Funding to the nation’s private sector, particularly Small and Medium-sized Enterprises (SMEs) with accessible growth potential, is set to receive a boost with the launch of Injaro Ghana Venture Capital Fund (IGVCF).
The IGVCF’s introduction is historic as it represents the first private equity fund in the country to be denominated in local currency – in addition to receiving overwhelming backing by a number of local pension funds as anchor investors.
Speaking at the launch, Director of the Financial Sector Division at the Ministry of Finance, Sampson Akligoh – who was representing the sector Minister, Ken Ofori Atta, said the introduction of a major private equity vehicle is consistent with efforts undertaken over the last four years to shift from a more fiscal dominated economy to one led by the private sector.
He stated that the prevailing setup is inimical to the level of development that the nation aspires to.
“The reality is that, as a country, we must change the tide; and this can only be done with a vibrant private sector. Unfortunately, this has evaded us for many years. The difficulty is that decisions made every day in the boardrooms show a risk appetite that is almost non-existent for our pension funds… our SMEs cannot grow primarily through credit from banks,” he said.
Touching on the IGVCF, he said: “As a nation, we need more of such strategic investments if we are to industrialise our economy, curb depreciation of the cedi and create high-value jobs for our youths”.
He also urged Tier 2 and Tier 3 pension fund managers to as a matter of urgency comply with the minimum limits set for Variable Income Investments, in accordance with the National Pensions Regulatory Authority’s (NPRA) guidelines.
He also commended the relevant regulators – the Securities and Exchange Commission (SEC) and NPRA – for recent reforms that have expanded the allocation entities under their remit.
On his part, CEO of Injaro Investments Advisors, Jerry Parkes, said the establishment of IGVCF is consistent with the overarching vision to build sustainable African businesses that create social and economic value.
Highlighting factors that have made the launch of IGVCF come to fruition, he said: “This epitomises how collaboration between the Ghanaian private and public sectors can overcome obstacles to produce private sector solutions for financing our SMEs”.
Reiterating concerns about development of the capital market, where the Ghana Stock Exchange’s market capitalisation accounts for 13 percent of GDP versus 194 percent in the USA, Mr. Parkes said the Fund will serve as a critical partner for the local bourse.
He added that asset managers and pension fund managers will have access to a higher return investment option and risk diversification in a market dominated by fixed-income investments.
“This gives our 1.6 million pension contributors the opportunity to benefit from these superior returns,” he added.
He further disclosed that the Fund will target scalable businesses in two broad categories – Basic Needs, including food, agriculture, education and healthcare; as well as Industrial and Manufacturing. The IGVCF has an initial target fund size of GH¢150million, he said.
This development comes as Data from the Bank of Ghana (BoG), contained in its Summary of Macroeconomic and Financial Data for March, show that the value of Private Sector Credit (PSC) outstanding stood at GH¢43.2billion – representing an annual growth of 7.4 percent.
When adjusted for inflation at 2018 prices, however, the real annual growth of outstanding credit to the private sector has contracted at a rate of -2.7 percent, according to the central bank.
