Ghana Venture Capital to invest US$20m in SMEs

The Venture Capital Trust Fund will invest US$20million in small and medium enterprises (SMEs) in different sectors of the economy this year, building on a portfolio of investments currently valued at close to US$60million.

The Fund invested US$8 million in 2012, and a total of US$16 million has been invested in 46 SMEs since its creation in 2004. It is increasingly a key investor in the local agricultural sector through its agricultural value-chain financing of cereals and grains, to provide feedstock for the poultry and brewery industries.

Chief Executive Daniel Duku, speaking to the B&FT after signing a memorandum of understanding (MoU) with the Ghana Institute of Management and Public Administration (GIMPA) to lay the ground for impact investing in Ghana, said the Fund will leverage new partnerships to provide additional support to businesses.

He said the Fund is now turning its attention to impact-investing as investors are no longer considering just financial returns, but also having a positive social and environmental impact in areas where they channel their investments.

The MoU will, therefore, establish a collaborative framework for promoting impact investing as a means of developing a business community of social enterprises to tackle the social and environmental challenges confronting the nation.

“The Trust Fund desires to attract additional private capital to support businesses while providing innovative and effective solutions to social and environmental challenges in the country.

“We hope the pioneering steps we are taking today will catalyse a positive transformation of Ghana’s entrepreneurial ecosystem, where business owners and managers look beyond financial returns to deliver solutions that reflect positively on the communities and societies within which they operate,” he said.

The agreement with GIMPA is expected to culminate in the establishment of a GIMPA Centre for Impact Investing (GCII), which will receive seed-funding from the Fund using a grant from the Rockefeller Foundation.

Mr. Duku said the Fund with support from the Rockefeller Foundation commissioned a comprehensive study of the impact-investing policy environment in Ghana. The outcome of the report will serve as a useful guide for the new centre -- expected to be launched with the full report by the end of next month.

In a world where Government resources and charitable donations are insufficient to address the world’s social problems, impact investing -- that is, investments made into companies, organisations, and funds with the intention to generate measurable social and environmental impacts alongside a financial return -- offers a new alternative for channelling large-scale private capital for social benefits.

With increasing numbers of investors rejecting the notion that they face a binary choice between investing for maximum risk-adjusted returns or donating for social purposes, the global impact-investment market is now at a significant turning point as it enters the mainstream.

Impact-investing occurs across asset classes including private equity, venture capital, debt and fixed income. It is estimated that the impact investment market holds about US$400billion to US$1trillion in investment potential over the next 10 years.

“I think Ghana stands to benefit from about US$10billion to US$20billion of this amount. If you look at the amount of money coming through impact investment, private equity and venture capital, we expect this trend to grow.

“It is this potential that informs and motivates the introduction of impact investing in Ghana as a means to complement Government efforts to address major social challenges by engaging private capital,” Mr. Duku said.

Rector of GIMPA Professor Franklyn Kwabena Manu said the time is past due for academia to step out of the classroom and use its knowledge and expertise to help in development of the national economy.

“The GIMPA Centre for Impact Investing (GCII) is the beginning of one of many active channels that will serve as a beam of light to assist the business community, Government and individuals in identifying projects that can provide measurable social, as well as financial returns,” he said.

Source: B&FT 

The entrepreneur’s dilemma

By: Adrian Dommisse, founder and senior partner for Dommisse Attorneys

If you’re a small technology-based business and you want to grow, at some point you’ll need more money than you can raise from operations, or borrow from family and friends. That’s when you will need to turn to professional investors, in the form of a venture capital (VC) or private equity firm that will inject cash in return for a share of the business.

But which is the best option, and what are the risks and rewards of each?

The biggest difference is that a venture capital firm will typically invest, for the short to medium term, in companies at a relatively early stage of their development, when the risks of failure are higher. Many investment companies will either fail, or just putter along without doing anything spectacular.

To compensate for that risk, the successful company had better do spectacularly well – and so the typical VC will want to exit within three years, for perhaps ten times their initial investment.

As a result, it’s an understatement to say that a VC investment comes with some strings attached; they’re more like heavy-duty industrial cables. Strict performance requirements are standard, as are explicit dividends, determined upfront, which accrue until they can be paid. The VC will typically also demand the right to liquidate their investment – which may require the right to sell the company as a whole.

Also, don’t expect that as the founder you are automatically the right person to continue as MD or CEO. Part of the value a VC brings is to scale the business, and identify roles within the business (however senior) that need specialised managerial skills. Successful VCs are not, in general, cuddly sorts of people. It’s their job to be hard-headed to the point of ruthlessness; there is, after all, a lot at stake.

So inviting and accepting a VC investment is not a step to be taken lightly, or because it’s some kind of start-up status symbol. The purpose of VC is to provide the funds you need to grow, and so the investment is not a sign that you’ve made it – it’s the cue to work harder and more seriously than ever.

The typical private equity investor, on the other hand, has a slightly lower appetite for risk. They are more likely to take a five- to ten-year view, investing in a company that already has an established track record and can offer good turns – if not the spectacular ones demanded by the venture capitalist. A private equity investor will also bring a wider range of skills to the board.

On balance, if you can possibly afford to self-fund for just a little longer it may be worth hanging in there until you become worthy of the private equity funders’ attention. If you know that your growth ambitions are doomed to fail without that early cash injection, go for the VC option. But in either case, keep your eyes very wide open – and take all the experienced advice you can get.

Ghana Venture Capital Trust to increase Fund size

The Venture Capital Trust Fund is working to increase its fund size to 250 million dollars by August this year.

This was after the fund secured a 150 million dollar facility from the China Exim bank last week. The facility is expected to help the Trust promote private equity funding in the country.

Government, which is the majority shareholder in the fund, however has to provide the necessary guarantee before the funds come in.

Chief Executive of the Venture Capital, Daniel Doku told JOYBUSINESS this will help improve its dealings with small businesses.

The Venture Capital Trust currently has a fund size of 100 million dollars.

Ghana Stock Exchange partners Venture Capital Trust Fund for listing SMEss of

GSE display board

The Ghana Stock Exchange (GSE) has joined hands with Venture Capital Trust Fund to support small businesses wanting to list on the local bourse.

This has seen the two institutions sign a memorandum of understanding on Tuesday to formalize the partnership.

The arrangement will see the two institutions set up a revolving fund with a seed capital of one million dollars to take care of the listing expenses of small firms.

Managing Director of the Ghana Stock Exchange Kofi Yamoah tells Joy Business this should make it easier for small enterprises to come onto the exchange

Chief Executive of the Venture Capital Trust Fund, Daniel Doku on his part says the arraignment should provide an exit strategy for its investments in some of these firms.

The Ghana Stock Exchange plans to establish a separate market for small businesses and start ups by June this year.

The Ghana Alternative Exchange will specifically would be dedicated to start ups and with flexible listing requirements.

Source: Joy Business