New financing to the tune of Ush34 billion has been made available to support agribusinesses in Uganda as new funding partners; Soros Economic Development Fund, part of Open Society Foundation (OSF) and FCA Investment (FCAI) join the Yield Uganda Investment Fund.
The Agribusiness Impact Fund, set up in January 2017 by the European Union (EU), through the International Fund for Agricultural Development (IFAD) and the National Social Security Fund (NSSF), with an initial £12 million investment, has now hit the £20 million (UGX 85 billion) mark in total commitments, following an £8million investment from the Open Society Foundations and FCA Investments.
“Mobilizing investment for the agro industrialization of Uganda had been the main reason for the creation of Yield Uganda Investment Fund by the EU.
“In 2017 NSSF joined the EU to launch the first investment fund and today FCA investments and open society foundations add substantial capital which will allow Uganda agribusiness companies to access the needed long-term capital for industrialization.
“As outlined in the European external investment plan, the EU is aiming at attracting capital into Uganda to foster development in agriculture, trade and industrialization,” said EU ambassador to Uganda, H.E Attilio Pacifici.
The Yield Uganda Investment Fund is a partnership between public and private investors that offers innovative and tailored financial solutions, using equity, semi-equity and debt, to small and medium-sized enterprises (SMEs) having the potential to generate both strong financial returns and significant social impact.
Deloitte Uganda and Pearl Capital Partners Uganda (PCP) established the fund, currently managed by PCP Uganda, with the mandate to make an investment in the rage of £250,000 to €2 million (approx. UGX 1 billion to UGX 8.5 billion).
To date, Yield has made an investment of over UGX 8 billion in SESACO limited, an agro-processing company specializing in Soya products, CECOFA, a coffee processor, and Chemiphar, an analytical laboratory providing testing and inspection services to SME businesses.
The fund targets agriculture-related business across all value chains including the supply of agricultural inputs, production and agro-processing within all sub-sectors, post-harvest storage and distribution, but also peripheral activities such as transportation, communications and certification.
The fund seeks to support businesses with a clear competitive advantage and ambitious local management.
The fund targets to improve over 100,000 rural households livelihoods through improving access to markets for their produce, higher quality agricultural inputs and services; creating jobs and employment opportunities, ensure food security while generating income, foreign exchange and new export opportunities, all fundamentally contributing to Uganda’s economic growth and goal to eradicate poverty.
High-quality Business Development Support (BDS) is critically important when modernizing and expanding yield funds investee companies to make them more effective, growth-oriented and profitable.
An integral and complementary part of the fund’s investment process is to support the operations of its investee companies through matching grants for BDS.
Typical areas of the funds BDs support include company governance, accounting, budgeting, auditing and tax compliance, innovation and technology transfer, marketing studies, and the adoption of international product quality and safety standards. This extra service to yield funds investee companies is funded with grants from the EU managed by IFAD.
“IFAD is reassured by the confidence and delighted to welcome open society foundations and FCA investment to the Yield Uganda fund as part of the 2nd close investors,” noted IFAD Country Director for Uganda, Laskhmi Moola.
“Their additional financing, to yield, and their expertise in the impact sector will add value to the existing partnerships. Together with OSF and FCAI, we will amplify the impact of the Yield Uganda fund by continuing to improve the fiscal environment for the Uganda agri-SMEs and improve the lives of the smallholder farmers they work with,” she added.
“Agriculture plays a vital role in economic growth and sustainable development. Investment in the sector is an effective instrument to alleviate poverty and enhance food security.
“Evidence suggests that gross domestic product (GDP) growth originating from agriculture is twice as effective in reducing poverty as GDP growth linked to the non-agricultural sectors, yet the sector is still underfunded. The Yield Uganda Investment Fund is a great opportunity for NSSF to support the sector,” said NSSF Deputy Managing Director, Patrick Ayota.
He added that the investment is in line with NSSF’s diversification strategy to increase exposure to equities to about 25% of its total portfolio from the current 18%, as well as supporting home-grown companies that have good corporate governance and are willing to provide NSSF with an exit through the stock exchange.
“Our investment in Yield fund Uganda is triple vote; in the resilience of Uganda’s Agricultural sector, in the power of the private sector to deliver improved livelihoods and in the ability of pear capital partners to direct the investment to the most deserving SMEs.
“FCA investment views the development of the private sectors as the most viable means to bring about economic development and prosperity in Uganda and with this investment, we hope to create thousands of jobs within the agriculture value chain and sustainably increase smallholder farmers’ incomes in addition to catalysing additional investment in the sector,” stated Jukka-Pekka Karkkainnen, CEO, FCA Investments.
“We invested in the Yield fund because we want to direct capital to local agribusinesses and entrepreneurs that are interested in sharing benefits with smallholder farmers, rather than exploiting them.
“We were also attracted by the fact that the fund is based in Kampala, giving it the ability to work closely with the businesses it invests in as they strengthen and expand. We believed this team is the right one to tackle some challenges that the sectors present.
“We hope that this initiative can provide a new model for successful investment in smallholder farmers that others will follow across the continent. And we are thrilled to provide our support,” added Jocelyn Songco, Principal Soros Economic Development Fund, Open Society Foundations.
“Some of the foundations and key principles from which Yield Fund Uganda was first established in early 2017 have been built around the unique conducive agri-business environment that we find here in Uganda; an environment which is not only rich in potential but which also gives us the opportunity to bring about real change and impact upon the lives of smallholder farmers and rural communities that remain the majority agri-partners in various ways now and over the coming years.
“This Ugandan domiciled yield fund is uniquely positioned to drive forward that change, by making strategic, effective and efficient on the ground investments. We are committed to bringing flexible and innovative financing solutions to the agri-business SME community, enabling several partners’ prosperity for the future.
“By utilizing our impact investing experiences and principles, we believe that we shall also create the core foundation from which the SME agri-business sector and smallholder farmer communities can develop and grow together,” said Dr Edward Isingoma, Managing Partners, Pearl Capital Partners (PCP)
Gabriel Ajedra, Minister of State for Finance, General Duties further applauded the Fund saying, “Uganda is pleased to have the Yield Uganda Fund which is dedicated to Uganda to provide capital through debt and equity to agriculture-related businesses across all value chains including, supply agricultural inputs, productions and agro-processing, post-harvest storage and distribution.
“Yield Uganda funds plan of providing first loss protection to equity investors will address the challenges of low and limited access to capital and the perceived high risk involved in agricultural business.
“Therefore an investment fund of this nature will go a long way to uplift the agricultural sector and most especially when the country is focusing on commercial agriculture, industrialization and value additions.”
BY GEORGE PIWANG