Breaking

Uganda to Waive Taxes on Foreign Venture Funds to Get The Domiciled Here

Most of the Venture Capital of Investment Fund companies that are operating in Uganda are domiciled in other countries where they are given easy conditions to establish.
26 Jan 2022 10:06

Audio 4

At least 930 billion Shillings is available for possible lending as cheap long-term capital for small and medium enterprises from the collective investment schemes, CIS, according to the Capital Market Authority.

This is the value of the Assets Under Management, which has grown from just  Shillings 13billionfive years ago when the CIS were launched as a savings vessel. CMA says this is largely idle capital yet lack of cheap capital remains the main challenge to Ugandan entrepreneurs, according to market surveys.

This does not include money at the National Social Security Fund, which it would like to invest, but for lack of investment opportunities. NSSF largely invests it’s 70 percent investment portfolio in government bonds and the 30 percent is largely idle.

CMA Chief Executive, Keith Kalyegira says that even this 30 percent is growing very fast and by 2025, it is expected to have grown to 25 trillion Shillings. He says they have to make sure that entrepreneurs seeking capital are connected to this fund.

The Financial Sector Deepening Uganda (FSDU), has partnered with the CMA and the European Union to help the Small, Medium and Large Enterprises access these and other funds for the development of their businesses. Dubbed the Deals Flow Facility, (FFD) the program targets enterprises that require new investment of at least  US$1.8 billion or US$ 500,000 to boost their businesses.

The FFD aims to close at 40 deals in five years. The DFF is not a financing program but helps build the capacity of medium-to-large companies to access long-term capital, mobilises holders of money and interests them in lending to local companies.

The program aims to support at least 220 growth-stage companies with business development support and match at least 40 companies to investors, according to Rashmi Pillai, the Executive Director FSDU.

//Cue in: “The deal…  

Cue out: …operating model.”// 

For a company to benefit, it should have been in existence for at least two years and located and operating in Uganda. It must be registered as a for-profit organization and demonstrate growth potential. The facility aims to be a one-stop center where companies can access all their transaction advisory needs, from tax, legal to banking and more.

The pool of select enterprises will have access to business development support to increase their competitiveness and place them on an accelerated growth path, according to FSDU. According to CMA’s Kalyegira Uganda needs at least 2.6 trillion Shillings in to meet the long-term investment needs in the country, based on international investment calculations. 

Unfortunately, Uganda Development Bank, the only government institution created for this objective, can only raise less than a fifth of this.

//Cue in: “The economy…

Cue out:… long-term financing.”// 

Most of the Venture Capital of Investment Fund companies that are operating in Uganda are domiciled in other countries where they are given easy conditions to establish.

This puts the host countries like Mauritius at an advantage of easily attracting investments for its local companies. Kalyegira says the CMA is leading efforts to ensure that such Funds are registered or domiciled in Uganda so that it will be easy for local companies to get cheap investments from the capital funds. 

Among other incentives to attract them will be allowing them not to pay capital for as long as they are domiciled in the country, as happens in other countries.     

//Cue in: “We need ….

Cue out: ….increase jobs.”//

The Deals Flow Facility will also see the European Union support the program with a support initiative worth 50 million euros or about 200 billion shillings, under its Sustainable Business for Uganda (SB4U) initiative.

Speaking at the announcement of the call for submissions of interested companies, Carolina Andreessen, who represented the EU said the EU facility will support in helping the private sector access to finance.

//Cue in: ”The way…  

Cue out: …in the market.”//