the tax laws that do not favour MSME growth; most SMEs do not want to share information regarding their business finance because of fear of being penalized by the taxman.

What should be done to address some of these challenges in the short term?

For existing SMEs, the CMA and USE need to demystify how public finance works. Adverts need to be placed on TV, in newspapers, on billboards and on their websites with well structured FAQs to explain in simple language how SMEs can raise public finance through the GEMS. Free public seminars for SMEs with brief presentations and long Q&A sessions with the appropriate variety of panel members/advisors would also work well.

In order to develop raising public finance as a culture in the future, entrepreneurship should be mandated as a course at 'O' Level, 'A' Level and at University. The curriculum should be developed in such a manner that anyone studying any course should be taught the practical basics of how to start and run a business and how to raise finance privately and from the public. This goes to addressing the challenges we face at the very core of our current ineffective education system.

The issue of limited human resources and skills in the sector has also been highlighted. What are we not doing right?

There is no course tailored towards developing such skills. In the US for example, they have the Financial Industry Regulatory Authority (FIRA), which administers the Series 7 exams that were developed by the New York Stock Exchange as a qualification for stock brokers. This provides industry professionals with the required skills for advising investors.

The CMA needs to learn from the FIRA and develop a series of qualifications/exams that will enable human resources within the sector to obtain the skills and knowledge they require to provide companies/investors/SMEs with appropriate advice on accessing public finance through the securities market.

The Independent
2-Aug-2013