Last week shares in power distribution company Umeme went on sale.
The company will raise sh170b by selling 38% or 622 million
shares to the public in an initial public offering that will last till November
7. The shares will then be listed on the Uganda Securities Exchange (USE). Each
share costs sh275 and Umeme threw in a further sweetener, pledging a bonus
share for every ten shares bought.
This brings to eight the number of local companies listed on
USE and to 13 the total number of companies listed on the USE.
Umeme, which is wholly owned by the UK Private equity firm
Actis, has been running the distribution arm of the Uganda electricity Board
(UEB) since 1995. UEB was broken up into
its generation, transmission and distribution components in order to facilitate
its privatization.
What makes the Umeme privatization unique from those that
have come before is that it owns the business of distribution of power but government
owns the assets. Its safe to say government leased the assets – the buildings,
power stations and distribution grid to Umeme. The government is paid an annual
fee by Umeme for the right to do the business and at the end of the 20 year
concession the assets and business will revert to government.
So shareholders will be buying a share in the concession,
which may or may not be renewed when it expires in 13 years’ time.
"It is reasonable to expect that investors will make back their money and more in this period as more power is generated, Umeme improves its capacity to distribute this power around the country and maintains its profitability...
Most of us sell our labour at our jobs or working in our
businesses to earn a living. Before one can think of accumulating wealth you
have to have an income. Once you have one the challenge is how you earn more
for your labour.
You can either work longer or get a better job. But because
you are one person there is a limit to how much you can earn. If you could be
in more than one place at once arguably you can multiply your earning power to
the extent that you can replicate yourself.
Since self-replication is out of the question the next best
thing is to have your money work for you.
Investing on the stock market is a useful tool to help
anybody have their money work for them.
In buying shares you are deploying your money to make you
more money. Of course like with any investment there are risks of loss, but
these can be mitigated through knowledge and experience.
The advantage of shares over other traditional investments
is that you don’t need a lot of money to begin with, so the cost of entry into
these kind of investments is low.
One other advantage is that you are buying into a going
concern. In setting up a business there is a steep learning curve, which costs
money. But in buying into an established business this “pain” can be avoided.
One will be buying into a tested business model, management and systems.
On a more general note, offering shares in the previously state owned companies widens the net of the asset owning class which has far reaching consequences for national stability and the growth of democracy.
National stability is not guaranteed by national armies and
security agencies but by narrower wealth disparities in a society. Asset owners
tend to resort to more civil ways of resolving conflicts than the poor, who
have nothing to lose and therefore violence and its attendant destruction does
not bother them.
By its nature an investment takes a while to mature, the
mentality of a nation of investors is very different from that of a nation of
consumers – and a safer place to live in too.
