Financial crisis pushes Uganda's NIC to delay listing

Special Report:Global Financial Crisis

KAMPALA, Dec. 18 (Chinese media) -- Uganda's National Insurance Company (NIC) has deferred the initial public offering (IPO) to next year citing the global financial crisis as one of the major adversaries.

This development offers anxious Ugandans no option other than waiting until the first quarter of 2009 before they can have the opportunity to own stakes in the company.

Remi Olowude, the chairman of NIC, was quoted by Daily Monitor on Thursday saying that the IPO was on course and its preparatory work has been concluded by MBEA Brokerage Services, the transaction advisors and consultants.

"However, it is the view of the advisers that the IPO be delayed until the first quarter of 2009 for a number of reasons, especially the global credit crisis which would more than likely have adverse effects on the offer," said Olowude.

The global credit crisis, which was triggered off by the collapse of the housing industry in America, has mopped up investor confidence in world stock markets, even here in Uganda.

As a result, it is estimated that 50 trillion U.S. dollars in wealth has been wiped off global stock markets in the last one year, and many investors haven't come to terms with the magnitude of wealth lost.

The fear of holding an IPO in such a depressed environment may not make NIC attractive for many investors and could result into an under-subscription like Kenya's recent Cooperative Bank IPO.

However, the extension also gives a chance to citizens to save more money to invest in the offering after a year of high costs.

NIC's IPO was scheduled to take place between October and December following its approval by the Capital Markets Authority.

Although it's too early to determine the number of shares that will be floated, the government which owns 40 percent of NIC will offload all its shares to the public, at the time of the IPO.

Olowude, however, declined to reveal the price at which each share will be sold.

"The government wants it to be as low as possible for everyone to afford," he added.

The lowest Ugandans have ever paid for an IPO was 70 Ugandan shillings (about 0.35 U.S. dollars) for Stanbic Bank Uganda in 2007.

NIC currently has a combined share capital of 501,940 valued at 10,000 shillings (about 5 dollars) worth more than 5 billion shillings (about 2.5 million dollars).

The government's move to sell its equity is part of its privatization efforts aimed at promoting profitability and efficiency of businesses in the economy with a wider objective of boosting the wealth of the nation.

The insurance firm's IPO will follow the sell of 60 percent of government's stake in the loss, making public entity of the time, to Nigeria's leading insurance firm General Insurance Plc (IGI), in 2005, for 6.2 billion shillings (about 3.1 million dollars).