JICA: Building Investment Pipeline & Strategy

The Japan International Cooperation Agency (JICA) has been working in cooperation with the Government of Uganda to foster socio-economic development in priority growth areas such as Economic Infrastructure, Agriculture, Basic Human Needs, Northern Uganda Reconstruction and Human Resource Development.

JICA now seeks to leverage the private sector to create impact through financing investment opportunities in the prioritised sectors listed below:

• Health Sector
• Energy
• Agriculture / Food Value Chain
• Job Creation / Business Support / Vocational Support
• Improvement / Redesign of Urban Space Utilisation
• Water / Hygiene Sector
• DX / ICT Sector
• Empowerment of the Vulnerable

JICA would like to contribute to narrowing the existing financing gap within the private sector investment ecosystem of Uganda. There was a need for JICA in establishing:

• Where to invest in form of debt, equity, and project finance instruments.
• How to invest with proper risk mitigation.
• What structures or capacity building JICA should implement to improve internally.
• Who to partner with (especially DFIs) and other investment funds for co-investments.

Furthermore, JICA needed to benchmark this approach against how other large development partners have moved to leverage the private sector in their bids to create impact within the country. This ought to offer learnings and considerations for JICA in its bid to create sustainable impact.

Objective

1. To understand the business environment of the private sector investment ecosystem in order to understand the investment landscape and determine where financing is available, the gaps, and where JICA can invest, creating the greatest impact.
2. To identify 30 viable projects (companies and PPPs) that JICA can invest in with ticket sizes of at least USD 10 M and USD 5 M debt and equity respectively.
3. To create relationships with Development Financial Institutions to co-finance viable projects in Uganda and leverage their expertise and capacities to invest in Uganda.

Outcome

1. A mapping of the private sector investment ecosystem was developed, and an analysis of Uganda’s investment environment and private sector conducted informed JICA on the investment landscape particularly the investment macro-environment, policy, legal and regulatory framework, the economic enabling environment as well as the current state of investments in the private sector.
2. For each selected sector, a business environment analysis was conducted to understand the sectoral financing gaps, financing needs, financiers, and partners (DFIs, MDBs, Development Partners, PE firms, private sector credit). These learnings were used to guide JICA on which sectors, sub-sectors, and levels of investment needed to fill the gaps.
3. A total of 223 concepts were received and reviewed using a developed scoring matrix based on JICA’s interests, the business model practicality, financial soundness as well as the investment readiness of the project. These companies were shortlisted for 50 and finally 30 cases.
4. JICA was supported in the development of investment strategic direction and plan. This included interactions with other Development Banks to learn how they finance in Uganda, mechanisms as well as capacities needed. From this exercise, JICA was able to identify potential co-financing partners for investing in the 30 shortlisted projects. This strategic direction and plan was also used to advise on how to invest in the sectors, the different level of risks associated as well as how to conduct due diligence for the private sector projects.