Ugandan manufacturers look to capital markets for financing

Ugandan manufacturers are turning to the capital markets for long-term financing in a bid to enhance access to non-bank financing alternatives and expand their operations. The COVID-19 pandemic has taken a toll on the manufacturing sector in Uganda, with some businesses operating at only 30 to 40 percent capacity, a significant decrease from pre-pandemic levels. To address this challenge and support the growth of the manufacturing industry, the Capital Markets Authority (CMA) of Uganda has entered into a memorandum of understanding (MOU) with manufacturers to facilitate market-based financing options. Keith Kalyegira, the CEO of CMA Uganda, highlighted the strategic importance of the manufacturing sector, which contributes about 8 percent to the country's economy. With every percentage point representing approximately $350 million in additional production, the need to bolster manufacturing activities is evident. The MOU aims to expose manufacturers to various forms of market-based financing, including private equity, corporate bonds, and public listings, to help them prepare for long-term growth. One of the key initiatives outlined in the MOU is capacity building and knowledge sharing to ensure that manufacturers are investor-ready. Kalyegira emphasized the importance of governance and readiness to attract potential partners and access patient capital. By equipping manufacturers with the necessary tools and information, the CMA aims to bridge the financing gap in the sector, estimated at $350 million per year to facilitate meaningful growth. Despite the challenges posed by the global pandemic, Kalyegira remains optimistic about investor appetite in the manufacturing sector. While valuations may have been impacted in the short term, he believes that the vaccination efforts worldwide will lead to a resurgence in investor interest. Sectors such as healthcare, IT, and logistics have proven resilient during the pandemic, offering promising opportunities for investment. In addressing the barriers faced by small and medium enterprises (SMEs) in accessing equity markets, Kalyegira highlighted the need for tailored solutions to support smaller businesses. He emphasized the importance of SMEs preparing themselves to engage with potential partners, addressing issues of control and access to capital. Leadership development and mentorship were also identified as critical factors in ensuring the success of businesses and their ability to tap into long-term funding options. As Uganda looks to accelerate the growth of its manufacturing sector, the partnership between the CMA and manufacturers signals a positive step towards enhancing market-based financing opportunities. By fostering a conducive environment for businesses to access patient capital and expand their operations, Uganda aims to position itself as a hub for sustainable industrial development.