Behind African Alliance’s move to quit brokerage business

Paul Bwiso, the USE chief executive officer, said he is confident that UAP Old Mutual will continue offering the necessary investment services to their old and incoming clients.

In terms of future of the market and its performance, he said: “The outlook is bullish and positive.” He added that current brokers in the market are well capitalised and are able to operate.

“We monitor their operations and when we see any broker getting near the red line, we advise them to boost their capital to continue with the business,” Bwiso said.

This new development is coming at a time trading figures are declining at the Nakawa bourse. According to Bwiso, in 2014 Shs460bn was traded, in 2015, the figure reduced to Shs363bn, it further went down to Shs187bn in 2016 before registering its worst mark of Shs46bn in 2018.

Bwiso attributed the sharp 2018 decline to Umeme’s trading which underperformed compared to years before because of the conversations surrounding the renewal of its current concession expiring in 2025.

However, going forward, Bwiso said that they have been approached by two entities from the financial sector with intentions to list. They are also optimistic that the President’s directive on telecoms to list on the market will boost trading and performance of the remaining stock brokerage firms. In terms of sustaining business for the exchange, he said that they have diversified their revenue to keep in business.

He said they have gone into data vending, registry services and are setting up a training division.

“We should be able to see non-trading revenue to keep the exchange running,” Bwiso said.

Can Old Mutual handle?

Samuel Sejjaaka, an economist, who also serves as the chairman board of directors for Old Mutual Financial Services Limited, said with 176 years of consistent growth and strong values demonstrated world over, they are ready.

“As you will come to learn, it is more than the trade for us, it is a partnership and moreover one that you can count on,” he said, “we are extremely delighted at this opportunity and our aim is to build on the foundation that African Alliance has laid over the years.”

He added that it is a question of synergies which they are bringing to the table besides insurance, fund management, property management and other businesses they do.

Commenting on the entire market performance, Sejjaaka said there is no velocity and that speaks to the fact that most people holding investments in the Ugandan market are institutional investors who are not interested in selling their stocks.

Simon Kusiima Mwebaze, the general manager for UAP Old Mutual said they have a strong team that can churn out research that can spur some of that activity needed in the market.

He said they would continue partnering with African Alliance particularly in regards to churning out opportunities regarding advisory and related investments.

So, what can brokers do to remain in business?

Cappon says brokerage firms need to embrace institutional brokerage business models offering full service intermediation, including investment banking, research, trading and sales and asset management. In addition, he says, they should offer low-cost, high –speed, high tech execution platforms.

“It is clear the institutional brokerage business requires specialisation. Successful firms have each found a unique combination of customer focus and products/services that match the needs of the targeted customers,” he says.

On the issuer side, Cappon says, firms may focus on certain industry sectors such as technology, healthcare, financials or any other niche.

On the investor side, firms may focus on traditional active asset managers and hedge funds.

Regarding products and services, firms also need to specialise. He says that whereas some have remained traditional full-service, many have become narrowly focused on areas such as research.

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