The arrival of the Stanbic Bank Uganda’s 7% dividend payout cheques was an excitement to many investors. But this was short-lived. Investors who received these cheques were surprised that the dividend almost amounted to nothing after being converted to Kenya shillings and parting with Ksh.1,000 for cheque clearance. To  investors with small shares, the cost of cashing was higher than its value, hence making it worthless.

Although Stanbic Bank Kenya came up with a temporary solution enabling investors to incur low charges when cashing their cheques, it leaves much to be desired on the handling of cross border share investments. This problem should have been anticipated long before the dividend cheques were drawn and a proper dividend reinvestment program {Drip} put in place to address it.

Many investors do not understand what is involved in investing in shares outside their country. When applying for the Stanbic bank Uganda share last December, most investors did not consider the fact that they would be dealing with foreign currency fluctuations that entail the profitability of shares depending on its market performance and the two countries' currency differences.

Investors out to invest in the Uganda Stocks exchange (USE) or the Dar-es-salam Stocks Exchange (DSE) should know that it will involve more than a mere call or email to the stocks broker or stocks agent. Not all brokers do cross border trades. One needs acquire sufficient information from his/her broker if he intends to buy shares in a different country. Since the Stanbic IPO, more Kenyan brokers now trade in the USE. No Kenyan brokers trade in the DSE. In this case it becomes tricky for the investor since the cost of trading with a different broker, in a different country, is prohibiting.

The mobility of shares in the USE is still done in share certificate form. This makes the trading process more slow than in the NSE. For Kenyans trading in this market, it may not look lucrative when someone wants to execute a quick sell or buy. Furthermore, the sealing of a deal in the USE takes very long. Buying shares may take more than a month due to a very long bureaucratic procedure.

The currency differences among these three countries can both be a blessing as well as a curse. When one executes a buy at a low exchange rate and sells it  highly, he not only gets the profits on the difference of the share price but also rakes in foreign exchange gains. The opposite is true as experienced during the refunds of Stanbic Uganda IPO where an investor who bought at an exchange rate of Ksh.1 to Ugsh.25 had to contend with a lower amount as refund when the exchange rate changed to Ugsh.26. Although the loss was not very big, in some cases it may be worse.

According to Ryan Shen-Hoover, an investment researcher from the world acclaimed Barron's, merging of the regions’ bourses would greatly lessen the difficulty of opening trading accounts in different countries and therefore be great for any investor seeking exposure to more than one country. It would likely unlock value in some companies that are listed in markets that trade infrequently (such as Tanzania and Uganda) and could have the opposite effect in some of Africa's overheated markets (such as Kenya). This is however a long term solution and doesn’t address investors’ issues at hand.

To beat the currency difference issue, an investor can transfer the dividend payable to him/her to a paying country investor, in the case of Stanbic Uganda, a Ugandan investor. This will be cheaper in terms of bank charges incurred. It’s also tax efficient to hold derivatives such as call or put options (Options are derivative securities that give the holder the right to buy or sell a specified amount of the underlying security at a specific "strike price" and within a specified timeframe) in a different country than to invest directly in those country’s stocks.

As Ryan suggests, these problems can be easily solved by merging the three markets. But this is in the long term, taking into consideration that most of the bourses have a nationalist sense of sovereignity that may be difficult to break. The best thing to do is to encourage more listed firms to cross list. The stocks brokers too can partner with their counterparts in Uganda and Tanzania to diversify services to their East African clients.