Let me be clear. Uganda certainly has its problems. Kony is one. Corruption, AIDS, and an increasingly dictatorial president are others.
But Uganda also has some things going for it that could make it attractive to frontier investors.
- The country is situated on billions of barrels of oil, which will eventually be brought to market. If this is managed equitably, it would be a huge boon to the nation’s economy.
- Less than 20% of the nation’s citizens have access to electricity and blackouts are commonplace, but the commissioning of new power plants should allow Uganda to get ahead of its surging energy demand.
- Recent reforms to property registration laws have made it easier than ever to do business in the country.
These factors are part of the reason that the IMF forecasts a 5.5% economic growth rate for Uganda in 2012.
So, what steps must investors take if they’d like to buy shares on this fast-growing country’s stock market?
I found two brokers to be particularly helpful and responsive when I asked them if they catered to foreign investors and, if so, how much they required in order to open an account. Both also maintain informative, English-language websites.
- African Alliance Uganda – African Alliance owns brokerage houses on most African exchanges. They produce top-notch research, and I can testify to the professionalism and expertise of their staff.
- Crested Stocks & Securities – Crested Securities is a local Ugandan broker that places a strong emphasis on investor education. They brokered my trades on the USE during my time co-managing the Kivuno Africa Fund.
Commissions and fees are fixed by the Ugandan Capital Markets Authority at 2.1% of trade value for all transactions less than UGS200 million (roughly $80,000).
Opening a Ugandan Brokerage Account
Now let’s walk through the process of opening an account and buying your first shares.
Step 1: Complete the Broker’s Account Opening Form
The account opening form (aka the “Know Your Client” or KYC Form) typically requires disclosure of your passport number or other ID number, your address, and banking details. Here is a sample from African Alliance Uganda.
Note that some brokers may ask that you submit a canceled check in order to verify your bank details.
Step 2: Complete the Securities Central Depository (SCD) Application in Triplicate
Like Botswana, Ghana, and Kenya, Uganda holds all shares of listed companies in a central depository in order to facilitate speedy, efficient trading. So before executing any trades on the Uganda Securities Exchange, prospective investors must apply for an SCD account that will track all of their holdings in the country.
The straightforward application form must be completed in triplicate and all three copies must be notarized.
Step 3: Attach a Color Passport-Sized Photo of Yourself to Each Completed SCD Application
Step 4: Provide a Photocopy of Your Driver’s License or Passport
The photocopy must be notarized.
Step 5. Send the Original Signed, Notarized Documentation and Passport Photos to Your Broker via DHL or FedEx
You may email photocopies of all documents to your broker to get a head start on the account opening process, but they must eventually receive the original documentation. And do yourself a favor by sending it via a courier like DHL or FedEx. Couriers are expensive, but the Ugandan postal service is simply not reliable. I’ve learned that the hard way.
Step 6. Wire Funds to Your Brokerage Account
After opening your trading account, your broker will provide you with its bank details so that you can fund your account. The most efficient way to do this is via wire transfer. If you haven’t sent an international wire before, I suggest that you take your broker’s bank details to your local bank branch and ask them to walk you through the process. They’ll make sure that your funds arrive securely. Note that most US banks charge about $25 for outgoing international wires.
Step 7. Submit a Trade Order
You’ve done your research and found a stock that you’d like to buy. What now?
While some brokers will request a signed trade mandate form, for most brokers, all you need to do is send an email to your broker with your trade instructions. Keep in mind that some shares on the Uganda Securities Exchange are rather illiquid, so I advise specifying a limit price for all of your orders. This will help you avoid paying significantly more for your shares than you had intended to pay.
Your broker will then execute your trade and send you a contract note that specifies the buy or sell price, commissions, and fees. Settlement of share trades takes five days on the Uganda Securities Exchange, so if you’ve sold shares, don’t expect to receive the proceeds of a sale before then unless you’re willing to incur a penalty to settle the trade more quickly.
A Note on Dividends
Collecting dividends from Ugandan stocks requires a bit of extra paperwork. You must contact the share registrar of the company you’ve invested in, and ask them to endorse your dividend checks to your broker. You will then notify your broker of this arrangement. The broker may then request that you fill out an indemnity form that will allow them to deposit your dividends directly into your trading account. This is kind of a hassle, but it sure beats trying to cash a check denominated in Uganda shillings at your local Wells Fargo branch!
That’s it! Follow these steps and you’re a Uganda investor.
The process of opening a foreign brokerage account can be confusing. If you found this walk-thru to be clear as mud, please don’t be shy. Post your questions in the comments, and I’ll do my best to get answers for them.