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Medium, and large firms to benefit from match-making facility
The match making facility will help Ugandan companies become investment ready. Photo | Rachel Mabala
What you need to know:
- Match-making facility is looking to solve the lack of long-term financing, which impedes the growth of enterprises, consequently resulting in slower job growth and economic development.
Companies seeking an investment of about $500,000 (about Shs1.8b) and beyond should cancel their appointment with a bank and tap into this patient capital; a match-making facility with more experienced and well-managed enterprises.
The brain behind this, Financial Sector Deepening (FSD) Uganda in collaboration with the Capital Markets Authority (CMA) and the European Union (EU) said this kind of duo arrangement is the first-of-a-kind in Uganda.
The innovative partnership has been established to make medium-to-large Ugandan companies attractive to investors.
According to FSD Uganda, the Deal Flow Facility (DFF) aims at increasing investment in medium to large companies in Uganda.
During the launch of the facility recently, the chief executive officer of CMA, Mr Keith Kalyegira, said mature companies or those at this level are more investable, urging the micro and small enterprises to get to this level to qualify for such support.
Funded by the EU and in collaboration with the CMA, the facility will help Ugandan companies become ‘investment ready’ according to FSD-Uganda executive director, Ms Rashmi Pillai.
Match-making
A statement issued earlier noted that this will be done by actively match-making them to long-term investment capital, to allow businesses to focus on growth rather than short-term funding needs.
“In addition to match-making, the facility will provide business development services to at least 220 companies over a five-year period, with the first cohort expected to start in September 2021. The facility is actively targeting relatively mature companies that are seeking investments of not less than $500,000 (about Shs1.83b),” says the joint statement issued by FSD-Uganda, the EU and CMA.
The facility, incubated at FSD Uganda, also aims to be a one-stop centre where companies can access all their transaction advisory needs from tax, legal, banking and more.
The pool of select enterprises will have access to business development support to increase their competitiveness and place them on an accelerated growth path.
Capital mobilised through investments and skills transferred along the investment cycle will contribute to two key objectives in the country’s National Development Plan III’; Strengthening the private sector to drive growth and create jobs and enhancing value addition in key growth opportunities. Uganda is one of the most entrepreneurial countries in the world and enabling local businesses to grow and succeed faster will have multiplier effects on jobs, household income, tax mobilisation and financial inclusion.
Stock market boost
In the medium to long-term, the DFF is expected to increase the development of Uganda’s capital markets, complementing ongoing efforts by CMA, including investor education.
Learnings from the DFF will provide the regulator and policy makers with objective evidence-based perspectives to shape the current and future investment climate.
Mr Kalyegira said the deal flow facility will play a vital role in mobilising saving and channeling them into productive investments for the creation of jobs and the development of the country’s economy.
“In addition to preparing companies that meet the participation criteria to access the growing pools of savings to meet their long-term capital needs, we are optimistic that this capital raising centre will prepare companies to raise working capital through the issue of short-term debt instruments that may not always require security,” he said.
He added: “By increasing the financing options available to business enterprises, we expect a lowering of financing costs in the economy. This facility bolsters our ongoing issuer resource persons programme, which started in 2018 and has so far facilitated Shs45 billion raised for six business enterprises in Agricultural processing and Manufacturing.
“A vibrant capital market is essential for our private sector to thrive and create jobs, so as to enable our economy to achieve its full potential. The CMA is keen to facilitate the capital markets ecosystem to increase employment, which will in turn increase the number of Ugandans who use the financial system to save for investment, save for retirement, insure their property and lives, and use the growing range of non-banking services.”
According to the joint statement, the EU Ambassador to Uganda, said “The launching of the Deal Flow Facility marks a new milestone in the Uganda and Europe partnership aimed at addressing the Access to Finance hurdles for companies operating in Uganda. Through the Deal Flow Facility 220 companies will get the necessary support to access the needed long-term capital for growth and job creation.”
