Written by Ryan Boatman
Today we visited the USE, or the Ugandan Securities Exchange and Crested Brokerage Firm and what an experience it was. We first went to the exchange, which was much different than what we encounter in the United States. On what we would call the “floor”, about 5 brokers were responding to calls about buying and selling shares of 12 publicly traded companies. Although this sounds very small, the USE is fairly new as it is in its twelfth year of operation. What shocked me was that they were using a white board to register all of their transactions, which is completely different from the electronic world the NYSE, Nasdaq, and others use. This manual way of striking deals causes the USE to be way behind the times in terms of trading. Bombay currently trades 6000 times a day, a number of transactions that would take 4.5 years for the USE to complete. The USE is open to the public, which is not the case for the NYSE. Another major difference is the fact that the USE only trades Monday, Tuesday, Thursday from 10:00 AM to 12:00 PM, as the United State’s exchanges trade for five days a week from 9:00 AM to 5:00 PM. This shows a large difference in the interest in the markets and how big of an impact each market has on its’ economy.
Once we were done touring the exchange floor, we sat down and learned a little about how the stock market works in Uganda. I was pleased to hear that the USE is in the process of going electronic, which will help it compete in the global market. It will also allow investors to trade from their homes, just like Americans do with E-Trade, Scottrade, and other online brokerage firms. It will also drive costs down and speed up the pace of the USE to compete with markets like Bombay. I believe this is a huge development for investing in Uganda, as more people will have access to the markets.
We then left the exchange and went to Crested Brokerage Firm, whose Chief Executive Officer is Robert Baldwin, a Wisconsin native who moved to Uganda. He discussed the potential of the Uganda markets and how his motive was to pursue smaller investors that are natives of Uganda. He said that there are only about 30,000-50,000 investors in the market currently and of those about 600 are Crested investors. Not bad for a company that started its’ efforts in 2005.
I think that the USE and its’ brokerage firms that are involved are a huge part of the future of sustainability of Uganda. As the country becomes more stable and the unemployment rate goes down, more people will have excess income to invest in the markets. As the economy grows, more international investors will see the opportunities that exist and will invest in the markets as well.
What were your opinions of the USE?
Do you think that the USE will be a driving force in the sustainability of Uganda in the next few years?
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I could not believe the USE when we visited. The scene we saw seemed more like an economics lecture activity than an active stock exchange. It was the simplest form of a stock exchange, and it was neat to be able to see and understand exactly what was going on.
ReplyDeleteI personally believe this exchange plays a huge role in sustainable development. For one, the companies that are being actively traded in the USE are able to use the money from issuing stock to invest and grow and develop. This helps their individual organizations and the markets as a whole. Additionally, the confidence gained by investors is reflected in other citizens and businesses, and this will give more businesses the opportunity to grow and develop.
Like Ryan said, the use of the whiteboard slows down trades and makes Uganda's stock market extremely weak. The presenter said that it currently takes about one week to settle one trade. This is so crazy since securities can be moved 6,000 times a day in Bombay. He also stated that for Uganda to trade this many securities, it would take four and a half years at the current rate. A more organized and electronically advanced platform would be beneficial.
ReplyDeleteUganda is trying to implement an automated or electronic system to attract more investors and compete globally. With a more accurate and digital system, foreign investors are more likely to invest in Uganda which will provide more financial security to the country. For sustainability in Uganda to actually happen, globalization and international trade need to occur.
Capital markets are relatively new avenue for Ugandans to invest their money.We are so used to investing in property,land and just opening fixed accounts in banks. (that is why if you chose to start a real estate firm here, you would do so well). We have a long way to go and more education is needed on capital markets so that USE can grow faster.
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