Ugandan MPs want to ‘fence off’ bourse

Currently, only two companies are listed in all three markets — East African Breweries and Kenya Airways. The three markets have a total of 50 companies listed on their main investment market segments.

Uganda’s State Minister for Finance (General Duties) Fred Omachi told The EastAfrican he was still studying the amendments to the CMA Act and would accommodate the MPs’ concerns to seal loopholes in the existing law.

“I am proofreading it. I already have a Cabinet memo on my desk. I will table the Capital Markets Authority Act amendments before Cabinet next week,” Mr Omachi said while appearing before the Parliamentary Committee on Finance to defend another Bill — the Securities Central Depositories Bill, 2008.

The minister says the CMA Amendment Bill will be tabled in parliament in three months’ time.

Uganda, Kenya and Tanzania last year signed an agreement committing them to enact the Securities Central Depositories laws by December 2007, which enables electronic trading on the stockmarkets.

Kenya and Tanzania have since started the electronic system after establishing the new law.

However, nine months down the road, Uganda is yet to establish the law. The country is still operating a manual system.

The MPs say they will restrict ownership of a central depository to Ugandans in the new law even though under the Community the five countries are currently negotiating a Common Market with free movement of capital and labour.

“Nobody (foreigners) will establish a central depository before their being licensed,” Mr Kato said.

In the new law, Uganda’s CMA, just like in neighbouring Tanzania, will license the stock exchange to operate the central depository.

The central depository is created to facilitate the immobilisation of securities; the deposit and withdrawal of certificates in respect of immobilised securities; the dematerialisation of securities; to open, maintain and close securities accounts and facilitate the efficient transfer of book-entry securities, among other things.

Uganda’s new law provides that the CMA will approve the central depository if it is satisfied that the establishment and maintenance of one would promote the positive development of capital markets in the country.

The law also provides that the central depository shall establish and maintain a guarantee fund for the purpose of providing an indemnity against default in respect of payments for delivery of securities by any participant.

An analysis of the two laws that are still to be passed by parliament indicates that Kampala is deliberately moving to ring-fence its stock exchange.

Uganda has taken a strong stance in reducing space for foreign participation in its stockmarket after complaints that the majority of Ugandan investors lost billions of shillings in the Safaricom IPO.