Download Yield Uganda - Pearl Capital Partners

€12
million
Impact Investment Fund
for Uganda, focused on the
agriculture sector
Investing in the
Agribusiness
Value Chain
1
An Introduction to Yield
zz PCP Uganda is launching a €12 million Fund to invest
in Small & Growing Agribusinesses (SGAs) positioned
in agricultural supply chains in Uganda, the Yield
Uganda Investment Fund
zz Yield is being formed with the support of the
European Union (EU) Delegation to Uganda and the
International Fund for Agricultural Development
(IFAD), who have provided an initial funding of €10
million, providing first loss protection to equity
investors
zz NSSF Uganda is providing funding of €2 million to the
Fund
zz This event marks the first closing of the Fund. Due
diligence is ongoing with prospective investors, looking
to achieve a second closing by November 2017 with a
total Fund size of €25 million capital
zz The Fund is registered, domiciled, and managed in
Uganda
2
Yield Uganda Investment Fund:
Why Agribusiness?
zz High impact and solid fundamentals
zz Stable government, sound macro-economic policy
framework, free movement of capital
zz Ugandan agriculture has extremely high potential:
• Favourable rainfall patterns mean that annual
double-cropping is possible in most parts of the
country
• Abundant supply of labour in rural areas
• Growth in domestic and regional demand for food
products
zz Improvements in rural infrastructure beginning to
drive reductions in transaction costs
zz Strong demand for investment capital from
an increasing volume of agriculture-related
entrepreneurs
3
Yield Uganda Investment Fund:
The Opportunity
YIELD
Summary
zz Single country-focus:
•No dilution of focus by the Fund
Manager, boots on the ground
zz High impact proposition:
•Focus on Economic Internal
Rate of Return, employment and
impact on rural households
zz Supported by practical and
commercial approach to financial
investing: mix of instruments
(debt and equity)
zz Supported by a dedicated
Business Development Support
grant facility available to
Yield investees, as soon as the
investment decision is made
Macroeconomic
Environment
Agriculture
in Uganda
zz Uganda’s GDP growth
was 5.3% in 2015, higher
than the Sub-Saharan
average of 4.5%, with
projections for 2020 at
6.3% and 5.4% for Uganda
and Sub-Saharan Africa
respectively
zz Agriculture continues to
be the most important
sector in Uganda’s
economy in terms of raw
materials for industry,
food and nutrition
security, employment,
income and exports to
regional and international
markets
zz The outlook for inflation
and interest rates shows
gradual decline over the
next 5 years to 2020,
which will provide a
conducive operating
environment for
businesses
zz The sector grew by
2.8% in 2014/2015,
contributing 24% of the
total GDP
zz Over 65% of Uganda’s
population is engaged in
agriculture
4
Yield Uganda Investment Fund:
Case for the Fund
zz The Yield Uganda Investment Fund is positioned for
the impact investor seeking to achieve:
• Risk adjusted financial returns
• First loss protection from the Fund’s Anchor Investor
(European Union)
• Strategic call option on sustained high commodity
prices
zz Investment returns and amounts:
• Mix of equity, quasi-equity, and debt designed to
generate Euro returns of 16% (equity) and 11% (debt)
• Investment range from €250,000 to €2 million
zz Plus high measurable social returns:
• Economic Internal Rate of Return of 30%
• Contribution to improved food security
• Commitment to sustainable economic growth in
Uganda
• Tax-resident in Uganda
5
Yield Uganda Investment Fund:
The Fund Manager
zz PCP Uganda is a wholly-owned subsidiary of Pearl
Capital Partners, an investment fund manager resident
in Mauritius and licensed by the Financial services
Authority of Mauritius. PCP Uganda is regulated by
the Capital Markets Authority of Uganda
zz PCP Uganda is managed from offices in Kampala. The
PCP Uganda team has been operating since 2005, and
has unparalleled experience of investing in Ugandan
agriculture-related businesses
zz PCP Uganda has in-depth experience of tailoring
investment structures to the needs of the individual
investee, including both equity and medium/long term
debt
zz PCP Uganda will be supported by Deloitte (Uganda)
Limited, which will conduct thorough financial due
diligence (including tax compliance and status review)
on all investees which pass initial screening
6
PCP Uganda – Track Record
zz PCP has demonstrated “proof of concept” during its 11
years of operations
zz Investments in more than 30 East African businesses
to date, including 9 in Uganda
zz Current Ugandan portfolio projected to yield 10-12%
with significant social impact
zz Average investment holding period 5-7 years
zz First exit occurred in June 2009
zz As a result of PCP risk capital investments, existing
portfolio companies have attracted substantial
additional capital from traditional investors (examples
available upon request)
zz Detailed track record available upon request
7
Yield Uganda Investment Fund:
The Fund Manager
Edward Isingoma
Wanjohi Ndagu
Chartered Accountant/MBA
Managing Partner. Has over 10
years with PCP first as CFO, then
on Direct Investments.
Partner. Joined the team in 2007.
Has over 9 years with PCP, initially
as Investment Manager. Holds an
MBA.
Kenneth Ibbett
Investment Advisor. Has over
20 years experience as NED,
Managing or Main Board Director
of public and private equitybacked companies in several
sectors.
Mike Kinuthia
David Wangolo
Investment Director. Joined
team in 2011 with over 8 years
experience in investment advisory
and corporate finance.
Investment Manager. Joined team
in 2012. Has 5 years experience
in transaction advisory and capital
raising. He is a CFA.
Wiem A. Bernet
Investment Manager. Joined team
in Dec 2015. Has over 6 years
experience in financial markets,
banking and risk. Holds a MSc
International Finance/Engineer.
8
Yield Uganda Investment Fund:
Key Terms
Target Fund Size
Blended Value
Fund
€25 million
Target 9% IRR (net) for equity
investors, 7% IRR (net) for Anchor
Investor
First loss protection for equity
investors
Defined social return
Manager
PCP Uganda Limited
First Close
Q4 2016 at € 12 million, Second
Close: Q4 2017 (latest)
Investment
Period
5 years
Term
10 years, extendible for 2
successive years
9
Yield Uganda Investment Fund:
Business Development Support (BDS)
Facility
Rationale for a BDS facility
Sound business administration, systems and internal
controls are critically important to build management
capacity beyond the entrepreneur
• Experience in SGA investing shows that
complete pre-investment assessment of business
administration, systems and internal controls,
followed by active post-investment support is
essential to enterprise growth
• BDS facility allows for specific allocation of time and
capital resources to meet this need
Structure of BDS facility
Separate BDS project to run alongside the Fund and
capitalised with a € 3 million grant funding, provided by
the EU and managed by IFAD
BDS provision process
BDS needs assessment as part of due diligence. Results in
a bespoke business development support plan agreed at
time of investment
• Cost sharing between BDS Facility and Investee
Companies
10 Yield Uganda Investment Fund:
The Prospective Investees
Investees' investment criteria
A. Business environment criteria
• No state marketing interventions in the sub-sector
• Absence of domestic price controls on agricultural
products
• No unduly restrictive regulatory burdens on the
sub-sector
B. Enterprise criteria
• Growth trend shown in historical and forecast
demand volume
• Competitive advantage: regionally competitive
cost of production, product quality matching or
exceeding regional industry standards
• Stable prices: increasing or stable forecast product
prices
C. Performance criteria
• Track record: minimum one year audited financial
records and positive reputation with banks,
suppliers and customers
• Excellent management team with good
entrepreneurial quality
• Well-researched and realistic marketing plan
D. Social and developmental criteria
• Targeted Economic Internal Rate of Return of 30%
• Social impact including overall job creation resulting
from the growth plan
• Equal opportunities by age, gender and health
status
• No adverse environmental impact
Investment Process
Investee Origination:
identify investee in targeted
sub-sectors
Investee Screening:
assess investees against investment
criteria, financial and social returns
Investee Due Diligence:
detailed due diligence to support Fund
Investment Committee and Board approval
Investment Completion:
signing of investment documents
and disbursement
Investee Management:
continuous monitoring and review of
investee performance
Investment Exit:
self-liquidation, trade sale, secondary
buyout, IPO, etc.
Key Contact Information
Edward Isingoma
PCP Managing Partner
Tel.: +256 312 264983/4
Mob: +256 772 663564
[email protected]
www. pearlcapital.net
Kenneth Legesi
Deloitte Manager – Advisory
Tel.: +256 417 701329
Mob: +256 776 391939
[email protected]
www. deloitte.com