Keith Kalyegira’s chieftaincy at CMA: a hit or a miss?

In this neck of the woods, you almost certainly never hear of bosses willingly honour their work contracts after they expire.

Instead, they run all sorts of charades to extend them. Not Keith Kalyegira, the departing CEO of Capital Markets Authority [CMA], who is observing his decade-long contract that has come to an end after he was appointed chief executive of the regulator in November 2013.

At the most basic level, the chief’s masterly conduct in being faithful to his contract communicates competency. Kalyegira’s capability at CMA can best be described by what he has been able to accomplish in the decade he has manned it. This comes with a caveat as the outgoing bossman leaves when many players in the industry expected more.

Like in his decade-long tenure, only two companies, MTN and Cipla Quality Chemicals Industries Limited, have been listed on the equities market on December 6, 2021 for MTN, and September 17, 2018 for Cipla QCI Limited.

Coercion can be cited in MTN’s listing on the Uganda Securities Exchange [USE] as it was a set condition for the renewal of its telecommunications licence. This denotes the general lack of interest, and ignorance of the significance of a stock market for corporations.

Kalyegira should have found more creative ways of indulging corporations to go public, such as creating noise around the impact of the USE. Andrew Muhimbise, a private fund manager and an analyst of Uganda’s capital markets, said: “In as regards protecting investors, which is CMA’s mandate, he continued where his predecessor Japheth Katto left off – both facilitating and many a times defending flouting of good corporate governance by listed companies.”

Muhimbise added, “CMA’s major failings under his tenure was the incomplete listings of Cipla (two per cent or four per cent not listed originally) and MTN (seven per cent Initial Public Officer undersubscribed). Both these companies have not fulfilled listing requirement of 20 per cent even after as a prerequisite of listing timelines were agreed upon.”

There has been a 24 per cent drop in market capitalization of the USE to Shs 17.67 trillion [~$4.9 billion] in June 2023 from Shs 23.16 trillion [~$6.4 billion] in the year Kalyegira took office in 2013/14. To put it into perspective, Kenya’s stock exchange — Nairobi stock exchange’s market capitalization at the end of June 2023 was $12 billion.

The drop in total value of traded shares on USE has been attributed to a dip in market capitalization of cross-listed counters: East African Breweries Limited [EABL], Kenya Airways [KA], Kenya Commercial Bank [KCB], Centum Investment Company Limited [CENT]; the suspension of companies like Uchumi supermarket, which at the time of exit from the USE had nine shareholders after eight years of being cross-listed on Uganda’s stock market.

Not to mention the fall in value of shares of locally listed companies like DFCU bank. In general, in the last decade, the equities market has stayed dormant, contributing a pitiable 3.3 per cent to the Shs 3.89 trillion [$1,084 million] assets under management [AUM] as of the last published financial reports of CMA for the financial year 2021/22.

The lion’s share of the authority’s financial securities [75 per cent] is in government bonds. In the second quarter of 2023, Bank of Uganda issued Shs 2.4 trillion [$669.5 million] worth of treasury bills and bonds. This means that the livelihood of capital markets in Uganda is not corporation expansion; rather, it’s government borrowing.

It’s a bad look when bonds are the most lucrative securities in a country because it means the country is a hotbed of inflation as bond yields rates are highest when inflation is high. For instance, at the end of June 2023, yields for the two-year bond were 13.5 per cent, three-year bond 14 per cent, five-year bond 14.8 per cent, and 20-year bond 16.3 per cent.

This is astronomical when compared to yields of USA bonds: two-year 4.7 per cent, three-year 4.45 per cent, five-year 4.13 per cent, and 20-year 4.369 per cent. The yields of USA bonds are lower because at the end of July, the inflation rate in the USA was at three per cent. Inflation eats into profits of companies, making Uganda unattractive for foreign investors.

On the contrary, in times of inflation, the stock market is the best place to invest, as share prices rise since there is enough money in circulation for people to spend and invest. However, investment in Uganda’s equity market remains lukewarm.

As he exits, Kalyegira has left many ideas where he found them — on paper. In 2013, the year Kalyegira took office, CMA took a feasibility study on real estate investment trusts [REITs], exchange traded funds [ETFs], and financial derivatives because as the November 2013 report put it, “market players had expressed interest…”

To this day, none of the mentioned products has come into being. And yet they would boost the markets; for instance, financial derivatives would push the currency/ forex market because futures and options would make it possible to trade currencies.

Geofrey Onegi Obel, the former chairman of the Uganda Securities Exchange, says it would be harsh to blame the CMA for the current performance of the market.

“Uganda’s financial services sector is very shallow…” he said. said, adding “CMA functions according to fiscal and monetary policy, and CMA hasn’t been able to open those doors.”

Obel explained that “infrastructure bonds attract domestic investors. NSSF is investing in Kenya infrastructure bonds because we don’t have them here. Policy has suffered because the government prefers trade sales to boost the domestic investment market.”

Kalyegira, an alumnus of one of the most coveted MBAs globally from the University of Cape Town, failed to make Uganda Commodities Exchange operational let alone integrate it with USE. The only transformation the quasi-exchange underwent during his decade-long stewardship was a name change from Uganda Commodities Exchange to Uganda National Commodity Exchange Limited.

To date, the CMA has not integrated economics and data analytics into its core mission, save for yearly reports. This has deprived prospective investors of information they would need to make fast, and better business decisions.

A quick look at the publications section of CMA’s website brings up: “Oops…Page Not Found,” while the market commentary section was last updated more than three years ago on May 4, 2020!

That said, Kalyegira’s superintendency has not been without wins under his watch. Assets under management have gone up from Shs 997 billion [~$277.7 million] in his first year as CEO to Shs 3.89 trillion [$1,084 million] in the last released financial report of 2021/22, symbolizing a 390 per cent gain.

Likewise, the number of market intermediaries, and investment vehicles has remarkably gone up. Brokers/dealers, investment advisors, fund managers, unit trusts, and the golden goose of them all — collective investment schemes [CIS] that registered $530.2 million at the end of June representing 1.14 per cent of Uganda’s GDP took off under Kalyegira.

It is during Kalyegira’s administration of CMA that CIS have been made popular owing to CMA’s public education strategy of sharing knowledge on them, addressing their bottlenecks and their best practices.

Kalyegira’s spell as chief executive hasn’t been as lustrous as his credentials. This places the onus on CMA’s Board to step up to the plate in the ongoing recruitment of a chief executive by recommending a more cerebral successor to the appointing authority. One who will make the capital markets visible; and they don’t have to be an ivy leaguer because those come highly recommended only to flake off almost immediately.

kimaona@yahoo.com