…targets US$100m to SMEs for next half-decade
The Chief Executive Officer of the Venture Capital Trust Fund (VCTF), Yaw Owusu-Brempong, has cited absence of a consistent, adequate and sustainable source of funding as the biggest constraint his outfit has faced in its 17-year existence.
A phenomenon he says has inhibited the fund’s ability to comprehensively deliver on its mandate to serve as an alternative source of patient finance for small and medium-sized enterprises. The fund, which was established by Venture Capital Trust Fund Act, 2004, (Act 680), was to be capitalised primarily from a 25 percent allocation of the National Reconstruction Levy.
Speaking during Ghana Venture Capital and Private Equity Association (GVCPEA) launch, Mr. Owusu-Brempong explained that his outfit had received in the region of US$25million from the Reconstruction Levy until it was abolished in 2007. Ever since, the fund has had to rely principally on irregular and inadequate funding from the Ministry of Finance.
“As the very institution that was created to provide funding for SMEs, our problem has been funding,” he said. “Since the Reconstruction Levy was abolished and not replaced, we have had to rely on the Ministry of Finance; and we all know how tight the purse has had to be recently with the financial sector clean-up and the pandemic.”
Despite these glaring constraints, the VCTF has disbursed approximately US$110million to some 60 companies through seven funds, he disclosed.
Ghana Economic Transformation Project
The VCTF Chief Executive however shared cause for optimism, as he stated that the Fund expects to disburse another tranche of capital in excess of US$100million over the next five years. He said this will be possible through a US$45million injection from the World Bank through the Ministry of Finance-initiated Ghana Economic Transformation Project (GETP).
Offering further insight, he said: “Fortunately, the Ministry of Finance has put us on the GETP and we are almost at the end of the tunnel (with regard to receiving the funds). Once the Venture Capital Fund Trust Board is inaugurated, we should begin accessing funds. We are in discussions with the Ministry of Finance on how to collaborate under the Ghana CARES programme, and immediately we have more funding we will be able to invest in more fund managers who will further lend to businesses”.
He added that special dispensation will be given to businesses owned by young persons, women and persons living with disabilities (PWDs).
On his part, Head of the Financial Service Division at the Ministry of Finance, Sampson Akligoh – who was representing the minister, Ken Ofori Atta – said his outfit, in addition to restructuring the Fund and placing it under the GETP, will ensure that the Venture Capital Trust Fund is integrated with other key institutions; including the impending National Development Bank.
“Fundamentally, it is our goal to strengthen the private sector ecosystem because the VCTF is a fund of funds and we will be working closely with the SEC to ensure that these reforms are in place; and it will be reinforced by having the Development Bank operational, which would give us a more comprehensive framework with which to tackle the problems,” he explained.
The association has been established “to serve as the mouthpiece of the industry, which is capable of engaging government for the necessary policy and regulatory frameworks that guide further development of the VC/PE ecosystem in Ghana”.