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Tag: Venture Capital Trust Fund

  • We’ve been recapitalised with $40m to invest in SMEs – Venture Capital Trust Fund

    We’ve been recapitalised with $40m to invest in SMEs – Venture Capital Trust Fund

    The Chief Executive Officer (CEO) of Venture Capital Trust Fund (VCTF), Yaw Owusu-Brempong, has as reaffirmed that his organization is prepared to assist new businesses and small and medium-sized enterprises (SMEs) in achieving growth.

    This comes on the back of government’s decision through the Ghana Economic Transformation Project (GETP) to recapitalise VCTF with US$40 million, in what is seen as a change in fortunes for the once cash-strapped fund. Its recapitalisation could offer SMEs much-needed capital to revitalise the recovery process.

    “Fortunately for us, for the past two years, venture capital has been given attention and we have been recapitalised with an amount of US$40 million to actually invest in more funds so that we can invest in SMEs. We have started investing in funds; last year we invested about GH¢95 million in four funds and in 2023, we intend to commit more. These fund managers are going to leverage them to raise additional money so, they have enough to invest in SMEs,” Mr. Owusu-Brempong said.

    The VCTF operates through Venture Capital Finance Companies (VCFC). Each VCFC is managed by a fund manager, licensed by the Securities and Exchange Commission (SEC). VCFCs (fund vehicle) act as intermediaries between SMEs requiring funds for viable business projects and the Trust Fund.

    Speaking at an SME roundtable in Kumasi, the Ashanti Regional capital, Mr. Owusu-Brempong, hinted that the fund is working at a full force as they have adequately been recapitalised and expects to raise GH¢100 million this year.

    Mr. Owusu-Brempong explained that the fund initially, was supposed to get 25 percent of the national reconstruction levy but unfortunately, the levy was scrapped the very year the trust started operations.

    Left with no option, he said the VCTF have had to rely on budgetary allocations which are not only irregular but inadequate, thereby limiting the fund’s ability to deliver on its mandate of providing financial resources for SMEs.

    He indicated that since 2010, the Trust Fund has investments in 11 VCFCs which have also gone ahead to invest in 70 companies.

    SME Round Table discussion

    As part of efforts to assist businesses thrive after its recapitalization, the VCTF is collaborating with the Association of Ghana Industries (AGI) to create awareness on alternative sources of funding for SMEs.

    “VCTF as part of our mandate has decided to create awareness and update knowledge about the kind of alternative funding venture capital/private equity offer to businesses especially SMEs and Kumasi is our first stop. We decided to do this in collaboration with AGI because of the role they [AGI] play in the Ghanaian economy”, he said.

    Chairman of the Association of Ghana Industries for the Bono, Ahafo Bono East and Ashanti Regions, Kwasi Nyamekye encouraged members of the association and other SMEs and startups to patronise VCTF, saying it gives borrowers ample time repay their loans, in addition to capacity building and other support systems.

  • VCTF funded with US$70 million since establishment

    Since its establishment in 2006, the Venture Capital Trust Fund (VCTF) has received investment totaling US$70 million, leaving a US$102 million financial gap that must be filled if it is to achieve its goal of providing financing to the Small and Medium Enterprises (SMEs) sector.

    Assessments by Bolton Consulting Group (BCG) found that VCTF needed a minimum of US$172 million to fulfill its mission before the World Bank recapitalized it under the Ghana Economic Transformation Project with US$ 40 million and a US$ 5 million technical assistance facility.

    The VCTF board has long-term funding sources as one of its main priorities, according to Yaw Owusu-Brempong, the organization’s chief executive officer, in an interview with B&FT.

    “At the board level, one of our major issues is a permanent source of funding. Because it’s a revolving fund, either we get one large money – which is very difficult – and then we don’t even go back to the ministry again, just like Development Bank Ghana; or on gradual basis, if for the next 10 years – if every year we are getting an additional US$10million – then after 10 years there will be no need to actually go back to the ministry. Because it doesn’t make sense that every now and then government will pump money into the fund.

    “We keep returning because financial inflows haven’t been steady, but if financing does start to flow steadily, as the BCG has advised, then there may come a day when we won’t even need government support because we’ll be able to stand on our own two feet,” Mr. Owusu-Brempong said.

    “The VCTF needed minimum of US$172million per recommendations by the BCG, and over the years from 2006 to 2021 the total monies given to us was US$30million; so there was a gap of US$142million. Now in 2022, as a result of the recommendation, US$40million has been received under the Ghana Economic Transformation Project. This leaves the current fund gap at US$102million,” the CEO revealed.

    VCTF commitments

    The VCTF has committed about US$25million – at different exchange rates – to seven funds between 2006 and 2020; and GH¢60million in 2022 and an additional GH¢60 million by the end of 2022.

    Over the next five years, VCTF intends to deploy GH¢1.5billion to support SMEs. With this amount, we intend to leverage about GH¢5 for every GH¢1 spent; thereby increasing the capital pool for SMEs to about GH¢7.5billion.

    Cause of funding gap

    When the VCTF was set up in 2004 and started operations in 2006, the Fund was supposed to get 25 percent of the National Reconstruction Levy – mainly a levy on the banks and insurance companies, with seed money of about GH¢22million, equivalent to US$22million at the time.

    “Unfortunately, in 2006 the levy was abolished – and that has been our biggest challenge,” the CEO said.

    “So, our source of funding was the reconstruction levy and then allocation from the Ministry of Finance; but if the levy had been there, I’m sure we wouldn’t even have needed money from the Ministry of Finance. Unfortunately, it was abolished. So, subsequently, allocations from the Ministry of Finance were not consistent. There were some years we weren’t getting anything at all, depending on the ministry’s priorities,” Mr. Owusu-Brempong stated.

  • VCTF funded with US$70m since establishment

    The Venture Capital Trust Fund (VCTF) has received US$70million in funding since its founding in 2006 – leaving a US$102million funding deficit in the aim to fulfil its objective of providing financing to the Small and Medium Enterprises (SMEs) sector.

    Prior to the World Bank’s recapitalisation of VCTF under the Ghana Economic Transformation Project with US$40million and a US$5million technical assistance facility, assessments by Bolton Consulting Group (BCG) revealed that VCTF needed a minimum of US$172million to carry out its purpose.

    In an interview with B&FT, the Chief Executive Officer of VCTF, Yaw Owusu-Brempong, stated that securing long-term funding sources is a top priority for the VCTF board.

    “At the board level, one of our major issues is a permanent source of funding. Because it’s a revolving fund, either we get one large money – which is very difficult – and then we don’t even go back to the ministry again, just like Development Bank Ghana; or on gradual basis, if for the next 10 years – if every year we are getting an additional US$10million – then after 10 years there will be no need to actually go back to the ministry. Because it doesn’t make sense that every now and then government will pump money into the fund.

    “We keep returning because financial inflows haven’t been steady, but if financing does start to flow steadily, as the BCG has advised, then there may come a day when we won’t even need government support because we’ll be able to stand on our own two feet,” Mr. Owusu-Brempong said.

    “The VCTF needed minimum of US$172million per recommendations by the BCG, and over the years from 2006 to 2021 the total monies given to us was US$30million; so there was a gap of US$142million. Now in 2022, as a result of the recommendation, US$40million has been received under the Ghana Economic Transformation Project. This leaves the current fund gap at US$102million,” the CEO revealed.

    VCTF commitments

    The VCTF has committed about US$25million – at different exchange rates – to seven funds between 2006 and 2020; and GH¢60million in 2022 and an additional GH¢60 million by the end of 2022.

    Over the next five years, VCTF intends to deploy GH¢1.5billion to support SMEs. With this amount, we intend to leverage about GH¢5 for every GH¢1 spent; thereby increasing the capital pool for SMEs to about GH¢7.5billion.

    Cause of funding gap

    When the VCTF was set up in 2004 and started operations in 2006, the Fund was supposed to get 25 percent of the National Reconstruction Levy – mainly a levy on the banks and insurance companies, with seed money of about GH¢22million, equivalent to US$22million at the time.

    “Unfortunately, in 2006 the levy was abolished – and that has been our biggest challenge,” the CEO said.

    “So, our source of funding was the reconstruction levy and then allocation from the Ministry of Finance; but if the levy had been there, I’m sure we wouldn’t even have needed money from the Ministry of Finance. Unfortunately, it was abolished. So, subsequently, allocations from the Ministry of Finance were not consistent. There were some years we weren’t getting anything at all, depending on the ministry’s priorities,” Mr. Owusu-Brempong stated.

  • VCTF to deploy GH¢1.5bn to boost SMEs

    In the next five years, Venture Capital Trust Fund (VCTF) will deploy GH¢1.5 billion to support small and medium-sized enterprises (SMEs) while accelerating their growth, the Chief Executive Officer of the VCTF, Yaw Owusu-Brempong, has revealed.

    This, the CEO said, has become necessary given the significant role SMEs play in the country, but faces serious challenges when it comes to funding.

    In an interview with the B&FT following the signing ceremony of investment agreements for MIREPA SME Fund and WANGRA Green Ventures, the CEO indicated that the VCTF stands to increase the capital pool to the SMEs sector.

    “Over the next five years, VCTF intends to deploy GH¢1.5 billion to support SMEs. With this amount, we intend to leverage about GH¢5 for every GH¢1 spent, thereby increasing the capital pool to SMEs to about GH¢7.5 billion.

    This is an ambitious plan and calls for all key stakeholders in the finance industry and other international agencies to partner with the Trust Fund to make this plan a reality,” Mr. Owusu-Brempong said.

    The VCTF investment agreement, signed with MIREPA SME Fund and WANGRA Green Ventures – venture capital (VC) Fund Managers, will deploy GH¢35 million to SMEs in Ghana. This makes total capital deployment toward SME finance to GH¢60 million in under 2 months this year.

    “We intend to deploy about GH¢95 million by year-end, so stay tuned,” the CEO assured.

    VCTF has been recapitalised under the Ghana Economic Transformation Project by World Bank with US$40 million to invest in both early-stage and transformational sectors of the Ghanaian economy in addition to a technical assistance facility of US$5 million, which allows the Trust Fund to design programmes for the development of the VC ecosystem.

    Between 2006 and 2020, VCTF committed about US$25 million to seven funds.

    “If you look at the fact that between 2006 and 2020, we’ve done a total of seven funds or we’ve committed to seven funds, and this year alone, we’ve done three, then, that is a significant growth. We’ve committed roughly about US$25 million but at different exchange rates because it’s over a period of time,” Mr. Owusu-Brempong noted.

    “By these investments, VCTF has demonstrated its willingness to back and build a talented group of young individuals who are able to combine industry and operational know-how with growth investment expertise to partner exciting SMEs and talented groups of entrepreneurs in strategic sectors of the Ghanaian economy,” he said.

    Some successful investments include Joyce Ababio Fashion, Axis Pension Fund, African University College of Communications (AUCC), Legacy Girls, Rising Sun Montessori, Everpure Ghana as well as Scientellect DNA Diagnostic Centre and Caltech – an ethanol processing business – which was later taken over by Kasapreko.

    “We are very selective in our choice of fund managers because VC investment is not about managing money, it is about managing several businesses at the same time; so you need skills that cut from investment to entrepreneurship, leadership and a general understanding of the business environment, and the kinds of support to give to businesses to thrive,” the CEO mentioned.

    He assured that VCTF will continue to support further development of the VC/PE ecosystem through its technical assistance facility.