The 2017 Bank of Uganda suspension against Ernst & Young (EY) from auditing financial institutions may have ended, but its effects have lingered on, affecting the audit firm’s 2018 revenues and profits.
EY was in 2017 suspended for one year, due to a pre-qualification glitch. Apparently, according to Geoffrey Byamugisha, the EY country leader, their pre-qualification documents for 2017 were submitted to a wrong office at Bank of Uganda. As a result the audit firm did not appear on the 2017 list of 104 pre-qualified external auditors for commercial banks, credit institutions, micro-finance deposit-taking institutions and foreign exchange bureaus & money remitters.
According to EY’s financials seen by this reporter, although EY survived 2017, barely unscathed, because the bulk of the 2017 audit work extends to the following year, the firm felt the full impact of the ban in 2018.
In 2017, EY registered a 14.46% rise in gross earnings- from UGX14.69 billion to UGX16.76 billion. Profit went up 22.5% from UGX2.91 billion to UGX3.56 billion.
However in 2018, gross earnings largely stagnated, declining slightly by 0.33% to UGX16.76 billion compared to UGX16.81 billion the previous year. However, profits declined considerably, by 16.9% from UGX3.56 billion in 2017 to UGX2.95 billion.
CEO East Africa Magazine, examined audited results of 23 out of 24 commercial banks and there was non-audited by EY.
3 of the other ‘big 4’ audit firms ruled the audit ‘feast’.
Deloitte & Touche audited 8 banks, followed by PricewaterhouseCoopers who audited 7 banks. KPMG audited 6 banks while little-known Grant & Thorntorn audited 2 banks.
KPMG however dominated the big banks, auditing 4 of the 10 biggest banks- including Stanbic Bank, the biggest. Deloitte and PricewaterhouseCoopers each audited 3 of the top 10 banks.
So lucrative is the bank audit business, that Stanbic Bank alone in 2017 paid UGX869.9 million in audit fees. This increased to UGX 1 billion in 2018.
A clause in the Financial Institutions Act (FIA)- Section 67, that allows financial institutions to use one external auditor for up to 4 years, is likely to lock out EY out of the lucrative sector for a little bit longer.
Kwame Ejalu’s Kent Holdings, acquires Alexander Forbes’ Ugandan unit; rebrands to Zamara
Alexander Forbes Financial Services Uganda Limited is now Zamara Actuaries, Administrators and Consultants (U) Limited.
This follows the ongoing exit of the South African financial services group from Uganda and the sale of their 51% stake in Uganda to Kent Holdings Limited- a Ugandan financial services group with interests in insurance brokerage and pensions management.
The two companies affirmed the sale, in a joint statement on August 21st, by Bonga Mokoena the Alexander Forbes Emerging Markets (AFEM) Chief Executive Officer and Kwame Ejalu, the Kent Holdings Limited Chairman.
“Alexander Forbes Emerging Markets (AFEM) and Kent Holdings are pleased to announce that an agreement has been reached on a sale of shares to Kent Holdings Limited. On 2 July 2019, a sale of shares agreement was executed in terms of which, AFEM sold 51% in Alexander Forbes Financial Services Uganda Limited, to Kent Holdings Limited, a co-shareholder in Alexander Forbes Financial Services Uganda Limited,” read the statement.
Kent Holdings, previously owned 49% of the Ugandan operations.
The statement however said that “the sale of shares agreement is subject to fulfilment of conditions precedent.”
“The terms and conditions of the sale agreement remain confidential,” both executives announced, but confirmed that Alexander Forbes has effected a name change and will now be known as Zamara Actuaries Administrators and Consultants (Uganda) Limited.
The name change was gazetted on 17th July 2019.
“Alexander Forbes Financial Services (Uganda) Limited, has been by a special resolution passed on 10th July 2019 and with the approval of the registrar of companies changed its name to Zamara Actuaries Administrators and Consultants Limited- 17th July 2019,” reads General Notice No. 762 of 2019, extracted from the Gazette.
In a separate announcement, media announcement run in the local dailies, Zamara also confirmed their entry into the Ugandan market, promising that they called “fresh perspective in the delivery of financial services in Africa.”
Who is Zamara?
According to their media announcement, the Zamara Group is a specialised financial services group providing actuarial advice and retirement administration solutions in financial services, umbrella retirement solutions, investment and risk sectors to individuals, corporates, parastatals and retirement fund clients.
The firm currently administers assets in excess of KSh. 280 billion an equivalent of UGX 9.995 trillion and is the only actuarial, consulting, accounting and pension administration firm in Kenya to be ISO 9001:2015 certified.
Uganda is the sixth Zamara operation after Kenya, Nigeria, Rwanda, Tanzania and Malawi. Zamara started operations in Kenya over 23 years ago as Hymans Robertson and later changed to Alexander Forbes (East Africa) Limited before renaming to Zamara Actuaries, Administrators and Consultants Limited, following the exit of Alexander Forbes from the Kenyan market in 2017.
For four consecutive years, Zamara, their umbrella fund, the Zamara Fanaka Retirement Fund (formerly Alexander Forbes Retirement Fund) and Zamara Vuna Pension Plan (formerly Alexander Forbes Vuna Pension Plan), Zamara’s individual pension plan have been variously awarded in Kenya’s Think Business Awards.
A brand that embodies a fresh perspective on the delivery of financial services
Commenting on the entry of Zamara into Uganda, Kwame Ejalu, the Kent Holdings Chairman said: “We are enthusiastic about this partnership between Kent Holdings and Zamara Group as it marks the entry into Uganda, of a formidable brand that embodies a fresh perspective on the delivery of financial services in Africa. This partnership blends Kent Holdings’ 22 years of local experience and strategic leadership with Zamara’s 23-year African heritage and technical capacity, to deliver innovative and excellent services to our clients, underpinned by simplicity, empathy and trust,” adding: “Zamara Uganda will now add to our portfolio pan-African expertise, actuarial services and other online solutions that we previously did not offer.”
Asked if Zamara had acquired the stake, previously held by Alexander Forbes, he said he would comment on this after “the Alexander Forbes-Kent Holdings transaction is fully complete and all conditions precedent are fulfilled.”
Ejalu however said that Zamara Uganda inherits and will continue to run a managed private pension funds sector in Uganda and managed assets under administration portfolio in excess of UGX380 billion- roughtly 40% sector market share.
James Olubayi, the Zamara Group Executive Director said that the Zamara Group looked at Uganda as “one of the key strategic regions in the market for growth of the group.”
“Zamara aims to elevate the quality of advice and solutions offered to stakeholders and inevitably be a game changer for clients it serves in Uganda. We look forward to the extended partnership with Kent Holdings, clients, stakeholders across Africa,” he said.
Miriam Ekirapa Musaali, Chief Operating Officer, Zamara Uganda who previously was the Alexander Forbes COO said “We remain the same enthusiastic, energetic, creative team that is committed to serving our clients in Uganda. We will no doubt continue to offer superior consulting, advisory and administration services to pension funds in Uganda and further enhance our offering and advice to truly world class levels.”
Stanbic Bank scoops June/July best gov’t securities dealer award
The Governor Prof. Emmanuel Tumusiime-Mutebile has given an award to Stanbic Bank Uganda (LTD) for being the best performing bank in dealing government securities for the months of June and July 2019. The award was received by Stanbic Bank CEO Mr. Patrick Mweheire during the quarterly Uganda Bankers Association (UBA) meeting at BoU headquarters in Kampala.
The bank has been recognised by the regulator for its role in the primary dealer system that helps in developing Financial Markets and in reducing the costs associated with issuing Government Securities; through increasing demand, market efficiency, encouraging secondary market trading and improving the quality of Financial Market information.
A primary dealer is a pre-approved bank, broker or financial institution that is able to lend money to the government through treasury bonds and treasury bills.
Background information on best performing banks in government securities award
In January 2005, the Bank of Uganda initiated the “Award for the Best Performing Primary Dealer in Uganda Government Securities for the Month” to recognize the Primary Dealer that performed best in trading Uganda Government Securities and transmitting information regarding the status of the financial markets to the Central Bank.
A Primary Dealer is any financial intermediary that has signed a Memorandum of Understanding with the Bank of Uganda to execute the following actions on a consistent basis:
participate as counter-party in Uganda Government securities auctions conducted
by the Bank of Uganda.
§ To provide the public with prices or yields that they will buy and sell “On-the Run” (the most recently auctioned) Uganda Government securities. i.e. Treasury bills and Treasury bonds on a continuous basis.
§ To provide the public with prices or yields that they will buy Off-the-Run (Other than the most recently auctioned) Uganda Government securities on a continuous basis.
§ To trade with the public Uganda Government securities at the prices or yields that they have quoted.
§ To make available information on the status of the market to the Bank of Uganda on a timely basis.
The points allocated for the Award to the Best Performing Primary Dealer in Uganda Government Securities for the Month are aggregated to determine the winner of the prestigious award.
dfcu Bank’s H1 profit declines by 14% to UGX35.7 billion
Interim H1 2019 results for dfcu Bank HY are out, indicating a 14.3% decline in net profit to UGX35.7 billion down from UGX41.6 billion in the same period in 2018.
Deposits declined by 1.5% from UGX2.02 trillion to UGX1.99 trillion while lending went down by 3.8% from UGX1.4 trillion to UGX1.36 trillion.
As a result, the bank’s asset book declined by 2.7% from UGX3.03 trillion to UGX2.95 trillion.
This is the first 6 months of new Managing Director’ Mathias Katamba’s firm grip on the bank, since he assumed full reigns in January this year.
However, compared to December 2018, there was a slight 1.3% growth in assets from UGX2.91 trillion to UGX2.95 trillion. Deposits also registered a slight 0.6% rise to UGX2.02 trillion, from UGX1.97 trillion.
dfcu yet to recover from 2018
dfcu bank, now Uganda’s fourth largest bank with about 10% of industry assets is yet to recover from what analysts say was a hard 2018.
Customer deposits largely remained flat, declining 0.4% from UGX1.99 trillion to UGX1.98 trillion. Lending went down 4.8% from UGX1.33 trillion to UGX1.4 trillion.
Full year profits took a 51.6% hit, reducing from UGX127.6 billion to UGX61.7 billion.
Assets declined 4.7% from UGX3.03 trillion to UGX2.89 trillion.
dfcu’s not-so rosy performance, has had an impact on its share price. Share price rose from UGX681 at the beginning of January 2018, rising 42.4% to hit a climax of UGX970 on 17th July 2018 but closed December 2018 at UGX822.97- a reduction of 15%.
Since the year began, dfcu share price has continued in a free-fall, dropping a further 21%, to UGX650 as of today, August 22nd 2019.
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