Ugandans may not benefit from seven divested companies soon

A rosy painting of Uganda’s economic development Umeme share listing on the USE. Photo/Morgan Mbabazi.  

By BENON HERBERT OLUKA Special Correspondent

Posted  Saturday, January 11  2014 at  15:41

In Summary

• Almost all firms whose percentage of government stake was to be sold off to the public are yet to pass a “compliance test” before floating shares on the Uganda Securities Exchange.
• Uganda Telecom, Kakira Sugar, Kinyara Sugar, Tororo Cement Works, Barclays Bank, Apollo Hotel (proprietors of the Sheraton Kampala Hotel) and Laico Lake Victoria Hotel were supposed to have listed on the USE more than 10 years ago, but have over the years found one reason or another to postpone an initial public offering (IPO)

 

The general public in Uganda has been locked out of the sale of and probably eventual ownership of at least seven divested public companies for yet another year.

Almost all firms whose percentage of government stake was to be sold off to the public are yet to pass a “compliance test” before floating shares on the Uganda Securities Exchange.

Uganda Telecom, Kakira Sugar,  Kinyara Sugar, Tororo Cement Works, Barclays Bank, Apollo Hotel (proprietors of the Sheraton Kampala Hotel) and Laico Lake Victoria Hotel were supposed to have listed on the USE more than 10 years ago, but have over the years found one reason or another to postpone an initial public offering (IPO).

In an unusual turn of events, the government, which in 2008 was threatening to sue the companies for breach of contract, has changed tack and in one instance even went ahead to sell at a discount, the 19 per cent stake reserved for the public to the majority, private investor.

Jim Mugunga, Ministry of Finance publicist said none of the companies was likely to list on the USE this year, or anytime in the foreseeable future, due to inconsistent financial performances.

“The Privatisation Unit, as a matter of policy, will only bring to the market or promote to the USE companies with a healthier financial/operational [status]. The idea is to encourage Ugandans to invest in proven success stories,” explained Mr Mugunga.

When Uganda started the process of offloading 139 formerly state-owned enterprises to the private sector in 1993, the government planned to sell part of its stake in at least 15 companies to the public on the stock exchange as a way of spreading the economic benefits of the process to ordinary citizens.

Public companies that have so far fulfilled that obligation include British American Tobacco-Uganda, Bank of Baroda, Uganda Clays, DFCU Bank, New Vision Printing and Publishing Corporation (now Vision Group), Stanbic Bank and National Insurance Corporation.

For the others, the process of share floatation on the USE is long overdue.

They include Uganda Telecom Ltd, which was supposed to have floated 49 per cent of its shares by now, Kakira Sugar Ltd (not less than 10 per cent shares), Kinyara Sugar (19 per cent shares), Tororo Cement Works (20 per cent by 1996), Barclays Bank (25 per cent by 2003), Apollo Hotel, the proprietors of the Sheraton Kampala Hotel (not less than 20 per cent), and Laico Lake Victoria Hotel (10 per cent by 2003).

The last of the lot, Uganda Grain Milling Company, was supposed to have floated the nearly 30 per cent stake owned by the government. However, it was placed under receivership, leading to an automatic forfeit of its shareholding by the government.

Mr Mugunga said Uganda Telecom Ltd (UTL) is yet to sufficiently improve its financial performance to meet the minimum financial performance benchmarks set by the USE before it can be listed.

Mr Mugunga said the Privatisation Unit had formally asked the Solicitor-General to follow up Tororo Cement Works and Barclays Bank after the two companies reneged on earlier promises to list on the USE.

According to Mr Mugunga, Tororo Cement Works was supposed to list after completing the rehabilitation of the company’s premises in 1996 but it has hitherto not happened. Barclays Bank, on the other hand, bought Nile Bank in 2006, leading to a period of operational turbulence as the two institutional formalised their merger.

One of the most controversial cases to date involves Kinyara Sugar Works Ltd (KSL), where the government offloaded the 19 per cent stake that it was expected to list on the USE to the majority shareholder, RAI Holdings, “to help consolidate investments in the company and grow the business.