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Oil could trigger financial markets growth

Uganda could see more companies list or buy shares on the Uganda Securities Exchange (USE) as the country gets closer to producing its first barrel of oil, Grace Kavuma, the board chairman of the Capital Markets Authority, has said.

Speaking at Standard Chartered bank’s clients meeting for trustee services, Kavuma said the financial markets in Uganda were flat with very limited capitalisation. Only 18 companies are listed on the USE, and most of them are foreign. The Kenyan bourse  has more than 45 listed companies.

But with more firms coming into Uganda to invest in the oil and gas sector, the capital markets could see vibrant growth with more investors buying into listed companies.

“We have seen a recent example from Tanzania where Tullow’s partner, Swala Energy, is in the process of listing at the Dar es Salaam Stock Exchange. In Ghana, Tullow oil is also listed there. We expect a number of companies to list [in Uganda],” Kavuma said.

Tullow Oil had expressed interest in listing on the USE, but the tax disputes it had with the government of Uganda, and its former partner in Uganda, Heritage Oil, led to the firm postponing its listing plans.

Uganda has discovered 3.5 billion barrels of oil, with at least 1.2 billion of that considered to be recoverable. Oil production is expected to start in 2018. Already, government has awarded the first production licence to Cnooc. Tullow expects a production licence early next year.

Kavuma, who also works as Tullow Uganda’s finance manager, believes Uganda’s oil industry needs to move as fast as it possibly can if investors are to get the confidence to list or buy shares on the Uganda Securities Exchange.

Close to $12bn is needed to get Uganda to the production stage. The oil pipeline and the refinery are the single largest investments needed in the industry. Last month, Uganda invited companies to express interest in the construction of a multi-million dollar refinery in a public-private partnership. At least 50 companies are said to have expressed interest.

Farida Mukasa Kasujja, Stanchart’s head of transaction banking, said the bank had started to fly in more experts in terms of management of oil proceeds.

“We have got a global footprint and the managing angle [of oil revenues] is not new to us. Our staff has been trained in oil and gas revenue management,” says Kasujja. She added: “We believe in synergies across networks. We are coming up with products to target the banking chain for SMEs coming from the oil sector.”

Kavuma urged Ugandan companies to borrow a leaf from Dfcu bank and Umeme that have had successful IPOs and managed to attract both local and offshore investors to buy shares.

He said Kenya had given Uganda a big challenge, with most of her companies cross-listing at the USE. Umeme is the only Ugandan company that is cross-listed on the Nairobi Stock Exchange. Early this month, Kenya’s Uchumi supermarket became the latest Kenyan firm to cross-list on the Ugandan bourse.

Kavuma also emphasised that government had to play a role in encouraging Ugandan companies to list. One of the ways government can do this is to create an environment for investments schemes to operate.

At the moment, government is in the final stages of opening up the pension industry. Already, banks have acquired licences to offer custodial services in anticipation of the liberalisation of the pension industry.

Stanchart acquired a licence from the CMA earlier this year to offer trustee and custodial services under the collective investments scheme. The bank will receive pension contributions on behalf of the scheme.

It will also offer advisory services to those seeking to invest on the stock market; prepare financial reports and be responsible for collecting of dividends and income in relation to the investments of the scheme.


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