Uganda Securities Exchange aims to double its market value in the next five years

18-April-2012

The Uganda Securities Exchange aims to double its market value in the next five years and is lobbying the government for tax incentives to encourage companies to list, its chief executive said on Wednesday.

The east African bourse also plans to draw new listings through an alternative market for companies that don't qualify for its main board, Joseph Kitamirike told Reuters.

"We want to double our capitalisation within the next five years but there are not very many companies that qualify for the main market in Uganda," he said.

The 14-year-old bourse is saddled with many of the constraints that characterise frontier Africa, where small, relatively illiquid capital markets have yet to catch up with robust economic growth.

The bourse is home to just 14 companies, several of them cross-listed Kenyan firms. Its total market value is $4.8 billion, less than half of nearby Kenya.

It was counting on a high-profile secondary listing of Tullow Oil this year to help bolster market value, but the oil explorer has decided to focus on other priorities, Kitamirike said.

"There's the large sugar companies, plantation companies, steel manufacturers," he said in a telephone interview to coincide with Reuters Africa Investment Summit.

"Some of the insurance companies, the banks. If we pick one or two of those every year we will probably be able to double our capitalisation on the exchange within that period."

Foreign investor interest in Uganda has grown since the east African nation discovered commercial hydrocarbon deposits in the Albertine rift basin along its border with the Democratic Republic of Congo in 2006. Small-scale commercial oil production is expected to begin later this year.

But the bourse is growing slower. Kitamirike said the exchange had asked the government to provide tax incentives to lure more listings.

These could include a lower tariff for up to three years and a tax waiver for companies with unpaid back taxes, he said.

"There are certain major companies that might qualify for the main market that have a tax history that needs to be cleaned up," he said. "We're asking the government to waive those, to give those companies a chance to come and list in exchange for the government dropping that claim."

The bourse is also planning to launch an alternative market to attract growing companies, with less stringent criteria than the main board.

He said the plans were awaiting regulatory approval, expected next month, and that the exchange was already in talks with three firms - an insurance company and two in the transport sector.

It is also looking to introduce trading of government debt and a gold-based ETF this year, he said.

By Tosin Sulaiman: Reuters