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A G E N T
African economies, Uganda lacks companies of sufficient size to
be interested in equity rather than bank finance, and so provide
a constant stream of IPOs for domestic and foreign capital to
devour and trade. The all-stock index has declined gently for the
last 12 months. Oil, which was first discovered in commercial
quantities in Uganda as long ago as 2006, has yet to leave the
ground, while the government squabbles with its three devel-
opment partners. Last year, foreign investors already squeamish
about emerging market risk ran out of patience. Turnover on the
USE shrank so fast that one day saw no trades at all.
B A N K S
I N
F R O N T I E R
M A R K E T S ]
asset-servicing and even settlements, which are processed via
the Central Share Depository (CSD), which has functioned as a
department of the LuSE since its foundation in 1996. The bank’s
highest category score is for relationship management, at a very
respectable 5.24.
Standard Chartered Bank
This is not the largest securities market served by the Standard
Chartered Bank local custody and clearing network. In fact, it
is not a large market for the bank as a whole (its retail network
here consists of just eight branches) but there are few where
inbound investors are harder to find at the moment.
Standard Bank
Stanbic Bank Uganda, which is listed on the USE, has a much
larger presence here than its international rival (there are also
three local custodian banks that participate in the Securities
Central Depository (SCD), the USE-owned central securities
depository). That country-wide reach stems from the acquisition
in 2002 of the Uganda Commercial Bank, which gave Standard
Bank of South Africa control of the largest retail network in the
country. It leaves the bank well-placed for economic lift-off.
ZAMBIA
The growth of the Zambian economy is driven by a combina-
tion of copper prices and agricultural output but constrained by
stubbornly high levels of government debt and persistent levels
of official corruption. So it has followed an extraordinarily vol-
atile path over the last 30 years. That is unlikely to change. An
effort five years ago to increase liquidity through an Alternative
Market for smaller companies met limited success. The recent
decision by the Bank of Zambia to authorise secondary trading
of government bonds on its systems might boost liquidity in that
market at least.
Standard Chartered Bank
Standard Chartered top-scored here in 2018 and does so again
this year. While the overall outcome is respectable rather than
outstanding (5.19), the bank is clearly performing the basics to
a high standard. Accounts can be opened easily, trades settle on
time, assets are kept safe and serviced, and the fees charged are
regarded as reasonable, though they could definitely be lower.
It is on the human side of the business that SCB falls short:
respondents want better client service. But it is hard to invest in
people when a typical day on the Lusaka Securities Exchange
(LuSE) might see only a handful or two of trades.
Standard Bank
The other custodian bank that works with investors active on
the LuSE – which lists a grand total of 25 stocks – has experi-
enced a modest deterioration in its overall score this year. Pric-
ing in particular has emerged as an issue, but the numbers point
to concerns about paper-heavy account-opening procedures,
ZIMBABWE
The Zimbabwe Stock Exchange (ZSE) has had a difficult spell
since the highs of October 2018, when investors fled yet again
the illiquidity in the currency market – created by government
borrowing from the banking system – by switching to stocks.
This repeated flight to equities dates back to the hyper-inflation-
ary policies of the Mugabe government. The end of the Mugabe
era encouraged hopes that the country can restore its wrecked
infrastructure and ruined agriculture, lure tourists back and
attract foreign direct investment. But they are so far disappoint-
ed. The official debt burden is massive and sanctions remain in
place on key individuals as the new government struggles to per-
suade its creditors that it is serious about reform. That said, the
ZSE, which has embarked on a series of sweeping changes in the
last few years. It has demutualised, switched from open outcry
to online trading, started to list debt as well as equity securities,
set up a data vending arm and is now exploring the scope to list
ETFs and open an alternative market for smaller companies.
Standard Chartered Bank
Standard Chartered Bank (SCB) re-entered Zimbabwe as a cus-
todian in 2010, when it acquired the African custody business of
Barclays Bank. At the time, the economy was stabilising after the
period of hyper-inflation and the dollarisation of the economy,
the commodity price bubble had yet to burst, and the Zimbabwe
Stock Exchange (ZSE) had reopened after the crisis of 2008-
09. Nearly a decade later, the structural damage inflicted by the
Mugabe years is better understood, and SCB is not inundated with
responses from clients actively investing in Zimbabwean stocks.
Standard Bank
Stanbic secures a more or less unchanged verdict in Harare
on a handful of responses, too few on which to base a reliable
assessment.
Spring 2019
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