Uganda Investment Authority (UIA) is set to hold its annual Private Equity and Venture Capital Conference next week on Tuesday in Kampala.
The event which will take place at Kampala Serena Hotel seeks to bring together the relevant stakeholders in order to find alternative sources of financing for Small and Medium Enterprises (SMEs), approved investors and other businesses.
According to Jolly Kaguhangire, the Executive Director Uganda Investment Authority, private equity is a viable financing alternative especially given that most businesses have been consumed by the high cost of credit in commercial banks.
“Ugandans have come up with great business ideas but capital remains a big challenge. Most startups don’t live to see their 5th birthday due to the high interests required to pay loans,” Kaguhangire told journalists on Tuesday on the sidelines of a pre-conference breakfast meeting at Hotel Africana.
“The conference will therefore help entrepreneurs to better understand how private financing works and get the necessary information in order to strengthen their firms,” she added.
Basil Ajer, the Director Small and Medium Enterprises Division at UIA says that Tuesday’s conference is an opportune platform to expose SMEs to private equity in addition to discussing how to leverage pension schemes and investment clubs to generate domestic financing.
However, experts in the financial sector say that majority of the local firms are too small to absorb the huge capital provided by foreign venture capital funds often beyond USD 500,000. In Africa, 95% of firms still depend on banks for financing while 3% use capital markets as opposed to USA and Europe where capital markets provide finance to 60% and 40% of the firms respectively.
“Our experience has been that when you invite foreign peivate equity firms, they offer a lot of money which our firms can’t absorb. The feedback we have got from our SMEs has been that they need equity in the range of USD 100,000 to USD 200,000,” Ajer said.