The Independent Uganda: You get the Truth we Pay the Price
By Joseph Were
Stanbic Bank Uganda is learning the hard way that this is not a good time to attempt to raise funds on the equity market thanks to lingering after shocks of the global financial crisis.
Its 7-year Shs 30 billion bond that was privately placed among institutions and private investors closed on August 6 with an over 10% under-subscription.
The bank hoped to raise Shs 30 billion but got only Shs 26 billion.
A similar bond, but for double the sum, was issued by Stanbic Kenya in July and was over-subscribed by over 28%. This underlines the localised nature of under-performance of Uganda’s financial markets.
Insiders describe frantic efforts to ensure better performance but Stanbic Uganda is putting a positive sheen on the missing Shs 3.5 billion. The Managing Director Philip Odera, according to a press statement issued August 17 ‘could not hide his joy’.
Experts, however, are predicting further gloom in its trading among secondary market investor on the Uganda Securities Exchange (USE). They point at the almost zero activity on the USE. The poor performance of the All Share Index on the USE is blamed on the absence of market-maker institutions like the National Social Security fund (NSSF). The Shs 30 billion, which is among the largest corporate debt issues in Uganda ever, was the first tranche in the bank’s bid to raise Shs 60 billion.
The Stanbic statement said ‘to come out and raise UShs 26.5 billion in what is an extremely tight liquidity situation is simply fantastic and attests to the inherent strengths of the Ugandan capital markets’.
The Stanbic bond gives investors the option of either a floating rate priced at the Government of Uganda 182-day Treasury Bill rate plus 1.5% or a fixed rate of 14.5%.
On August 17 when Stanbic made this announcement the highest rate in the bond market was 14.464% on the Bank of Uganda three-year bond issued in May.
Bank of Uganda has in the past attributed the high and rising securities’ rates to the tighter liquidity conditions in the market and the deteriorating market sentiments driven by exit of offshore players who are major players in the government securities market.
The bank statement proceeds from the bond issue will be used for long-term liquidity and capital management purposes.
Stanbic announced that is closed 2008 with US$6.5 billion in deposits but these were mainly of a relatively short -term nature.
Uganda’s main vehicle for mobilising long-term domestic savings, the NSSF, has been off the trading flow since its management was over-hauled late last year as a fall-out of the Temangalo land saga.
NSSF’s absence has further structurally weakened the Ugandan economy, stifled growth of the shallow financial markets, and distorted private capital allocations.
