Reluctance to full disclosure starves local firms
June 21—Many Ugandan firms are starved of investment money due to a reluctance to provide full disclosure or the true financial details of their enterprises to potential investors.
“We are trying hard to get investors for the private sector. But this is proving to be hard, because our morality as Ugandans is questionable due to high levels of corruption on different levels of development,” Evelyn Anite, a state minister for investment in the finance and economic development ministry said.
She said, “Investors are not confident that if they invest their money, the entrepreneur will equally reveal the activities, earnings and the interests the business is making which is a requirement for capital markets.”
Speaking during a private equity and venture capital conference organized by the Uganda Investment Authority (UIA), Anite advised Ugandan entrepreneurs to be more transparent and trustworthy if they want to access investment funds available in the local capital markets.
A reluctance to provide full disclosure is one of the main reasons why Ugandan private firms fail to qualify for listing on the Uganda Securities Exchange (USE).
Anite said, “The government has availed funds in different development banks and institutions like the Uganda Development Bank where we have put over 50 billion shillings just for private sector development. We have also put a lot of money in the Microfinance Support Centre (MSC) with the current money coming from the Islamic Development Bank. However most of this money is never recovered, because businesses are too informal and not transparent hence they fail to grow and make profits.”
However, Jolly Kaguhangire, the UIA executive director said, the private sector has not fully utilized the capital markets, because they lack information and knowledge on the relevant requirements and procedures.
“The investment sector here has over UGX 9 trillion Ugandan shillings (about $2.5 billion), but only 2% of this money is going to the private sector. This is why we organized this conference so that the private entrepreneurs can meet and interact with the equity investors so that they can present their ideas and also learn about the requirements for acquiring those investments.”
The conference which was held under the theme; ‘Converting Domestic Institutional Investors into Private Equity’ was intended to shed some light on the challenges that are facing the private sector in terms of access to financing. The conference is one of the different functions that are intended for the investment week which will take place throughout this week.