VCTF can do better for SMEs

The Venture Capital Trust Fund (VCTF) has not lived up to its potential to transform the fortunes of small and medium-scale enterprises (SMEs) in the country and support government’s growth agenda, Albert Essien – a banking and finance consultant, has said.

“I think it [VCTF] should have been the real engine or catalyst for the growth of SMEs. But what do we see? I am happy they have put some money in a couple of funds, but they can do better in supporting government’s growth agenda,” Mr. Essien told the B&FT in an interview.

To him, the VCTF should be investing in private equity (PE) and venture capital (VC) funds that have the capacity to strengthen SMEs, lead those SMEs to profitability and offer them listing on the Ghana Stock Exchange or private hands.

“I have never supported the fact that they have placed monies with commercial banks. I believe they should place funds with PE funds, or do so directly and ensure that those companies have very good boards and technical people directing them.

“The VCTF should be part of good technical assistance to these businesses and offer them listing on the GSE or alternative exchange. I think that is how we should nurture businesses in Ghana. The VCTF has not done that, and I think it has not done good service for this country over the years,” he added.

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The Venture Capital Trust Fund (VCTF) was established by an Act of Parliament, Venture Capital Trust Fund Act, 2004, Act 680. The objective of the Trust Fund is not only to provide financial resources to the SMEs, but also to initiate relevant activities for development and promotion of the venture capital industry in the country.

Since its establishment in 2003, the VCTF was funded from the National Reconstruction Levy which came to an end in 2006 – and since then was funded from budgetary allocation until that also stopped in 2013.

VCTF reacts

But the current Chief Executive Officer of the VCTF, Yaw Owusu-Brempong, told the B&FT in a separate interview that the VCTF, since its establishment in 2003, is still in the business of supporting SMEs.

“Our mandate as a VCTF is to provide longer-term capital and develop the local capacity of our financial advisors and fund managers to effectively deploy that capital in the most promising SMEs through equity and quasi-equity instruments,” he said.

The VCTF, he noted, has deployed a total of US$19million in six VC funds, and this capital has supported about 52 portfolio companies to expand and grow in various sectors of the economy. “We are proud to say that through the US$19million funds provided by the VCTF, the six funds have raised an additional US$89.2million – bringing the total funds under management to US$108.2million,” he added.

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He assured that the VCTF will continue to champion the cause of the private sector and SMEs in Ghana by easing access to long-term funding for the private sector by supporting more PE and VC funds.

“We are currently reviewing six fund applications, and I can assure you that the VCTF is back to fulfil its mandate of supporting SMEs through venture capital financing,” Mr. Owusu-Brempong added.

Revival of the VCTF

The VCTF, for the first time in five years, was allocated GH¢219million in the 2017 budget to support SMEs. In the 2018 budget, government added GH¢100million.

The last time the fund had budgetary allocation was in the 2012 budget that was implemented by former Finance Minister Dr. Kwabena Duffuor, which saw the fund receive GH¢5million. Before that, the fund was supported with GH¢10million.

Since then, no budget allocation had been made in the 2013, 2014, 2015 and 2016 budgets, prompting managers of the fund to urge government to come to the aid of the fund – which is mandated to support SMEs at more affordable rates.

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