In 2013, seven private equity firms established the association to raise awareness on Private Equity and Venture Capital (PE/VC) as an asset class, both in the public and private sector with a need to delve deeper into the essence of ‘Private Equity in East Africa. As an industry association, the East Africa Private Equity & Venture Capital Association has since grown to close to 100 member firms active across East Africa with its primary mandate being catering to the interests of actors within the PE/VC ecosystem by facilitating an environment that promotes private capital inflows into East Africa. In executing its mandate, EAVCA operates along four pillars. These include advocacy, intelligence, training and networking events.
After primarily running the regional operations from Nairobi, Kenya for the past eight (8) years-, the Association has expanded with setting up a physical office in Uganda. It is envisaged that the establishment of the Uganda Chapter will enable EAVCA to decentralise its services and provide more context- cognisant advocacy, intelligence, training, and networking opportunities to Uganda’s expanding PE/VC ecosystem.
SETTING UP A PRESENCE IN UGANDA
The Association decided that it was time to expand its physical presence to other parts of the region as clearly laid out in its Strategic Plan. In implementing EAVCA’s growth and expansion strategy, Uganda was a priority for several reasons. Primarily, in 2018, EAVCA was able to host the Doing Deals in Uganda Seminar, the first EAVCA stand-alone event hosted on-ground in Kampala. From the event, it was evident to EAVCA that there was an interest in investing in Uganda and equipping investors with the necessary tools to understand the landscape.
Investors who were already on the ground in Uganda attended and spoke about their experiences of investing in the country. We also had other Investors interested in moving into Uganda. These, as well as other actors in both public and private sectors. and were interested in how the landscape looks.
There got to a point where the deal activity on the ground was growing, and in addition to the quarterly activities held by EAVCA in Kampala, there was a much bigger need for an active presence and more industry-growing initiatives in Uganda. We thus saw the need to set up a chapter in Uganda to provide more country-focused interventions –Esther Ndeti.
In addition, the Country’s positioning as the second largest investment destination for private capital in East Africa after Kenya was key to informing EAVCA’s decision to set up an office in Uganda.
Once the decision was made to set up EAVCA in Uganda, EAVCA in tandem with three (3) EAVCA member firms (XSML, Ascent Capital and Pearl Capital Partners)- steered a conversation and embarked on setting up the Chapter. The steering committee thus defined the scope of setting up in Uganda and addressed crucial needs such as launching, resources, and partnerships. Their efforts culminated in the establishment of the Chapter, as a legal entity, in September 2020. With support from the Dutch Embassy- Kampala and recruitment of the Country Coordinator, Chapter operations began in April 2021.
EMERGING OPPORTUNITIES IN UGANDA
Within the enabling and policy environment, emerging opportunities in Uganda’s PE/VC ecosystem are from ongoing and planned activities and interventions by relevant Government Ministries Departments and Agencies (MDAs) and development actors- keen to leverage on the private sector to meet key development objectives.
Regulatory streamlining for Uganda’s PE/VC industry
At present, the Capital Markets Authority (CMA), Uganda, is streamlining the regulatory framework for the Country’s PE/VC industry. This will likely provide greater clarity on a regulatory environment that was previously, at best ambiguous and fragmented and certainty for both current and prospective investors looking to set up Funds in Uganda. The impetus to attract more inflows of private capital into Uganda, through an attractive regulatory regime, is central to CMA-Uganda’s recently launched Strategic Development Plan (2021/22-2024/2025). The Plan places PE/VC front and centre to CMA-Uganda’s growth strategy, with the stated objective being increasing the share alternative (non-bank) financing to total financing from the current 1.5% to 3% by 2025.
In addition, with the support of the European Union (EU), CMA-Uganda has developed a Deal Flow Facility under incubation by the Financial Sector Deepening Uganda (FSDU). The objective of Facility is first, to build investment readiness of prospective investee firms and second to match investment-ready firms to PE/VC investors. With investment readiness a key constraint to the deployment of capital by PE/VC funds, even amidst the growing supply of stated capital, it is envisaged that the EU-supported intervention will increase the pool of investment-ready companies available to PE/VC funds.
Leveraging on the interest of Uganda’s donor community
There has been significant interest by the Donor Community in leveraging on patient capital to bridge financing gaps and meet key development objectives. The most notable is the US$ 20 million Yield Uganda Fund, set up with support of the EU and the International Fund for Agricultural Development (IFAD). The Fund is the first Ugandan domiciled PE/VC Fund and among the few Funds within the region that have onboarded a local pension fund as a Limited Partner.
Financial Assistance (FA) facilities deployed by development actors have heavily relied on debt financing focused interventions to bridge financing gaps in sectors of interest. This is through interventions such as loan guarantees and on-lending. There is however increasing interest in leveraging on patient capital to address development challenges. The EU and EU country embassies have been most active in this space. USAID has also shown interest in putting in place interventions to do the same- Doris Acheng Odit.
Other key trends specific to the demand/supply sides of the ecosystem that present opportunities for growth in Uganda’s PE/VC ecosystem include:
Increased Investor confidence
As expected at the beginning of the pandemic, new investments were stalled when businesses’ liquidity came into question, which led to Investors focusing more on portfolio companies. However, there appears to be a reversal of the COVID-19-induced effects as ventures within East Africa, start to rethink their business models.
“We are starting to see iterations of pivoting in businesses across the region. Technology is being incorporated into businesses and innovations to facilitate internal operations and deliver services. Investments are beginning to pick up as we see significant resilience in East African businesses.”- Esther Ndeti
“Bridge capital is being provided by Investors to support businesses jump hurdles that emerged as a result of the pandemic. We are seeing the emergence of new private debt structures equity providers.” – Esther Ndeti
Smaller ticket sizes being Invested
“We are seeing appropriate sized tickets being deployed across East Africa and more deals being done as a result. This is a shift from traditional paradigms where large-ticket sizes were dominant with fewer companies able to absorb capital on offer.”- Esther Ndeti
Going forward, the most promising sectors for PE/VC investments in Uganda are those that have traditionally delivered. These include energy and natural resources, health, agribusiness, and financial services. Majority of these are also prioritised in Uganda’s third National Development Plan (NDP III) as sectors or sub-sectors that will be key to steering the country towards inclusive growth.
WHAT EAVCA’S PRESENCE WILL MEAN FOR UGANDA
As EAVCA sets up in Uganda, the Association will hold steadfast to serving the country’s PE/VC industry under its four pillars of advocacy, intelligence, training, and networking events.
“We hope to provide a more context-cognisant and collective voice for the industry. CMA-Uganda is currently drafting the regulatory framework for the industry. Alongside key strategic partners, our role will be to spearhead relevant consultative processes as and when the need arises to ensure that the industry presents a unified policy position and voice as to the favourability of proposed regulations towards expanding private capital inflows”- Doris Acheng Odit.
“We will leverage on our network of experts and members to bridge key competency gaps present in the Country’s PE/VC industry. While our training mandate is primarily focused on our members, we recognise that building awareness on the asset class among prospective institutional investors is to the interests of the industry, specifically in as far as diversifying Limited Partners (LPs) is concerned. Therefore, additionally, we envisage on undertaking outward-facing capacity building activities to build awareness on PE/VC as an alternative investment, specifically among local pension funds.”- Doris Acheng Odit.
“We plan to have events that will allow both our members and other ecosystem actors to convene and create synergies with activities that are taking place, and be the first point of information for those looking to gain insights on the investment landscape in Uganda.”- Doris Acheng Odit.
Creating awareness on debt-financing
“We are looking to partner with an assortment of strategic partners to carry out awareness on private equity as an alternative source of financing among SMEs- as demand side actors. This is towards both raising awareness on the presence and importance of, and dispelling misconceptions among prospective investee companies towards PE/VC.”- Doris Acheng Odit.
Esther is the Executive Director at the East Africa Private Equity and Venture Capital Association (EAVCA). Esther has developed a track record in the region’s investment & SME sector development by being an active champion for entrepreneurial access, a fervent supporter of business leaders and a connector & builder of the entrepreneurial ecosystem with 10+ years of experience spanning across East Africa in strategy, operations, project management, product development, partnerships and capital-raising advisory roles. Her experience also spans into building and engaging networks in both the private and public sector and leveraging these relationships to create enabling environments for increased capital deployment in the region.
Doris Acheng Odit
Doris is the Uganda Chapter Country Coordinator at the East Africa Private Equity and Venture Capital Association (EAVCA). Doris has acquired vast experience in assisting private enterprises in expanding, diversifying and modernizing their operational and investment activities through investment appraisals to analyse project operational and financial viability to attract debt financing from commercial and development banks. Her focus was on medium and large-scale enterprises with good institutional track records and a capacity for optimal utilisation of funds.