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[2007-12-28] Support the Uganda Securities Exchange
The Uganda Securities Exchange (USE) closed for business this year last week. It has been a ground breaking year for the Exchange whose turnover jumped by more than 50% for a year end total of sh73b.
Stanbic's sale of shares at the beginning of the year has boosted activity. Tens of millions of shares exchanged hands on the Stanbic counter ensuring that it commanded more than two-thirds of trading on the USE.
In addition, in the last two months of the year share prices of all the local listed companies jumped; the New Vision doubled during the period.
In the processes the market value of local listed companies more than tripled to end the year at a total of sh1,643b from sh550b at the beginning of year. These gains were all earned by share investors during the year.
Purely on the basis that the exchange allows Ugandans to buy assets and improve their standard of living, it is in government's best interest to support this institution.
In last year's budget. finance minister Ezra Suruma announced a reduction in withholding tax on dividends. Withholding tax is charged on dividend payouts and can be claimed by individuals or companies when filing their income tax returns. But more still has to be done.
Currently there is urgent need for legislation concerning the automation of the exchange and the liberalisation of the pension sector awaiting government action.
Automating the exchange will not only make transactions faster but will also improve its price discovery role. Currently delays in transactions discourage trading and therefore compromise the market's ability to price securities accurately.
Liberalising the pension sector, essentially taking away NSSF monopoly to manage workers' funds, will bring more liquidity to the market, thus boosting activity and improving the market pricing mechanism.
Poverty breeds insecurity. By promoting the exchange so that more and more Ugandans can get involved - currently there are about 20,000 Ugandan shareholders - the Government will have done one more thing to banish the spectre of instability.
