Venture Capital Idle As Businesses Fail to Meet Funding Standards

Though Uganda has attracted a substantial amount of venture capital from investors globally, much of it remains idle as local businesses struggle to meet the necessary investment criteria.

Speaking at the American Chamber of Commerce of Uganda (AmCham) CEO’s meeting on “Globalization to Navigate Cross-Border Trade and Investment Flows,”  John Businge, the country coordinator for the East Africa Venture Capital and Private Equity Practitioners Association highlighted the lack of a sufficient pipeline of businesses ready for investment in Uganda.

According to Businge, a significant amount of work is required to bring businesses to an investment-ready level. He noted that this includes all aspects of business, such as bookkeeping and revenue mobilization, among others.

Recognizing the presence of business support systems in the country, Businge emphasized the need to enhance and expedite these efforts so Uganda does not continue to miss out. “We have a lot of innovation hubs and business development organizations helping these businesses prepare, but this needs to happen on a larger scale and faster so businesses can absorb the available funds,” he said.

In 2023, approximately USD 78.6 million was invested across about 10 to 15 deals, averaging around USD 5 million per deal.

According to Businge, a lot of money is coming in but there are few. He added that there is a new trend of developing financial Institutions directly working with investors without intermediaries.

Humphrey Asiimwe, CEO of the Uganda Chamber of Mines and Petroleum, underscored the need to attract patient capital, particularly for the mining sector due to its lengthy processes. He emphasized that Uganda must market its minerals to potential investors for exploitation and value addition before export.

This begins with exploration to assess the financial viability of these resources, a phase that demands readily available patient capital. However, the mining sector has yet to attract this type of risk capital.

Evelyn Zalwango, the AmCham general manager, mentioned that the chamber serves as a platform to promote economic development between the US and Uganda. “The chamber brings together all Ugandan-based, American-affiliated businesses. All association members must have an American affiliation, with the main goal of facilitating business between the two countries,” she explained.

The platform currently has around 66 members, with more expected to join, particularly in the ICT sector, which attracts significant interest from American investors. “Most venture capitalists in the Ugandan market are Americans, and the capital they are willing to invest is substantial, often too large for the Ugandan market to absorb in its entirety. Thus, it’s distributed across smaller ventures,” Zalwango added.