L-R: Keith Kalyegira, the CMA CEO, Rashmi Pillai, the FSD Uganda Executive Director and EU Ambassador to Uganda, Attilio Pacifici after launching the deal-matching facility
Financial Sector Deepening (FSD) Uganda is launching a Deal Flow Facility (DFF) to increase investment in medium to large companies in Uganda. Funded by the European Union (EU) and in collaboration with the Capital Markets Authority (CMA), the facility will help Ugandan companies become “investment ready”. 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 matchmaking, 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 UGX1.83b).
The facility, incubated at FSD Uganda, also aims to be a one-stop center 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.
In response to the need for a Deal Flow Facility and FSD Uganda’s role, Ms. Rashmi Pillai, the FSD Uganda Executive Director stated “FSD Uganda has always been at the forefront of new ideas, and policy changes that strengthen financial market development. Apart from increasing capital inflows, the accelerated growth of medium to large companies via the DFF will result in direct and indirect job creation – a key goal of the third National Development Plan. 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. We are excited that this facility is being birthed with like-minded partners like the Capital Markets Authority, the Ministry of Finance, and our donors – the European Union. We will leverage learnings from other program interventions funded by our other donors – the Foreign, Commonwealth and Development Office (FCDO) and the Bill & Melinda Gates Foundation to encourage the companies we work with to adopt gender inclusive and sustainable business practices”.
In the medium -to- long-term, the DFF is expected to increase the development of Uganda’s capital markets, complementing ongoing efforts by the 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. Keith Kalyegira, the Capital Markets Authority (CMA) CEO pointed out that 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 Uganda’s economy.
“The Capital Markets Authority is pleased to be part of this important development to be implemented by FSD Uganda which is undoubtedly a credible implementing partner. We would like to appreciate all the development partners for supporting the establishment of this Deal Flow Facility. 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 center will also prepare companies to raise working capital through the issue of short-term debt instruments that may not always require security. 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 program which started in 2018 and has so far facilitated UGX 45 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.”
H.E. EU Ambassador to the Republic of Uganda Attilio Pacifici explained “The Sustainable Business for Uganda (SB4U) Platform launched in March 2020 by H.E the President of the Republic of Uganda was created to promote private sector investment in order to spur sustainable economic growth and generate decent jobs in line with the Africa- EU Alliance for Sustainable Investment and Jobs. 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”.
FSD Uganda has built a strong legacy working collaboratively with market actors to create an enabling environment for inclusive financial services that benefit a wider section of adults in Uganda. This technical expertise, the embedded partnerships that already exist and learnings from the Facility will be used to address systemic barriers to investment, enhancing the operations of the Facility and similar initiatives in the market.