Ugandan private sector gets tips on venture capital
June 21—Ugandan business people continue to struggle with bank loans, because they have failed to understand such concepts as venture capital/equity capital which would help them sustain their businesses by way of strong partnerships with the investors who have the money.
The Chairman of the Uganda Investment Authority (UIA), Denis Mugalya has said, “Equity capital is based on partnerships and shared interests. However, for the entrepreneurs to access these funds, they need to have a business plan that is concrete and the structures for managing the businesses must be transparent enough to make it easy for the investor to trust that his funds will be secure enough,’’Mugalya said.
He said the resources for private equity and venture capital are in abundance in Uganda. However the entrepreneurs who are seeking for these resources are unqualified to receive them, because they lack the management structures necessary to make them bankable.
Mugalya said, “This is lacking in most business plans that are presented for financing, because Ugandans are still doing business informally. Even those who have tried to formalize their businesses have done it only on paper just for the sake of accessing funds. The investment institutions are formal entities that deal with other people investment money. There for it will be hard to just invest in a business that is not clearly laid out.”
Kenneth Kitariko, the CEO at African Alliance (Uganda) said entrepreneurs could make themselves more attractive for investments if they introduced a formally acceptable rating agency. He said the agency would rate the performance of these companies over the years so that information is availed to the inventors in case they want to invest in a certain project.
“As much as these entrepreneurs keep books of accounts, it is hard to be trusted by investors because Ugandans are known to be untrustworthy. It is therefore important that we introduce some rating strategy that is acceptable internally and externally. That way, it would be easy to access these funds,” Kitariko said.
On the other hand, some business people have blamed the investment community for being bureaucratic in the process of getting these funds and hence the preference for bank loans.
Racheal Mulindwa, a lecture at Makerere Business School and an entrepreneur said as much as investors are blaming the entrepreneurs for being semi-structured and not organized, they have also not done enough to make sure that information concerning the available resources and who qualifies, has not been adequately publicised.