As we rise up the hill, the boda boda driver is caught off-guard by the affluence on display. “But, in my seeing, Kololo is better than Muyenga,” he says (his stage is in Bukasa, down the hill from Muyenga). I agree, and start listing what I think are the most affluent neighbourhoods in Kampala – and by extension, Uganda. I am still listing when I see a sign on a gate on the right side of the road announcing my destination. It is ALTX East Africa’s offices on Mackenzie Vale Road.
I am here a day after the new securities exchange opened its platform for trading. It is Uganda’s country’s second stock exchange; the first, the Uganda Securities Exchange, started operating in 1997. Few people are as well versed about capital markets in Uganda as is the man I am here to see, Joseph Kitamirike. Between 2010 and 2013, he was CEO at USE. When he left, he co-founded ALTX Africa Group, ALTX East Africa’s parent company. He is currently ALTX East Africa’s CEO.
Read More: Newest stock exchange starts trading
Kitamirike comes down the steps from an upper floor, turned out in business casual attire: white checked shirt, navy blue khaki trousers, black shoes. He inquires about the boardroom, but the receptionist says it is taken. So he decides we proceed where we are, in the reception area; not that I care – the leather sofas are very comfortable.
My immediate impression of Kitamirike when we first met, at the CEO Summit in August, was his laid-back but self-assured demeanour. Then, he seemed a bit miffed that I was blocking his exit and peppering him with questions about the exchange. He answered all of them, still. When I called two weeks later, with more questions, he was travelling and suggested meeting in person so he could answer them to my satisfaction.
An engineer by training (he also has an MBA from the University of Connecticut), Kitamirike has held several top managerial jobs in the government. He turned National Housing and Construction Company into a profitable enterprise when he was its CEO, leaving it with projects worth $250 million. Prior, he was a Commissioner of Industry and Technology in the Ministry of Tourism, Trade and Industry, and a financial analyst at the Uganda Development Bank. After NHCC he went to the USE. He was also a finalist in interviews to replace Richard Byarugaba as managing director of the National Social Security Fund in 2014; Byarugaba was reappointed to the position.
I raise his USE tenure, especially the circumstances surrounding his exit. Is it true, as some in the press said, that the exchange’s board had refused to renew his contract, particularly because he had refused to appease a faction in the body? “I was not ousted,” he says. “My contract run out, and I did not renew it.
“I don’t know, I work a certain way, so I believe it’s possible to build great companies in our region,” he goes on. “I believe we have the people with the skills and the capability to do great things. But I get impatient when others don’t pick up that belief quickly.” He then moves to the exchange. “The people we have at ALTX are globally competent; they can work anywhere. Okay? And this is why we managed to do what we have done. So, we have got to have belief, we have got to have belief: I think that is the primary thing.”
A question I have been seeking an answer to since I heard about the exchange, and which got me invited for a more detailed conversation, is why he thought this was the right time to open a new stock exchange. There are only eight listed local companies twenty years after the USE launched; four of those are former parastatals that listed as part of government’s divestiture program. Some stocks are dormant for long periods, and share prices are static. And Kenya, with its deeper economy and more active securities market, has only one exchange.
ALTX, he says, wants to provide capital to entrepreneurs, of which there are many in Uganda. “We have a handful of really wealthy people. And then we have another lot of people who are aspiring to be middle class. Some are middle class, others are aspiring to be middle class. I think most of the people in that area are probably aspiring to be true middle class. And then we have lots of people who are at the bottom of the pyramid, so to speak. A very large population.
“We are not a very wealthy country. Some do have investment opportunities, others don’t. We are fairly entrepreneurial as a country, but the survival rate of those businesses is very low, of entrepreneurial businesses. It is terrible. The biggest reason is capital.”
The companies said to be asking for government help to sort out their debt obligations would not be where they are if they had capital, he says. “What an exchange does, what an exchange introduces to a market like ours, is a different type of capital.” That type of capital would be a lifesaver in an economy like Uganda’s, where bank loans are expensive. “You have capital that comes from the owners, the founders can put capital together, then you have capital that comes from banks. That’s becomes very expensive of late, in recent years, and companies are actually folding because of that problem of expensive capital.”
So, what is the link between ALTX and the lower middle class entrepreneur whose business needs capital? We don’t dwell too much on it, and I don’t press. We move on to what ALTX is offering. “We list an asset backed security called a depository receipt. It is backed by what the government sells, by assets in the treasury market.”
There are no immediate plans to list a company on the exchange. And it is not for lack of trying. ALTX approached several companies about the possibility, Kitamirike says, but came away thinking it would not work. “Between their readiness to list and our preparedness to take on a listing, there was still quite a bit to negotiate. So we are coming to the market with a different kind of instrument that is not particularly tied to a company and then we shall move in to the company markets.”
Still, if they got the right company, they are ready to list. “If there is somebody who wants to get listed, we are ready to list even now. We are as good as any you will find in the world. Fairly advanced and very accessible.”
I point out that neighbouring Kenya has over 64 companies listed; how is it that Uganda has failed to list more companies, especially privately owned entities? The Nairobi Securities Exchange has existed for 62 years, he says, which justifies the number of listings it has. Uganda’s securities markets go back to the 1990’s, and ALTX is just three years.
But there’s more. “It’s just that companies, most of the companies that are high potential in Uganda that we see, are caught up in a situation where there are commitments to high cost capital that I talked about. So they are not in a situation where they can decide to change the type of capital they have on the balance sheet because they have commitments to banks that are quire onerous. So a lot has to happen in Uganda for us to start a wave of listings. One the things that has to happen is probably a change in the level of interest rates so that the debt burden can begin to reduce. It is only then that they will begin to see new capital as being favourable.”
He says ALTX plans to set up other exchanges across the continent. It was conceived as a pan African company, and is registered in Mauritius. They choose Uganda first because it is their home – the other co-founder, Jatin Jivram, is also Ugandan – and it is the market they knew best.
Regardless of Uganda being home, and his relative knowledge of the capital markets scene, setting up was not easy. Bureaucratic hurdles delayed their start which he says was expensive for the project. Their most testing year was 2015. “We spent a long time waiting for the regulator to give us the approval. It was a very uncertain period yet we were fully invested.
“So, it can be tough if you work in a regulated environment and you are not getting what you thought you would be getting. But the regulator has to do its work. That was a difficult time. But we have overcome all of that. It has been a joy setting up the IT, setting up the systems, fantastic. To see that we are the fastest exchange in Africa, trading on T+0. The second exchange will probably be in South Africa in about two weeks, it will also trade on T+0. There will probably be a third exchange somewhere in Southern Africa also trading on T+0. So, we are the first. We (Uganda) also wanted to hoist that flag.”
Now that he’s switched roles, from government technocrat and executive to business person, he is more aware of regulatory hurdles. “These are difficult things. We talk about, ease of doing business, regulatory framework, but once you are in a process like this you experience the difficulty that many other people might experience trying to set up a business in Uganda. And it was good for us to experience it, in the comfort of home so that when we go to other countries we know the limit of how much we can complain.”
Even then, he excuses the Capital Markets Authority. It had only licenced one exchange before, twenty years ago, in a much different economic and technical environment. Most of the people working with the authority did not know what it was like to authorise and activate an exchange, especially one as advanced as ALTX. If anything, ALTX must have been a “headache” to CME, he says.
I ask about their experience as an active exchange. But he dismisses my question as “premature” because the platform was opened the previous day. “But you have a sign up button for people to open accounts.” I continue: “what has the interest in that been like?” He says he was answering questions about the exchange just before coming down to see me. “We like the response, the response to our website, to our activities. I think it is a very good response. And there are securities listed on offer, so those who are ready can begin to participate. We are at the beginning of this pipeline. And at the beginning of the race I cannot tell you how it will go.”