South African risk financier for small and medium enterprises (SMEs) Business Partners has begun operations in Uganda, aiming to make investments of between US$50,000 and US$1 million in East African companies.
Business Partners has launched Business Partners International (BPI) Uganda in Kampala, with chief operating officer (COO) Mark Paper saying it forms part of the establishment of the larger Business Partners International East Africa (BPI EA) company.
BPI EA was established last year as a US$30 million investment company, with Business Partners leading a consortium that also includes the International Finance Corporation (IFC), Swiss Investment Fund for Emerging Markets (SIFEM), Stichting DOEN, the Dutch Development Agency (FMO), Mennonite Economic Development Associates (MEDA) and Norfund.
BPI Uganda is a move by Business Partners to increase its exposure in the East African region having previously launched the BPI Kenya SME Fund in 2007 and the BPI Rwanda SME Fund in 2012.
“Previously, we have always set up and managed investment funds with an investment life limited to 10 years. This new investment vehicle however doesn’t have a limited life and has been established as a permanent company with the purpose of offering risk capital and technical assistant support for the targeted countries in East Africa,” Paper said.
After positive results from the Kenya and Rwanda funds, Paper said Business Partners had recognised the opportunity to establish a permanent company in the region with an unlimited investment life. The Kenya and Rwanda funds will also be converted into permanent companies once they end their operations in 2017 and 2018.
Uganda was a clear choice for investment for the first phase of the company’s expansion plan across Africa, Paper said.
“The country has experienced an upsurge in middle class and the level at which new business enterprises are being opened and established is increasing. Entrepreneurship is thriving in Uganda and currently contributes approximately 90 per cent to the country’s GDP,” he said.
“We also recognised Uganda as a growth centre for Africa due to the country’s growing economy over the past five-year period, and the fact that the East African region continues to prosper, with a forecasted GDP growth of 5.5 per cent expected in 2016.”
BPI Uganda will look to provide access to funding, post-investment technical assistance support and mentorship for entrepreneurs and SMEs.
“Similar to South Africa, all applications will be assessed on the viability of the business, the entrepreneur’s integrity, drive and experience, as well as their ability to manage a successful independent enterprise. Capital and security are not necessarily required for an application to be accepted,” said Paper.
The new company will also have a specific mandate to operate exclusively in the SME space.
“We seek to reach out to family-owned companies and those enterprise owners whose businesses are doing well but cannot attract the full commercial lending support that they need from traditional banks,” Paper said.
“Private equity firms often refrain from lending to these SMEs as they are either too small, or prefer not to deal with the complexities of doing business with a family management team rather than a board of members. This is however the area that BPI specialises in, and the exact service offering that we are working to expand to entrepreneurs across Africa.”