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THE CHALLENGES AND PROBLEMS FACED BY CAPITAL MARKETS IN
UGANDA, AND THEIR CONSEQUENCES ON INVESTORS.
(The Case Study of Capital Markets Uganda)
By
UWANYILIGIRA TELESPHORE
BBA/7790/51/DF
This Research Project is Submitted to the School of Business and
Management in Partial Fulfillment of the Requirement of the Award
of the Degree of Bachelor of Business Administration (Finance) of
Kampala International University.
October 2006.
DECLARATION
I, UWANYILIGIRA TELESPHORE, do hereby declare to the best of my
knowledge that this graduation report is my original work and that it has
never been submitted to any university or any other institution for the award
of any qualification.
The literature and citations from other people's work have been duly
referenced and acknowledged in the text and bibliography.
Signed ................ ~~ .............. .
DEDICATION
This project is dedicated to my family, especially to my late mother
Primitiva AKIMANIZANYE, my father Venant NKUNDABATWARE, my sisters
Chantal TWAGIRAMARIYA, Venerande MUKANDANGA and my brothers Eric
ISHIMWE, Christian NKUNDIMANA, Onesphore DUSABIMANA, Christophe
NGABIWENIMANA, Janvier MANIRARORA and Anastase BIZIMANA.
111
ACKNOWLEDGEMENT
An accomplishment of project of such nature was possible only through hard
work, dedication and assistance from those who supported me morally,
spiritually, financially and otherwise.
First and foremost, I would like to thank God for His abundance grace and
the opportunity He awarded me to carry out my project successively.
A high vote of thanks to my supervisor, Dr NYABOGA Yobes, for his guidance
and great advice he gave me when undertaking my project.
Special thanks to all my friends, the insight gained from them will go a long
way in my career life and in the business world.
Great appreciation to the lecturers of the School of Business and
Management at Kampala International University and Nairobi institute of
Business Studies for their cooperation and training throughout the course
and when we were undertaking our project.
Sincere thanks to my family for their financial and moral support. Thanks for
their ceaseless prayers and advices in making me reach this height.
I would like to take this opportunity to also thank my dear classmates for
their encouragement, support and prayers.
God bless all of you.
IV
TABLE OF CONTENTS
Declaration ............................................................................................................... i
Dedication ................................................................................................................ ii
Approval .................................................................................................................. iii
Acknowledgement ................................................................................................. iv
Table of Contents .................................................................................................. v
List of Tables and Figures ................................................................................... vii
Abbreviations ......................................................................................................... viii
Definitions of Terms .............................................................................................. ix
Abstract .................................................................................................................... xii
CHAPTER ONE
1.1 Background of the Study ............................................................. 1
1.2 Statement of the Problem ........................................................... 3
1. 3 Objectives of the Study ................................................................ 3
1.4 Significance of the Study ............................................................. 4
1.5 The scope of the Study ................................................................ 4
1.6 Research Questions ...................................................................... 5
1.8 Theoretical Framework ................................................................. 5
1.9 Hypothesis ....................................................................................... 10
CHAPTER TWO
Literature Review ....................................................................................... 11
CHAPTER THREE
3.1 Research Methodology ...................................................................... 15
3.1.1 Sampling Procedure .......................................................... 15
3.1.2 Sampling Profile .................................................................. 15
V
CHAPTER FOUR
4.1 Data analysis and Interpretation of the Findings ........................ 16
4.1.1 Companies Data Analysis ................................................. 16
4.1. 2 Investors Data Analysis .................................................... 22
CHAPTER FIVE
5.1 Summary, Conclusions and Recommendations ........................... 34
5.1.2 Problems Facing the Capital Markets ............................ 34
5.1.2 Priority Problems and Causes .......................................... 37
5.2 Recommendations ............................................................................. 39
5.3 Limitation of the study ...................................................................... 41
APPENDICES
QUESTIONNAIRES
1. For Companies.
2. For Investors
3. For CMA Staff (Discussions)
VI
LIST OF TABLES AND FIGURES
Tables
Table 1 Table 2 Table 3 Table 4 Table 5 Table 6 Table 7 Table 8 Table 9 Table 10 Table 11 Table 12 Table 13 Table 14
Figures
Figure 1 Figure 2 Figure 3 Figure 4 Figure 5 Figure 6 Figure 7 Figure 8 Figure 9 Figure 10 Figure 11 Figure 12 Figure 13 Figure 14 Figure 15
Companies that responded ........................................................ 16 Listed and unlisted companies .................................................... 16 Proportion of Companies' Investment in Securities ............... 17 Distribution of securities ............................................................... 18 Companies Wishing to Go Public in Future ............................... 20 Sex of the Respondents ................................................................ 22 Age of the Respondents ................................................................ 23 Occupation of the Respondents .................................................. 24 Education Level of the Respondents .......................................... 26 CMA Awareness ............................................................................... 27 USE Awareness ............................................................................... 28 Sources of Awareness of CMA and USE .................................... 29 Participation in the Capital Markets ........................................... 31 ............................................................................................................ 32
Listed and unlisted companies .................................................... 17 Proportion of Companies' Investment in Securities ............... 18 Distribution of securities ............................................................... 19 Companies Wishing to Go Public in Future .............................. 20 Preference of the respondents .................................................... 21 Sex of the Respondents ................................................................ 22 Age of the Respondents ............................................................... 23 Occupation of the Respondents ................................................. 25 Occupation of the Respondents ................................................. 25 Education Level of the Respondents .......................................... 26 CMA awareness .............................................................................. 27 USE awareness ............................................................................. 28 Sources of Awareness of CMA and USE .................................... 30 Participation in the Capital Markets ........................................... 31 ........................................................................................................... 32
Vll
ABBREVIATIONS.
BATU
BOBU
BOU
CMA
CMP
DFCU
EABL
EADB
KQ
MDI
MFI
NAWOU
NSSF
NVL
PTA
PSF
ROSCA
SME
UDB
USE
UTODA
UWEAL
UWFT
UWONET
- British American Tobacco (Uganda)
- Bank of Baroda (Uganda)
- Bank of Uganda
- Capital Markets Authority
- Capital Market Projects
- Development Finance Company Uganda
- East African Breweries Limited
- East African Development bank
- Kenya Airways
- Micro-finance Deposit-taking Institutions
- Micro-finance Institutions
- National Association of Women Organization in Uganda
- National Social Security Fund
- New Vision Limited
- Preferential Trade Area
- Private Sector Foundation
- Rational Savings and Credit Association
- Small and Medium Scale Enterprises.
- Uganda Development Bank
- Uganda Securities Exchange
- Uganda Taxi Operators and Drivers Association
- Uganda Women's Entrepreneurs' Association Ltd
- Uganda Women's Finance Trust
- Uganda Women's Network
viii
DEFINITION OF TERMS.
Balance sheet -a quantitative summary of a company's financial condition
at a specific point in time, including assets, liabilities and net worth
Bond - a certificate of debt (usually interest-bearing or discounted) that is
issued by a government or corporation in order to raise money; the issuer is
required to pay a fixed sum annually until maturity and then a fixed sum to
repay the principal.
Capital -cash or goods used to generate income either by investing in a
business or a different income property.
-the net worth of a business; that is, the amount by which its assets
exceed its liabilities.
-the money, property, and other valuables, which collectively
represent the wealth of an individual or business.
Capitalization - the process of adding unpaid interest to the principal
balance of a loan. This will increase the outstanding principal balance of the
loan and may increase the monthly payment amount.
Capital Markets- the means by which large amounts of money (capital) are
raised by companies, governments and other organizations for long term use
and the subsequent trade of the instruments issued in recognition of such
capital. New money is raised in the Primary market by issuing shares or
bonds to investors who can then trade them on the relevant Secondary
market.
Corporate governance -A generic term, which describes the ways in which
rights and responsibilities are shared between the various corporate
participants, especially the management and the shareholders.
IX
Debt - an amount owed to a person or organization for funds borrowed.
Funds -assets in the form of money
Invest -to engage in any activity in which money is put at risk for the
purpose of making a profit.
Investment -laying out money or capital in an enterprise with the
Investor -an individual who takes an ownership position in a company, thus
assuming risk of loss in exchange for anticipated returns.
Liquidity -the ease with which an asset can be turned into cash.
Market -the world of commercial activity where goods and services are
bought and sold.
Money Market -a sector of the capital market where short-term obligations
such as Treasury bills, commercial paper and bankers' acceptances are
bought and sold.
Net-worth -the value in money of all assets less all liabilities. Net worth
may be expressed as money amount, or as a percentage of either assets or
liabilities, calculated by subtracting liabilities from assets and dividing the
remainder by assets or liabilities.
Savings - fund of money put by as a reserve
Security (a) -a type of transferable interest representing financial value.
Traditionally securities have been categorized between debt and equity
securities, and between bearer and registered securities.
X
ABSTRACT
Uganda's impressive economic growth is a result of the country's
reform process. The government is committed to private sector-led growth,
which necessitates adequate availability of investment capital. However the
shallow and underdeveloped nature of the financial sector is a hindrance to
raising long-term finance. The ultimate role of Uganda's Capital Markets is to
provide alternate means of raising long-term finance. Therefore, the
government is encouraging the development of capital market industry as a
way of generating long-term capital to promote sustainable growth, mobilize
savings and broaden the availability of funds for investment purpose.
Promotion of capital markets provides new options for Ugandans to invest
their savings from local, regional and international sources. It makes it more
convenient for Ugandans to save and enhance the efficiency of the financial
system to mobilize savings for economic development. It makes it also
possible for larger institutional investors to enhance the effectiveness of
managing their assets and liabilities, particularly with regards to the risk and
reward associated with different investment.
This research project gives ideas on how the ways capital markets
development creates ways for business communities to raise capital and run
the business. This is possible in fact, not only these businesses get funds
from raised bank loans, but also by raising capital directly from the public by
issuing financial instruments such as bonds, stocks to investors locally,
regionally and internationally.
Mobilization of savings from savers to borrowers is conducted
efficiently if there is existence of financial intermediaries (middlemen who
identify individuals with surplus of money and use their money to lend people
with deficit, who need money). The role of capital markets comes in to create
stock exchange, which is the market, where buying and selling of securities
take place. In Uganda, this place is named Uganda Securities Exchange.
Xll
There is a concern about lack of confidence in financial sector among
Ugandans also the dilution of ownership and questionable shareholders.
Smaller companies in particular, fear the loss of managerial grip on their
companies and the financial requirements, which is identified as an area of
contention in the impediments.
This study establishes why there are a number of local firms that are
interested in going public but that there is a considerable degree of
reluctance of going ahead. This attitude may correspond to the low level of
awareness of the securities market among Ugandans companies.
This research also shows reasons and causes of lack of participation of
the population in the investment opportunities, the challenges of capital
markets, and later it will give recommendations and suggest measures that
can be taken in order to overcome them.
xiii
CHAPTER ONE
1.1 BACKGROUND OF THE STUDY
Introduction
Capital Markets can help raise funds through a number of means. In
several capital markets; listing public offering of shares through the stock
exchanges has been a useful means to raise project finance. Communication
networks, road systems, plant and machinery can all be financed by a
comprehensive properly supported and sponsored public offering. Capital
markets provide the framework and platform for this and will be the primary
success factor in this form of funds mobilization.
For government development, listed government bonds are very
important source of finance, particularly through medium and long-term
bonds. Not only do active capital markets improve an economic cash flows
and the channeling of these funds to the development of key infrastructure
areas, but also create an opportunity for the local population and
international investors to invest their money, and in turn, accumulate profits
and as result lift the national economy at higher level.
The securities markets in Uganda emerged as a result of structural
transformation of the Ugandan economy. The Capital Markets Authority
(CMA) was established under the Capital Markets Authority Statute of 1996.
It is a regulatory and supervisory body of the capital markets. It licenses and
regulates investment intermediaries and deals with exchanges and deals with
the issuance and trade in securities. The Uganda Securities Exchange (USE)
was licensed to operate as an approved Stock Exchange in 1997 and became
operational in January 1998 with the listing of the East African Development
Banks 4 year bond. USE is the only formal trading place for securities all
companies wishing to be listed at the USE must be approved by CMA.
I
The current capitalization in Uganda stands at about US dollars 209
million compared to Kenya and Tanzania with US dollars 1 billion and US
dollars 618 million respectively. Capital markets flows in Uganda have the
potential to make a substantial contribution to the economic growth.
However in a nascent market as Uganda, the private sector is reluctant to
make full use of these resources. On the other hand, investors in the capital
market are also reluctant to use the capital markets as an alternative, and
benefit from them because it is a fact that the most characteristic of a
successful capital market, that investors appreciate, is liquidity.
Purposes/ Reasons of Developing Capital Markets in Uganda
It's understandable that the main cause of developing capital markets
in Uganda is to enhance the mobilization of financial resources for investing
purposes and more efficient utilization of financial growth. The main
objectives of developing capital markets in Uganda are:
a. to increase domestic savings;
b. to efficiently allocate savings to investment in the
public and private sector;
c. to improve the distribution of income;
d. to avail investment capital to a broader range of the
population;
e. to widen the range of financial services available
through financial institutions;
f. to improve the operational effectiveness of financial
institutions
g. to improve the terms under which foreign funds are
raised and reduced relative to the amount required.
2
1.2 STATEMENT OF THE PROBLEM
The big role of capital markets is to ensure that there is mobilization of
funds especially from lenders with surplus to borrowers with deficit in money
terms.
However, it is very important to know that the process does not run in
a smooth way, but it is challenged with impediments that require
improvement to take the way forward.
The study highlights the most common problems and challenges encountered
by the Capital Markets in Uganda, and how they affect investors in general.
1.3 OBJECTIVES OF THE STUDY
Capital markets play a big role in the economy of Uganda by
facilitating the movement of monetary resources. Therefore, the main
objectives of the study will be:
Firstly, to give an overview and explain the meaning of capital
markets, their role in the economy and how people would benefit from them.
Secondly, it will try to identify the problems and challenges faced by
the Uganda's capital markets, assess them and find out what might be the
causes and reasons of those problems.
Finally, it will give recommendations, and some measures that can be
taken by CMA and USE in order to overcome these impediments.
3
1.4 SIGNIFICANCE OF THE STUDY
Individuals and companies, with interest in capital markets, will find
this document essential as it touches crucial areas of concern of these
markets. Therefore, the research will be helpful in various ways:
- Students and other people will understand well what are the capital
markets and their roles to the economy of countries.
- Companies will know the benefits they may enjoy if they decide to
participate in the capital markets.
- This research will be helpful to CMA and USE because it highlights
some of the problems of capital markets as well as
recommendations, solutions and suggestions that can be relevant
when fighting those challenges.
- This research may be put in the CMA, USE's Information Resource
Centres and serves as documentation for people who will want to
do further research on capital markets.
1.5 THE SCOPE OF THE STUDY.
The research was conducted in the capital city of Uganda, Kampala,
due to the following reasons:
- Most of high income- earners are located in Kampala.
The big percentage of companies, listed and not listed is
based in the capital city, the hub of economic activity.
- Both CMA and USE head offices are located in Kampala.
- Due to limited financial resources, the research was limited
in the capital city, which was easier and cheaper for the
researcher to commute, and avoid high transport costs.
4
1.6 RESEARCH QUESTIONS
1. What are capital markets?
2. What are the benefits and advantages of capital markets to:
- the individuals?
- the nation as a whole?
3. What are the problems and the challenges that the capital markets
encounter? What may be their causes as well as their effects?
4. What measures that can be taken in order to resolve these
problems and eliminate those challenges?
1.8 THEORETICAL FRAMEWORK.
The theory to the problem will emphasize on the capital markets and
its functions, its benefits, as well as the risk investment that investors are
supposed to be aware of, and how to measure it.
Capital and Capital Markets Definitions.
In "An Introduction To Capital Markets; Products, Strategies,
Participants" by Andrew M. CHISHOLM, states that in the broadest sense the
term "capital" can be defined as the accumulated wealth that is available to
create further wealth. It is wealth that is engaged in reproductive process.
The "Capital Markets", on the same line, are meeting places where
those who require additional capital seek out others who wish to invest their
excess. They are also places where risk can be distributed, shared and
5
diversified, so that for instance, those with surplus wealth can spread their
risk among a wider range of attractive investments.
Originally, the meeting places were physical spaces with such as the
forum of an ancient city or coffee house or a stock exchange. In one day,
capital markets participants may be located in different continents and
conduct deals over the telephone or 'meet' in cyberspace via electronic mail
and the internet.
Who are the Users of Capital?
The answer in one sense is 'we all are'. At least part of time:
- We borrow money to buy a house or a car, or make our own
small contribution to the growing wealth of nation.
- Corporations, for instance, when building a factory or buy
new equipment, will be engaged in capital expenditure by
using funds provided by shareholders or lenders or even
retained profits to generate future cash flow.
Government uses tax revenues to invest in major national
infrastructure projects such as roads and subways systems
and to invest in education and health and policing so that we
can all go about our business and lead fulfilling lives.
- Agencies such as World Bank and European Bank for
Reconstruction and Development inject funds into developing
economies so that they have a basis for economic growth
and future prosperity.
6
Who are the Suppliers of Capital?
Again the answer is that 'we all are':
- Sometimes we do this directly by buying shares and bonds
issued by corporations and debt securities issued by
governments and their agencies.
- Sometimes we employ financial instruments and other
financial intermediaries to invest funds on our behalf.
- We deposit money in bank accounts, invest in mutual funds
and set aside in pension schemes for our retirement.
- We pay taxes to the government and local authorities.
- We pay premiums to insurance companies who invest the
proceeds against their future liabilities.
- Corporations themselves become sources of capital when
they reinvest profits in their business rather than paying
money out in the form of dividends to their shareholders.
Types of Investors
According to Uganda Capital Market Authority: Disclosure Guidelines
Project, Interim Report- July 1999, in Uganda, as well as most of the
countries in the world, capital markets attracts four (4) kinds of investors in
general:
- General public; primarily retail investors or anyone who is not specifically
selected by the companies/issues to receive the offer.
- Existing shareholders and debt holders of a company; include retail
investors, institutional investors and market professional who already hold
shares or other financial instruments in the company and therefore can be
deemed to have knowledge of the company and its operations.
7
- Institutional investors; fund managers, insurance and pension companies,
large corporation or anyone who can be assumed to have specialized
knowledge of the company and instruments they are buying and can
negotiate the terms of the purchase with the vendor.
- Market professionals; venture capitalists, banks, market makers, brokers,
individual with sufficient capital and experience.
Examples of Investors in Uganda:
• International investors
• High-net worth individuals
• Upper-middle class (financially self sustaining and elite)
• Rational savings and Credit Associations (ROSCA) both within
institutions and informal groups
• Development banks e.g. Uganda Development Bank( UDB)
• Pension Funds e.g. NSSF
• Contributors to Collective Schemes
• Association of Business groups e.g. UTODA,PSF, Owino traders
• Students at secondary level and institutions of higher learning
• Professional bodies e.g. lawyers, accountants, bankers, doctors
• Women's groups/associations e.g. UWONET, UWFT, NAWOU, Mother's
Union, self help groups
• MFI's
• MDI's
• SME's
• Farmer's associations
• Religious organizations
8
Benefits of Capital Markets.
From the book "Know Your Capital Markets Inside Out" by Zephy Metro
NWOYE ELEH, December 2004, the researcher finds that there are a lot of
benefits derivable from the capital markets.
As an issuer (government and corporate bodies), the capital markets
provide the necessary funds, which can be channeled to the necessary
economic development.
Corporate bodies through the issue of securities are able to expand
their operations, or restructure their companies for optimum benefits.
The governments on the other hand are able to channel such funds for
developmental purpose for the growth of the economy and fulfilling their
electoral promises.
To the investor, the capital markets confer benefits through profits
earned as a result of the securities bought and sold in the market. Investors
receive dividends or capital gains when companies declare profits or when
the shares are sold.
Besides, the capital markets provide the much-needed employment
through the participants or through programs executed from funds sourced
from the capital markets.
9
Investment Risk.
All investors invest their money in order to get returns. However,
investments present various risks that can results in losing money invested.
It is said that the higher the risk, the higher the returns. It is just a
statement and it not justified.
Another question that arises is how to estimate or calculate the risks.
How can we tell an investment with higher or lower risks?
Professional, Fundamental and Technical analysts use methods such
Accounting Ratios and models to measure and evaluate risks and it is left t
the investors to make choice according to their personal judgments.
1.9 HYPOTHESIS OF THE STUDY
The establishment of Capital Markets Authority was an important step
in instituting and promoting an orderly, fair and efficient capital markets
industry in Uganda. This provides Ugandans with an opportunity to acquire
different financial assets and the option to invest their savings.
Capital markets have emerged in shaping the financial market in the
country to ensure orderly growth. It is therefore very important that I have
to adopt the following hypothesis:
Hl: effective capital markets can help in lifting the national economy at a
higher level.
HO: effective capital markets cannot help in lifting the national economy at
a higher level.
Hl: lack of awareness among the population and companies is a big
problem to the capital markets industry.
HO: lack of awareness among the population and companies is not a
big problem to the capital markets industry.
10
CHAPTER TWO
LITERATURE REVIEW
Capital Markets Journals are very essential. It states that the
capital market's role is to educate and keep updated the public about Capital
Markets as they tackle each aspects of the Capital Markets Industry. The 1st
issue was June 1997 and it is released 3 times a year. They address issues
such as Financial Sector reforms, features of Uganda's Capital Markets
Authority, USE, bonds, and interviews with role players in Capital Markets
industry, privatization among others. They also talk about fixed income
securities, how to make money on stock exchange, requirements of listing on
USE. In few words, they help the reader to get a full picture of the
functioning of the capital markets and also the type of challenges that
present in that industry and the measures taken to get over them.
For an insight in to the concerns of Capital Markets development, a
collection of papers presented at a symposium on Global Capital Markets
titled "Changing Capital Markets: Implication for Monetary Policy" have been
useful. It highlights considerations that policy makers have to make
especially in developing markets. This symposium was sponsored by Federal
Reserve of Bank of Kansas. These papers were presented by prominent
personalities like Alan Greenspan, Chairman of Federal Reserve Board.
"Uganda Vision 2035, Towards A Modern, Industrialized and
Knowledge Based Society", June 2005, a book coordinated by NPA, the
National Planning Authority is important in that it addresses issues on where
Uganda is today, as an underdeveloped nation, challenges, pre requisites,
policies and strategies for the foreseeable future. The book also suggests
necessary development planning framework and strategic intervention to
reach goals and vision set for the year 2035, and that capital markets will
play a big role in that achievement.
11
In "Capital Markets: the Journal for the Capital Market Industry
Investor Protection in Zambian Securities Markets" By MUMBA S. KAPUMP,
it is stated that the most valuable asset any investor can own is knowledge.
By understanding investment and Capital Markets, individuals will be better
prepared to make informed decisions. Mr. MUMBA's article contains
insightful advise for investors, not only the Zambian market but worldwide.
Investors are entitled to protection, but they must also take some measures
to minimize investment risks.
Leo KIBIRANGO, Chairman of CMA, in Capital Markets Authority
Annual report 2004, states that Capital Markets Project (CMAP) as a unique
initiative aiming at providing technical support to companies with potential to
make public offers and list on the Uganda Securities Exchange (USE). He
stresses that CMA has been aware of the challenges of stimulating private
sector led offers and listings, and that with this new project, funded by the
US department of the Treasury, potential enterprises in the private sector will
be equipped to raise capital for expansion and growth through the market.
In the report written by Japheth KATTO, chief executive officer of
CMA in the CMA Annual Report 2004, he states that the small number of
companies listed on USE and the absence of listings from the private sector
companies has continued to be a big challenge to the industry. He continues
saying that in order to make progress in the area, CMA is working with USE,
bank of Baroda and the Ministry of Finance succeeded in getting the US
Treasury to fund Capital Markets Projects (CMAP) whose principal objective is
to increase the number of private sector companies listing on the USE.
In the address to shareholders by Mr. Japheth KATTO during the
CMA end of the year seminar, he said, "The industry needs new products to
boost market participation. This means in addition to privatization,
encouraging the private sector to list their companies on the stock exchange
12
hence creating a wider choice to potential investors." He continues, "As the
supply side is boosted, demand should also be addressed through
encouraging participation in the primary and secondary market. This can be
done through public awareness, incentives and appropriate saving vehicle
such as pension and Collective Investment schemes." In this speech, Mr.
KATTO explains some of the strategies that should be made in order to over
come some of the challenges of Capital Markets in Uganda.
In the interview of Mr. RUMBIDZAYI NYABADZA, the Executive
Director of Investment Advisor Renaissance Capital Ltd. by Frederic MASIGO
of the Daily Monitor published on July 4rn, 2006 page 19, Mr. NYABADZA
explains that ignorance is one of the challenges of Capital Markets in Uganda,
but that the common man is not to blame. He insists that it just because the
whole issue of Capital Markets is fairly new and what needs to be done is for
more players to come on the market. He also talks about marketing the
Capital Markets.
Dr Michael Atingi EGO said in his interview with the Daily Monitor
published on July 21st, 2006 page 19, that Uganda must graduate to the level
which it can borrow funds from international Capital Markets to finance
investments in the country. He said that for Uganda to reach the level of
borrowing from international capital markets, it must have a strong domestic
capital markets meaning that Uganda's stock market should have several
companies listed, which trade regularly through a more computerized
system. The interview shows us how Uganda should concentrate on its
Capital Market by borrowing outside and develop its own.
The existence of informal and curb market, moral hazards, adverse
selection effects, and asymmetric information affect the behavior of financial
markets in developing countries. Stiglitz and Veiss (1981) have shown that
there will still be credit rationing, even with financial liberization, because of
imperfect information on the part of the borrowers and lenders. To reduce
13
the inefficiency associated with the weak credit markets, Cho (1986) argued
that credit market need to be complemented by a well functioning equity
market in developing countries. The underlying assumption in this analysis is
that both potential shareholders and risk-neutral lenders have the same level
of information on firms with which to judge the expected productivity of their
investment projects. It has been suggested that Cho's analysis ignores
information costs and the informational requirements it imposes on the
individual equity investor as well as agency problem in management
controlled operations.
According to Ms Sheila Karungi Mugyenge, in the article "Challenges
to Trade and Investments in Uganda" published in The Guide magazine,
Trade and economic Development in Uganda Issue no.2, march 2006, the
challenges to development of trade and investment, among others include
access to finance, competitive incentives regime, bureaucracy, lack of skills
and some major obstacle to may potential investors to achieve their
development plan. Existing financial institutions, which are largely foreign
owned, mainly focus on short-term lending and at incredible interest rates.
To hers, this situation has for long remained unchanged.
14
CHAPTER THREE
3.1 RESEARCH METHODOLOGY
3.11 Sampling Procedure
The researcher collected both primary and secondary data. Most of the
information that the researcher gathered was collected from interviews
conducted face-to-face, with public and private investors, Capital Markets
Authority staff and companies' management.
A great deal of the research was also gotten from the information
center of CMA as well as the Kampala International University Main Library.
Because of the commendable role played by the media in marketing
the Capital Markets, the news papers, articles, journals and magazines were
used a lot in conducting the research.
The researcher also relied upon the Internet for its easy and fast
accessibility.
3.1.2 Sampling Profile.
The researcher targeted business Companies staff, investors (common
citizens) as well as Capital Market Authority Staff.
20 companies were given questionnaires, in which some of them were
listed and not listed on USE.
80 people (citizens) were given questionnaires to fill at heir own will.
Interviews were conducted with 2 members of CMA staff.
15
CHAPTER FOUR
4.1 DATA ANALYSIS AND INTERPRETATION OF THE FINDINGS.
4.1.1 Data Collected From companies Responses
Table l C ompames t at respon e h d d
Status of companies' responses.
Companies that gave full respond 12 66.7%
Companies that gave incomplete responses 6 33.3%
Companies contacted 18 90%
Companies not contacted 2 10%
Total number of companies in the proposal 20 100%
Source: Primary Data
Among those 18 companies contacted, only 4 were listed to USE
(Uganda Securities Exchange), 14 were not listed yet. In this chapter, there
will be discussion of the reasons why some companies have not yet
considered going public and other are not interested to do so at all.
4.1.1.1 Listed and not Listed Companies That Responded:
Table 2 Listed and unlisted companies Number Percentage
Listed companies 4 22.3%
Not listed companies 14 77.7%
Total 18 100%
Source: Primary Data
16
Figure 1 Listed and unlisted companies
■ listed companies ■ not listed companies
In the 14 companies that are not listed, it was found that only 3 of them
have invested in securities traded in USE.
4.1.1.2 Proportion of Companies' Investment in Securities
Table 3P roportion o ompames fC . , In . s vestment m ecunt1es
Current investment
Shares 5%
Treasury bills 10%
Bonds 5%
Non-current assets 80%
Source: Primary Data
17
Figure 2 Proportion of Companies' Investment in Securities
Iii shares ■ T-Bills □ Bonds □ Non-currrent assets
As this data shows, only 20% of the 3 companies have invested in the
securities markets by either buying treasury bills, bonds from either listed
companies or government (Treasury bills).
This how that 20% was distributed in the securities market.
Table 4 Distribution of securities Progortion
Government/ BOU Treasury bills 50%
PTA/ EADB/ UTL Bonds 25%
EABL 8%
KQ 7%
DFCU 3%
NVL 3%
Uganda Clays 2%
BARODA 2%
BAT -
East African Jubilee -
Source: Primary Data
18
Figure 3 Distribution of securities
I
111 T-Bills
■ PTA/EADB/UTL Bonds
■ EABL
D KQ
■ DFCU
DNVL
■ Uganda Clays
o Baroda
As from the answers from the respondent companies, it is found out
that the big percentage of companies' investments (50%) is in government's
Treasury bills. There is actually a similar reason from the three companies of
why they chose T-bills:
T-bills are risk-free investment, that is, these companies are assured
that anyhow, on a specified day in the future they will get their money back
plus interest that would generate approximately 8% per year.
Investing in equity shares on the other hand present uncertainty of
returns and that is the reason why most companies do not invest in shares
traded in USE. According to John Ngumi, Regional Director Investment
Banking of STANBIC Bank, the reason is the uncertainty of returns;
19
companies may or may not declare dividends and also the high share price
fluctuations.
4.1.1.3 Unlisted Companies Wishing to Go Public in Future.
In 14 companies that were not listed yet, 10 of them envisaged to go
public in the near future.
Table 5 Companies 1shm2 to 0 u IC ID uture w· . G P bl" . F
Number of comganies Period in y:ears
2 1-2 year
5 3-5 years
3 6-10 years
1 Not sure
Source: Primary Data
Figure 4 Companies Wishing to Go Public in Future
5 ~-------------------------------,
4 -+-----------
3 +-----------
2 -1---
1 -1---
0 -i---
1-2 years 3-5 years 6-10 years
I• Number of companies I Not sure
The researcher found out in the 10 companies that are willing to go
public, all preferred to issue shares more than any other financial
instruments such as commercial paper and bonds.
20
Their response on that was:
1st choice:
2nd choice:
Shares
Bonds
3rd choice: Other financial instruments
Companies wish to issue shares because they think it is low cost of
capital because the company pays dividends only when profits are made.
Paying dividends is not compulsory like in case where by the company want
to retain some profits.
Bonds and commercial papers are less preferred because they have to
be serviced by paying interests and it is obligatory to pay back investors their
money when the time is due.
The preference presentation is demonstrated by the following pie chart:
Figure 5 Preference of the respondents
5% 15°/o
80%
21
■ Shares
■ Corporate bonds
□ Other financial instruments
4.1.2 INVESTORS DATA ANALYSIS.
Questionnaires were distributed to 80 respondents but only 60 of them
managed to give feedback.
4.1.2.1 Sex of the Respondents
Table 6 Sex of the Resoondents Sex Number
Male 37
Female 23
Total 60
Source: Primary Data
Figure 6 Sex of the Respondents
40 ...,._ __________ _________ _,
35 -1------
30 -1---- --
25 -1------
20 -1------
15 -1------
10 -1------
5 ~ - ---
0 -1------
■ male
■ female
A large number of respondents are males compared to females. The
researcher chose males because it is a fact that worldwide men are the ones
who mostly likely are involved in investments. Females are considered to be
risk-averse and chose not to participate in capital markets. Therefore, most
ideas of capital markets would come from males.
22
4.1.2.2 Age of the Respondents
Table 7 A!!e of the Respondents
Age
Under 18
18-29
30-39
40-49
50-59
60-69
70-80
Above 80
Source: Primary Data
Figure 7 Age of the Respondents
25
20
15
10
5
0
-
I
-I:
-
-- -
',
- -
I I
Number
None
9
22
14
9
6
None
None
I □ Years of age I
-n I
In the research, people aged between 30 and 40 make the high
number of respondents.
23
The reason behind that is that they are easily available, and were not
reluctant to accept questionnaire and fill them. The researcher also chose
people of this class because they are in middle age where people at this
stage are becoming financially stable; they earn money and are ready to
take investment risks. They are still young enough to recover from
investment losses.
4.1.2.3 Occupation of the Respondents
The researcher classified respondents also according to their
occupation:
Table 8 OccunatIOn of the R espondents
OccuQation Number Percentage
Students 13 21.7%
Employed 22 39.6%
Self employed 16 26.7%
Retired 3 5.0%
No occupation 6 10.0%
Source: Primary Data
24
In numbers: Figure 8 Occupation of the Respondents
25
20
15
10
5
0 Students Employed
In percentage:
Figure 9 Occupation of the Respondents
Students 24%
No occupation
8%
Self employed
Retired
5%
25
Employed 31%
No occupation
Self
employed 32%
■ Occupation of Respondent sin
Large number of the respondents are employed, self-employed and
student. They were ease to access them from their work offices, their shops
or enterprises and in schools. They are also among the people who know
what is happening in the country as they contribute a lot in the economic
growth and development. However, some of the respondents had no
occupation and others are retired, and so the researcher got information
from all fields, in terms of occupation.
4.1.2.4 Education Level of the Respondents
T bl 9 Ed a e ucation eves o t e espon ents L I f h R d
Level of education Number
Uneducated 3
Primary 3
Secondary 4
Diploma 9
Undergraduate 16
Graduate 18
Postgraduate 7
Source: Primary Data
Figure 10 Education Levels of the Respondents
Postgraduate -----------+------+---- -
Graduate
Undergraduate
Diploma
Secondary
Primary
Uneducated
-+------+------+------+---------'I
0 5 10 15 20
26
Ill Level of education
A great number of respondents are educated at least beyond the
diploma level. This helped a lot as they have sufficient knowledge and can
give personal judgment on most problems presented to them. They helped in
analyzing the problem from the roots and gave contributions on what should
be done in order to overcome the challenges that the capital markets face.
4.1.2.5 Respondent's Awareness of CMA and USE
CMA Awareness
Table l O CMA awareness
Respondents aware
Respondents not aware
Source: Primary Data
Figure 11 CMA awareness
Respondents not aware
800/o
Number
12
48
27
Percentage
20%
80%
Respondents aware 200/o
USE Awareness
Table 11 USE awareness
Respondents aware
Respondents not aware
Source: Primary Data
Figure 12 USE awareness
Respondents not aware 35%
Number
39
21
Percentage
65%
35%
Respondents aware 65%
Respondents not aware of both USE and CMA were 7, the
percentage is 11.66%, of all the respondents. These people have no
knowledge and have never heard of either CMA or USE.
There is a bigger awareness of USE than there is of CMA among the
respondents. Most respondents know both bodies but could not establish a
clear relationship between the two.
What they ignored is that:
28
• The Capital Markets Authority is a government body, which performs
the duty of a regulator, hence is the overseer of the capital markets
industry in Uganda.
• The Uganda Securities Exchange is a private sector body regulated by
Capital Markets Authority. It is a private company limited by
guarantee, whose shareholders are brokers/dealers and investments
advisors.
However about 15% (less than 10 respondents) especially graduates and
postgraduates could establish a clear relationship between the two bodies.
4.1.2.6 sources of Awareness of CMA or USE
The respondents, who were aware at least CMA or USE, knew about
them from different resources as represented in the figure below:
Table 12 Sources of Awareness ofCMA and USE Source Number Percentage
Radio/TV 21 39.1%
Newspapers 13 25.1%
School 11 20.7%
Friends (mouth to mouth) 8 15.1%
Internet - 0.0%
Source: Primary Data
29
Figure 13 Sources of Awareness ofCMA and USE
Source, Mouthto-mouth,
15%
Source, School, 21%
Source, Internet, 0%
Source, Newspapers,
25%
Source, ---Radio/TV,
39%
Radio and television are the main sources that provide most
information on CMA and USE. The newspapers also provide a source of
information as radio and television but it is obvious that people watch TV and
listen to radio more than they read newspapers, especially the business news
section
Students also get chances to know about capital markets from lectures
they get from universities, colleges and high schools. One respondent was
from high school and have participated in the Inter-high School Capital
Markets Quiz Challenge.
30
4.1.2.7 Respondents' Participation in the Capital Markets.
The researcher wanted also to know whether among the respondents
are some who have bought/sold or currently own any security traded in USE.
The feedback was:
T bl 13 P f . f . th C "t I M k t a e ar 1cma 10n m e ap1 a ar e s. TJ'.Qe of resgondent Number
Never participated before 46
Bought shares 7
Source: Primary Data
Figure 14 Participation in the Capital Markets.
Participated in the
securities markets
13%
31
Percentage
86.8%
13.2%
Never Participated
before 87%
Most of the respondents have never bothered to participate before but
some of them admitted that they would like to in the future.
Table 14 TtRe of resgondent who:
Intend to buy shares/bonds
Are still undecided whether to buy or not
Do not trust bonds and stocks
Are less likely to buy stocks and bonds in
the future
Source: Primary Data
Figure 15
less likely to buy bonds and
stocks 170/o
Do not trust bonds and
stocks 210/o
Number
7
26
11
9
Percentage
13.2%
49.1%
20 .8 %
16.9%
Intends to buys shares
130/o
Undecided whether to bu·
or not 490/o
Despite the low awareness of capital markets and low willingness to
participate in security markets among the respondents, there are also those
who have information about the markets but are still lenient to buy stocks or
bonds.
The large number is for those who are still undecided whether to buy
bonds/stocks or not. They say that they are not sure of the benefits they will
32
get from them. They are risk-averse people in the fact that they do not want
to risk their money in shares and bonds but instead they choose to invest in
less risky properties such as cars, furniture, etc and save the rest in
commercial banks.
Some respondents, nevertheless, have the will to participate but they do
know how to go through it.
Only 8 respondents could name all companies whose financial
instruments are trade in USE, and have an understanding of instruments
such types of shares, bonds classification and commercial papers.
Among all respondents, only 1 person owns shares from outside of
Uganda. The person owns shares from NSE and the reason was that he
wanted to try to make diversification of his portfolio.
Almost 80% of respondents are risk-averse persons, and 38 of all
people admitted to be pessimist. It all goes with the risks attributed to
capital markets when it comes to invest insecurities themselves. Many people
have a negative image towards them because of little understanding of these
markets.
33
CHAPTER FIVE
5.1 SUMMARY. CONCLUSIONS AND RECOMMENDATIONS.
5.1.2 Conclusions: Summary of the Problems Facing the Capital
Markets Industry.
The capital markets industry faces many problems. During the interviews
conducted, the interviewer identified several problems facing the industry.
The main ones are the following:
1. Lack of awareness/ low level of awareness of the roles and activities of
capital markets industry.
2. Low confidence in capital markets due to past experience e.g. public
not getting returns from shares.
3. Weak corporate governance with some local companies.
4. Lack of savings and liquidity in Uganda.
5. Inadequate financial support from the government.
6. Lack of products on the market/ few products on the market.
7. The industry is still young/ skeptical.
8. Lack of incentives for listing.
9. Mistrust of companies and capital markets management.
10.Lack of Central Depository System (DPS).
11.High liquidity preference.
12.Most literature is too complex and only addressed to elites.
13.Slow rate of law reform
14.Inadequate funding
15.Few companies from private sector listed
16.Few professional practitioners
17.Lack of long-term investments
34
As it can be observed, the industry faces many problems. However no
initiative can address all problems simultaneously within the same period.
Additionally, some issues that are termed as problems may actually be
causes or effects of the main problems. Therefore, the players in the capital
markets industry need to identify the main problems present in order to
analyze and prioritize their causes as a first step towards identifying effective
solutions.
The problem tree is an effective tool of identification and analysis of
relevant causes of the main problems. As illustrated in the diagram, most of
the problems have interlinking causes:
P.T.O
35
Effect
Problem
Causes
Effects
Problems
Causes
Slow rate of law reforms.
Inadequate financial support from government.
Lack of awareness.
Most literature too complex.
Weak corporate governance with some local companies.
Few companies from private sector listed.
Lack/Few of products in the capital markets.
Lack of incentives for listing.
The industry is still young.
Source: CMA~---------~
- Low saving culture and Inability to trust liquidity in Uganda. - companies' and capital
market management.
Inadequate funding of --
36
awareness.
Fear of companies to open up to other shareholders.
Few professional practitioners.
s.1.2 Priority Problems and Causes
- People do not have the confidence to invest their money in capital
markets industry (mistrust of the industry).
Causes:
• This arises from institutions and individuals investors who have lost
money before. In this respect people have not yet gained enough
confidence in the operation of the capital markets industry. People do
not have the confidence to entrust their money in other people's hands
and in the industry.
• Many people are not aware of the operations of capital markets
industry.
- Lack of awareness about capital markets industry In Uganda.
Causes:
• Lack of to information about financial services to different parts of
Uganda.
• Low literacy levels and poor reading culture.
• Lack of independent analysts about the capital markets industry.
- Saving culture in the country characterized by preference for short
terms real estate investments.
Causes:
• Uncertainty about available options for savings. People tend to be
certain about what is at hand. This is linked to the macro economic
uncertainties such as high interest rates and political uncertainties.
• Low disposable income, which does not encourage saving.
• Tendency to prefer short-term to long-term investments. This due to
various reasons such as low income and being unsure of the long-term
37
markets.
• Due to lack of public confidence in the financial markets in general.
People in Uganda fear long-term investments in the financial sector
and instead rely on buying and owning other assets such as land,
houses and family business as a form of saving.
- Few products listed on the market.
Causes:
• The listing criteria are laborious. This scenario does not favor
competition with other investment sources, which have less laborious,
fast and low cost processes, compared to the listing criteria. As much
as it is important to safeguard the capital market, the process itself
contributes to limited participation.
• Lack of incentives combined with high Initial Public Offer (IPO) costs.
When a company goes public, there is no mechanism by which the
company can recover the costs involved in going public, including the
time spent, since IPO's are not taxable. Since companies are
rationally, an appraisal of the !PO costs to be incurred in the light of
the uncertainty of recovery time is likely to force them to look for
other alternatives.
• The capital markets industry is still young, thus potential issues feel
insecure. In addition, insurance companies have also not ventured yet
in this new industry. Further, underwriting has not been made
mandatory requirement for issuers.
• Uncertainty regarding macro economic and political stability, the basis
for a healthy interest rates regime.
• Low level of industrialization and a small and underdeveloped private
sector in the country.
• Lack of financial resources due to a thin financial sector.
38
5.2 RECOMMENDATIONS
The purpose of the research was to assess the problems, hindrances
and challenges faced by the capital markets, and to identify their causes. In
this chapter, the researcher is giving some recommendations, or some of
possible solutions that CMA and USE can use in order to overcome these
problems.
The recommendations given by the researcher are the following:
Increase the awareness among people by creating ways of communicating
to people by simplified material in local languages and use of visual media
channel. Terms such as share prices, equities and so on, should be clearly
defined. Although CMA and USE have produced booklets and brochures that
explain these terms, the continued lack of awareness of capital markets by
the public, especially outside Kampala, suggest that CMA and USE still need
to simplify the language used in these publications. Alternatively, the
messages can be disseminated through different communication channels
other than print material e.g. drama or video, and translated into local
languages that may have terms that are easy to understand. Use of visual
communication in local languages with storylines that can help the audience
relate capital markets to real life may be more effective than using mainly
print media. Currently, publications have only been translated in Luganda.
There is need to translate them into more local languages. Initially, the
industry can begin with one major language from each region.
Use of Testimonies. The capital markets industry should also make
testimonies from organizations and individuals that have benefited from
participating in capital markets. Research results suggest that many people
think that only the wealthy people with 'idle' money should participate in the
capital markets, and would like to see/hear testimonies or success stories of
people who have benefited from the market.
39
Move from awareness to education. CMA and USE should move towards
actively changing the attitudes and behaviors of the public in order to
address the problems facing the capital markets industry, such as lack of
saving culture, or capital markets not being seen as an investment choice by
the public. This means aggressive marketing by specifically USE, targeted at
behavioral change. The financial instruments floated on USE should be
promoted by making them relevant to Ugandans, both issuers and investors.
Opinion leaders such as Local Council leaders, religious leaders are some of
the groups of people that USE and CMA can use as source of information.
Initiate discussions with Ugandans business and private sector
organizations. Likewise, lessons learnt can be used to generate future
interest in the securities market, both for the company as an issuer or for the
owner/ chief executive officer as a private investor.
Enable high-income earners to invest in securities, especially investing
in government securities, either direct or indirect through mutual funds.
Since these individuals pay income tax, one can direct their interest to
securities through partly tax exempted investment in long-term mutual
retirement funds, which would not only change their savings habits, but also
increase competition in the pension fund sector by reducing the monopoly of
National Social Security Service fund (NSSF).
Contact several companies that expressed their interest in the
securities market. This may be an opportunity to discuss with interested
counterparts views on company and tax laws, auditing rules affecting listed
companies, the advantages and disadvantages of being listed on a stock
exchange. Eventually, new members should be introduced to the market.
Encourage government to continue privatization through public
floatation, which is still the most realistic sources of companies that will list
on the stock exchange. Encourage also listing of government securities and a
40
government market for private investors as the stock exchange, this will
expose the exchange to the public and, at the same time, may give the
broker community an opportunity for high profitability and incentives to
improve profession competence.
5.3 LIMITATIONS OF THE STUDY
The project was conducted successfully, but the researcher had little
difficulties during the research. Some of the limitations were:
Communication barrier as most of Ugandans speak their local
languages thus the researcher had to use English, which was
unfamiliar to some people.
Financial resources also made it difficult for the researcher to cover
a bigger scope of Uganda. For instance, the researcher focused
mainly in Kampala.
Some respondents claimed ignorance of capital markets and said
that they needed not to be sensitized and that to them it would
have been a waste of time.
41
BIBLIOGRAPHY
Books
1) Andrew Bohnstedt, Alfred Hanning, Ralph P. Ondendall, Capital
Markets Development in Uganda: Private Opinion,
2) Andrew Chisholm, An Introduction to Capital Markets: Products,
Strategies and Participants.
3) Emmanuel BURINGURIZA, Johan HYLTENSTAM, Capital Market
Development in Uganda- Statistical Profile of the Securities Market,
FSD Series no. 10.
4) M.J ELLYNE, A review of Uganda's Structural Adjustment Programme.
5) MUMBA S. KAMPUMP, Capital Markets: The Journal For Capital Markets
Industry, Investor Protection in Zambian Securities Markets
6) Sheila Karungi MAGYENGE, Trade and Economic Development in
Uganda, published by The Guide Magazine.
7) Zeph Metro Nwaye ELEH, Know Your Capital Markets Inside Out, Dec
2004.
Journals
1) Capital Markets Journals.
2) Capital Markets Disclosure. Interim Report, July 1999.
websites
1) www.cmauganda.co.ug
2) www.investorword.com
42
QUESTIQNNAIRESFOR COMPANIES.
Your company has been selected by the researcher as one of the beneficiaries and participants in the financial markets. Please answer the following questions carefully and help us get information on the performance of Capital Markets in relation with investors.
BASIC INFORMATION
Company Name ................................................................................................ .
Contact detail: Telephone ................................................ . Fax ............................................................ . Email ........................................................ . Website .................................................... . Name of the respondent:
Position of the respondent:
Age: ................................................. Sex: ..................................................... .
Type of business (e.g. manufacturing edible oil, bank, brewing, etc.)
Questionl Have you participated in the securities markets (i.e. bought or sold shares, Treasury Bills, Bonds, etc.)? Please tick (v) where applicable:
Yes ( ... ) No ( ... )
If Yes, go tom question 2 and follow through to the end skipping Question 4 a. only. If No, please go directly to Question 4 a. and follow through to the end.
1
Question 2 What proportions of your current investment is in?
Current investment Proportion(%) Shares Treasurv Bills Bonds Others (please specify) Total
Question 3 Please indicate, in the Table below, the estimated proportions of your current investments by issuer of securities:
Cateaorv of issuers Prooortion (%) Government/ BOU Treasury Bills PTA bonds Uaanda Clays British American Tobacco East African Breweries Limited Kenya Airways DFCU BARODA East African Jubilee NVL Total
If you have participated in the securities markets already, please skip Question 4 a. and proceed with question 4 b.
Question 4
a. Given the relativity "higher returns on investments and tower cost of capital" in the securities market than from for example, savings account at commercial bank, would you consider participating in the securities market in the future? Please tick (v') where applicable:
Yes ( ... ) No ( ... )
If Yes, go to question 4 b. and follow through. If No, please go to question 4 f. and stop.
b. Is your company willing to issue securities on the market?
2
Please tick (v) where applicable: Yes ( ... ) No ( ... )
c. If Yes, please indicate the period, from now, when you intend to issue by ticking (v') where applicable:
Period in Years v' 1 2 3 4 5
10 Other olease soecifv
d. With the improving performance of the securities markets (increasing activity, the likely increase in yields on investment and lowering of cost of capital), what would you envisage as your future issuance of preferences, by category, in the security market?
Please rank the options by indicating: 1. for your 1st choice. 2. for your 2nd choice. 3. for your 3rd choice.
Shares Bonds
( ... ) ( ... )
Other financial instruments ( ... ) Please specify the type of investment.
e. What proportions (percentage) of your future investment will be in?
Title of investment Prooortion (%) Shares Treasurv Bills Bonds Others (Please specify) Total
3
f. Please give reasons why you would not want to participate in the securities markets:
Question 5 With improving performance of financial markets (increasing activities, the likely increase in yields on investments and lowering of cost of capital), what would you envisage as you are your future investment preference by issuer of the security?
Please rank the options by indicating: 1. for your 1st choice. 2. for your 2nd choice. 3. for your 3rd choice.
Government Private sector Foreign securities
( ... ) ( ... ) ( ... )
Others ( ... ) Please specify the type of security.
4
What proportions (percentage) of your future investment will be from the following issuers?
Title of investment Proportion(%) Private sector e.a. UCL. BAT Government Treasury Bills Foreign securities and Cross listinqs Others (Please soecify) Total
Question 6
Finally, please give us your personal comment/ opinion/ criticisms on:
Capital Markets in Uganda
Its performances.
Its challenges and difficulties
Its benefits and advantages.
You may write as much as you want
5
QUESTIONNAIRE FOR INVESTORS
NAME: .......................................................................................................... .
SEX: ............................................................................................................. .
Marital status: ........................................................................................... .
Address: ...................................................................................................... .
Email: .......................................................................................................... .
Telephone: ................................................................................................. .
Age (please tick in the box where you belong):
!Under 18 I j1s-29j J3o-39I 140-49!
1so-sg I l6o-69j j7o-soj !above sol
1. Which of the following is your occupation:
a) Employed
b) Self employed
c) Student
d) Retired
e) No occupation
2. Please indicate by ticking the level of your education:
a) None f) Graduate
b) Primary g) Postgraduate
c) Secondary
d) Diploma
e) Undergraduate
1
3. Do you know about;
• CMA?
• USE?
a) Yes
b) No
4. If yes, please briefly explain how you understand them, by telling the
relationship they have, if any.
5. How did you know about CMA and USE?
a) Newspapers
b) Radio/ TV
c) Internet
d) School
e) Other (specify)
6. Have you ever sold/ bought or currently own securities?
a) Yes
b) No
i.If yes, specify which one(s)
ii.If no, describe why not.
7. Concerning securities, please indicate by ticking whether you:
a) intend to buy shares/ bond
b) are still undecided whether to buy or not
c) don't trust bonds and stocks
d) are less likely to buy stock and bonds in the near future
2
8. Do you actually own shares in international stock exchanges such as:
NSE, DSE, NYSE, LSE, JSEW, or NASDAQ?
a) Yes
b) No
i.If yes, briefly tell in which one(s), and why.
9. Finally, as a person with a modest or excellent business mind, how
would you plausibly describe yourself, given any exposure s to risk
(business risk, default)?
a) Risk averse
b) Risk taker
c) Optimistic
d) Pessimistic
3
QUESTIONNAIRE FOR CAPITAL MARKETS STA.ff
This is a kind of interview or discussion and will be based on the following
questions:
1. What are capital markets?
2. What are the benefits and advantages of capital markets to:
- the individuals?
- the nation as a whole?
3. What are the problems and the challenges that the capital markets
encounter? What may be their causes as well as their effects?
4. What measures that can be taken in order to resolve these problems
and eliminate those challenges
