Uganda retains 10th position in Absa Index

Capital markets. Brokers at the Uganda Securities Exchange. Photo/FILE

Summary

• Uganda could have done better and this is something that the banking industry regulator does not shy away from.

By ISMAIL LADU

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Uganda has retained the 10th position in the Absa Africa Financial Markets Index (AFMI) involving 23 African countries.
The Absa Africa Financial Markets Index, is a toolkit for African countries seeking to strengthen their financial markets. 

Speaking during the launch of AFMI report earlier in the week, Bank of Uganda Deputy Governor, Dr Michael Atingi-Ego noted that Uganda’s overall ranking of 10th from 2017 to date could be regarded by pessimists as stagnation, but for an optimist like himself, “it speaks to stability and resilience.” 
The national score also increased from 50 in 2017/18 to 52 out of 100 in 2019/20, but even though Uganda somewhat consolidated its ground, he believes a lot of room remains to be covered.

Uganda’s strength in access to foreign exchange, ranking only behind South Africa, is anchored on a liquid forex market, healthy foreign exchange reserves that are above five months of import cover as well as a vibrant interbank swap among other things. 
The country also scored strongly in market transparency, tax and regulatory environment, ranking sixth overall, and first in the East African Community (EAC). 

This, according to Dr Atingo-Ego reflects the moderate risk of national debt distress, sustaining of the sovereign credit ratings at “B” by Standard and Poor’s and “B+” by Fitch Ratings, and compliance with International Financial Reporting Standards together with the commendable tax and accounting environment that is overseen by an independent oversight body –the Institute of Chartered Public Accountants of Uganda.

Uganda also offers competitive macroeconomic opportunity, ranking 6th overall, and 1st in the EAC, due to a record of strong economic growth.
Lessons 
Uganda could have done better and this is something that the banking industry regulator does not shy away from. He admits that Uganda has a lot to learn from its peers to catch up in market depth, beefing up the capacity of local investors, as well as the legality and enforceability of standard financial market master agreements.

For much more improved ranking in the future, it emerged that Bank of Uganda is considering a host of reforms to address the poor performance in some indicators, for example, to boost market depth by enhancing the size, liquidity and diversity of market products, the Bank of Uganda together with stakeholders, has undertaken a set of interventions including: reforming the Primary Dealership System in October 2020. 

The Central Bank is also working on linking the Central Securities Depository with the Securities Depository at the Uganda Securities Exchange. It is also participating in developing the framework for EAC Designated Market Makers for cross border trading in Government securities. This is in addition to working towards a single EAC financial market by linking stock exchanges and central securities depositories among the partner states. 

Equity market   
While equity market liquidity improved this year according to the AFMI, it remains concentrated among three firms and is below 1 per cent of market capitalisation. 
Uganda is one of six countries in the index with an equity turnover ratio below 1 person, something Mr Kalyegira says is troubling.  
Uganda has pension fund assets per capita of $76, well below the top five countries in this indicator that have over $1,000 per capita.