Platform for African – European Partnership in Agricultural Research for Development

Tuesday, May 22, 2012

Setting-up an equity fund for SMEs agribusinesses in Uganda

May 10, 2012. The European Union and other partners are working with the Government to explore the possibilities of setting-up an equity fund for SMEs agribusinesses in Uganda.

The proposed equity fund would blend resources from development partners, Uganda’s institutional investors and private investors. It would invest in small and medium enterprises in need of capital to develop new agribusinesses.

The objective of the initiative would be to contribute to the development of Uganda’s agriculture and agribusiness sector and to improve rural livelihoods, incomes and food security. A public private equity fund would support the development SMEs engaged in agribusiness by providing both access to “patient capital” and business development services to address capacity constraints. Benefits Incorporated in Uganda, the fund would be able to work very closely with Uganda’s SMEs. It would also allow Uganda’s investors to invest their money in the development of Ugandan agriculture, rather than on international markets. Producing crops and livestock is not the task of public institutions. SMEs, including the millions of Uganda’s smallholder producers are the driving force in agriculture. Public institutions are simply there to establish the policy and principles and regulations and to create an enabling environment for the private sector.

Equity funds, by providing long-term equity finance, contribute to address the funding gap. Equity funds are mutual investment funds that invest in private companies, becoming shareholders of these companies.

A feasibility study in August 2011 has concluded that the “equity fund initiative is relevant to support the mid-size agribusiness in Uganda” and would deliver impact on the sector. Capacity constraints also affect small and medium agribusinesses. There is a high need and demand for business development services to reinforce many of the key aspects of their business. These include financial management, corporate governance, access to - and management of information, production management and marketing. The European Union Commissioner for Development Cooperation, Andris Piebalgs, will visit Uganda on the November 8-9. One of the main events of his mission will be a high level roundtable on public private partnerships to boost investments in agriculture.

Agricultural investment funds for developing countries. FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS Rome, 2010, 165 pages Agricultural investment funds, which have experienced significant growth in numbers and volume in recent years, have underscored public and private sectors’ interest to help address the resource constraints for achieving food security. Moreover, the growing attractiveness of agricultural investment projects as profitable business ventures has played a role in the emergence and growth of such funds, especially in light of higher agricultural prices and improved business climates that favour longer-term investments. This publication provides insight into the nature and operations of these funds and draws lessons for development agencies, governments and investors.