‘Use Venture Capital financing for 1D1F projects’

Yaw Owusu-Brempong - CEO of Venture Capital Trust Fund

CEO of the Venture Capital Trust Fund (VCTF), Yaw Owusu-Brempong, reckons his outfit should be involved in the financing of government’s One District, One Factory (1D1F) initiative rather than the banks.

According to him, government has to step in and strengthen them in order to successfully execute the programme, since it is more beneficial to use Venture Capital financing than loans.

“So, what I am saying is that if Venture Capital is well-resourced we can actually partner the promoters of 1D1F with equity – with that you are taking shareholding on behalf of the government of Ghana, and as it stands now VCTF is the only institution in Ghana that can take equity on behalf of government.

“And if it is an equity it is long-term; in five to ten years the business doesn’t need to service any loan at any point in time. The business starts generating enough cash-flow, the promoter of the business feels that now he can be on his own; he can then sell back venture capital shares to other partners and they can exit. By then the company would have generated enough cash-flow – there will not be any interest hanging around the company’s neck,” he told B&FT in an interview at the 2019 Q4 CEO’s Breakfast Meeting in Accra.

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Furthermore, he explained that most of the banks on their own decided to support 1D1F – maintaining that those new companies which start with a loan end up with huge interest to pay; but the Venture Capital comes in as equity to cushion the company, with the owner not having to service any long-term loan.

On whether they have had discussions with government, he indicated that they have had several discussions with the 1D1F secretariat and Ministry of Trade – which have agreed that the Fund is the appropriate organ to support the 1D1F.

“We have our own budget and we also have our constraints in terms of getting enough money to set up more funds. We have set up one fund and are at the end of closing it.”

To demonstrate their commitment to supporting small, medium enterprises and businesses, they have set up a GH₵50m Industrial Support Fund to that effect; however, there challenges in getting the Fund to be operational which have to do with the Securities and Exchange Commission.

He stated: “Before you can manage a fund set up by Venture Capital, you need to be licenced by SEC as an investment advisor; but currently, because of the issue SEC is having with fund managers and investment advisors, they have put a hold on new licencing – and that is affecting us as well. But we are having discussions with them that are ongoing, so very soon the issue will come to an end”.

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VCTF promotes and supports the private sector as an equal partner in achieving the country’s developmental goals, by easing access to long-term funding for SMEs.

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