Uganda bets on reforms to boost private equity financing

Data from AVCA shows that companies in the East African region completed 205 private capital deals allowing them to raise close to $2.26 billion in fresh capital from private equity investors in 2022 and 2023. PHOTO | SHUTTERSTOCK

Data from AVCA shows that companies in the East African region completed 205 private capital deals allowing them to raise close to $2.26 billion in fresh capital from private equity investors in 2022 and 2023. PHOTO | SHUTTERSTOCK

By JAMES ANYANZWA

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Uganda’s Capital Markets Authority (CMA) and the Ministry for Finance, Planning and Economic Development are working to review the regulatory framework to boost

the uptake of private equity (PE) financing, as an alternative source for capital for private sector.

The regulator says in its latest annual report that mobilising alternative sources of funds to finance private sector is one of its key priorities in enhancing growth of the economy.

“During the Financial year 2022/2023, several engagements were held with Ministry of Finance and President of Uganda Yoweri Museveni, highlighting legal and fiscal challenges that are inhibiting the domiciliation of Private Equity Funds in Uganda,” the CMA said.

“This was in partnership with East African Venture Capital Association, International Fund for Agricultural Development (IFAD) and the European Union (EU). This culminated into a study that made specific proposals with respect to amending the CMA Act, Partnership Act and Income Tax Act.”

Read: Kenya tops EA nations in PE, venture capital deals

Uganda is hoping that the uptake of market-based financing by Ugandan enterprises from private equity, venture capital and crowdfunding portals will increase to three percent GDP in the 2024/2025 fiscal year.

Uganda is seeking to promote economic development by creating a facilitative environment for businesses and government infrastructure projects to access market-based financing.

“Key to achieving the stated goal is strengthening the legal and regulatory framework for registration and establishment of private equity funds in Uganda to enhance the supply of capital available to Uganda’s private sector,” said the market regulator.

Recent surveys show that companies in East Africa are raising more money through deals involving private equity than initial public offerings (IPOs) as regional stockmarkets struggle to attract new listings.

For instance, a survey by the African Private Capital Association (AVCA) shows that there is an increase in the number of PE deals in the region, demonstrating how issuers are increasingly shying away from costly listings and the full disclosure requirements relating to governance, financial and tax positions.

PE is capital investments made in companies that are not publicly traded, with a focus on long-term investments while public equity refers to ownership in publicly traded companies, which are available to anyone with an investment account.

Data from AVCA shows that companies in the East African region completed 205 private capital deals allowing them to raise close to $2.26 billion in fresh capital from private equity investors in 2022 and 2023.