With limited access to affordable and long-term credit continuing to hinder investments in agro-processing in Uganda, collaboration among the sector players is key to unlocking new funding mechanisms.
This is even more important as the Uganda Manufacturers Association (UMA) reports a 60% reduction in production by members occasioned by the COVID-19 pandemic.
The Yield Uganda Investment Fund (Yield Fund), managed by Pearl Capital Partners (PCP), provides one such avenue for access to credit for companies in the agro-processing value chain.
Last week saw the conclusion of months of behind-the-scenes work involving UMA, PCP, and Pura Organic Agro Tech Ltd that resulted in the approval of an investment worth $2.5 million (about Shs8.8b) in Pura Organic Agro Tech Ltd, an agro-processing company focused on the cassava value chain.
This investment, the eighth by the Yield Fund into the Uganda agriculture sector, marks the first substantial value addition investment into the cassava value chain in Uganda.
It also presents a great opportunity for the development of a myriad of products for both the domestic and export markets.
To put this into perspective, the global cassava starch market size was valued at $40.53 billion in 2018 and is projected to reach $66.84 billion by 2026, exhibiting a CAGR of 6.50% during the forecast period and Uganda now stands poised to play a key role in this market.
Mr Daniel Birungi, the Executive Director of UMA, last week applauded the efficiency of the Yield Fund’s internal processes that have seen the investment approved in only three months from initial introduction.
He noted that this was a step in the right direction to foster sustainable agro-industrialisation through supporting companies in the agri-business sub-sector.
“Working with the Pearl Capital Partners, we intend to hand-walk more of our members towards affordable and patient financing options as we have done in this case. The COVID-19 pandemic has made the need for such a service even more urgent and we are keen to build on this success,” Mr Birungi added.
Mr Wanjohi Ndagu, the Partner at Pearl Capital Partners, also expressed confidence that this investment in Pura would not only be a success to the Fund but also a great contributor to Uganda’s socio-economic transformation.
“We are honoured to work with Pura to boost cassava value addition and achieve Uganda’s import substitution industrialization strategy,” he said.
Mr. Ramesh Babu, the proprietor of Pura, said that the investment by Yield Fund was a timely relief for Pura which will support the company to establish this cassava processing unit, which is a valuable addition to the farmers.
“Pura will buy cassava from out-growers and support them to get value for their produce. Also, the farmers will get cassava cuttings from Pura’s farm or supply the cuttings from out-growers who intend to produce cassava roots since they have a buy-back confirmation,” he said.
European Union Ambassador to Uganda Attilio Pacifici said the investment is part of a broad partnership between Uganda and the EU to promote sustainable investments especially in the agriculture sector.
“This long-standing partnership has been bringing concrete results over the years and this investment is one of them. One of the key objectives of this intervention is to support the agro-industrialisation of the country while ensuring the full engagement of smallholder farmers and promoting food quality and security,” he said.
Lakshmi Moola, the IFAD Country Director for Uganda, added: “Pura’s addition to Yield Fund’s portfolio enhances the diversity of the Fund, as the company focuses on a staple, food secure and nutritious crop – cassava. The domino effect of this investment for rural smallholders will be tremendous and through the BDS facility, IFAD will support Pura in achieving a smallholder inclusive business model.”
The Yield Fund is an innovative social impact investment fund targeting the missing middle in the investment space – agricultural small and medium sized enterprises (SMEs) and producer groups in Uganda.
It offers patient, risk capital products, such as equity, quasi-equity and debt funding and its partners include: the European Union (EU), through the International Fund for Agricultural Development (IFAD) and the National Social Security Fund (NSSF), with follow-on investments from the Open Society Foundation (OSF) and FCA Investments in June 2019.
The Yield Fund also has a Business Development Support (BDS) matching grant facility provided by the EU and managed by IFAD to support the investee company’s operations and technical needs.
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