Uganda opens alternative market for smaller firms

The Uganda Securities Exchange ( is seeking innovative steps to make its market more relevant to the development needs of the local economy by relaxing listing rules to allow smaller and medium-size enterprises.

According to local media, Simon Rutega, USE Chief Executive Officer, told a workshop on the new rules that the exchange would cut eligibility requirements but maintain governance and reporting rules: “It is very important that while we relax some requirements, we maintain the corporate governance rules and audited accounts to give prospective investors comfort that it is a good investment,” he is reported to have said.

The USE had conducted a study with UMACIS Consulting to understand why local companies had not taken advantage of the alternative investment market listing rules that have been in place since 1993. The alternative investment market is aimed at institutional investors and high-value retail investors (termed “sophisticated investors”) to buy a stake, unlike with the main market which is open to the general public.

According to the reports, the alternative market listing rules require companies to have issued and paid-up capital of at least UgSh200m ($107,000) and net assets valued at UgSh400m. Compared to the main board requirement of 5 years of audited accounts, smaller companies need 2 years. The companies need a minimum 100 shareholders. Senior management should be qualified and have no criminal record.

Out of 41 companies that participated in the study, apparently 7 expressed interest to list and Mr Rutega reportedly says: “If we can get one or two to list next year, that will be good.” The bourse will give training and technical expertise to the identified firms

The study found that smaller companies feared listing would erode family control and their eventual survival. The report says this is based on the misconception that sustaining family control is the most efficient way of assuring enterprise growth and expansion beyond the lifetime of the founding entrepreneur. One of the biggest challenges for small and medium enterprises is that they do not follow good governance practices, the study found. There is often no clear separation between the role of the board chairman and the managing director, one of the USE’s listing criteria.

The study apparently recommended the participation of institutional investors as key to kick-starting this alternative market segment, noting that: “Uganda’s institutional investors are still risk-averse and have tended to limit their financing to low-risk activities such as real estate.”


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