Thursday July 24 2014

Local SMEs set to benefit from Shs130b equity fund

Grain millers and traders sort maize for

Grain millers and traders sort maize for packaging. Such groups of entrepreneurs will be able to access money from equity funds under the new arrangement. PHOTO by STEPHEN OTAGE 



Small and Medium Enterprises (SMEs) that have not matured to raise capital through the stock market can now benefit from funds mobilised by private equity players to grow their businesses further, trade and investment experts have said.
One such equity fund that the SMEs should take advantage of, according to the industry experts, is the $50 million (about Shs131 billion) that has been made available by Eastern Africa’s new private equity player, Ascent.
Last week, Ascent announced the first close of their =Ascent Rift Valley Fund (ARVF), which raised $50 million to be invested in growth of enterprises across Eastern Africa—with SMEs being among those targeted to benefit from the fund.
“Ascent will invest in 8 to 12 companies across the region. The investment size will be between $1million (about Shs2.6 billion) and $9 million (about Shs27 billion),” reads the press statement issued by the private equity player, Ascent.
In an interview yesterday, Capital Market Authority chief executive officer Keith Kalyegira said: “ Anything thing that helps SMEs become better is welcome. And anyone that can help SMEs with patient capital (long term capital) is even far better.”
He continued: “Private and public equity are good avenues that SMEs can take advantage of. However, the only challenge is that most of our SMEs have bad governance structures and do not pay attention to important operational details of their companies.”
Mr Edgar Mutebi, a trade analyst, told the Daily Monitor yesterday that funds provided by the private equity will help SMEs that are trying to list (raise money through capital markets) but are short of the required threshold.
He said: “SMEs can take advantage of the equity funds and then two years down the road they can hit the stock market for more funds.”

Source of the funds

The $50million fund was tapped from the local institutional capital, including pension funds, in its first fundraising. The total Kenyan institutional capital contribution to the Ascent Rift Valley Fund currently stands at $5 million, which is 10 per cent of total commitments. Commercial investors - local institutions and private international investors have committed 70 per cent of the funds. Speaking at the launch of the fund, Ascent Capital Advisory Services’ Partner David Owino, said: “This is the first time in the region that local pension funds have committed to invest in a private equity fund.”