By Emmanuel OWUSU
For years, the domestic start-up ecosystem – like many across Africa – has benefitted from the benevolence of foreign donor agencies. USAID, through its various initiatives, has injected funds into sectors ranging from agriculture to fintech. But as recent events in Kenya show, that well can run dry – and fast.
The abrupt shutdown of USAID funding in Kenya left more than 30 start-ups scrambling. These were not mere experiments; they were promising businesses solving real problems. Now, many face an uncertain future simply because a foreign agency pulled the plug.
The reality is stark: Africa’s start-up scene, for all its vibrancy, still leans too heavily on donor funds. And Ghana is no exception. We have our success stories – our fintech darlings, our renewable energy innovators – but beneath the surface lies a fragile dependency on capital that isn’t homegrown.
The question is, do we wait for the inevitable or do we start preparing now?
The case for Ghana’s own capital
The USAID pullout from Kenya should serve as a wake-up call. Ghana cannot afford to rely on donor funds that come with external priorities and shifting political winds. The real safety net is not another foreign development grant but a robust, locally-driven venture capital ecosystem that understands Ghanaian businesses and is committed to their long-term success.
This is where the Venture Capital Trust Fund (VCTF) comes in. Established by law in 2004, VCTF was designed to catalyse venture capital financing in Ghana by investing in locally managed funds that support small and medium enterprises (SMEs). It has played a critical role in funding high-potential businesses that traditional banks would not touch.
VCTF has already laid a foundation. It has invested in Venture Capital Finance Companies (VCFCs), enabling them to provide risk capital to Ghanaian start-ups and SMEs. It has been instrumental in setting up the Ghana Angel Investor Network (GAIN), which connects high-net-worth individuals with early-stage businesses. Furthermore, it also supported the establishment of Ghana Alternative Exchange (GAX), creating a path for SMEs to raise capital through the stock market.
These are not small wins
But the reality is that Ghana’s venture capital ecosystem is still underdeveloped. Many local investors remain risk-averse, preferring real estate and government bonds to tech startups. The result? Ghanaian entrepreneurs still find themselves knocking on the doors of foreign investors who, when the tides turn, can just as easily walk away.
A stronger case for homegrown venture capital
If Ghana is serious about sustaining its tech ecosystem beyond donor cycles, then the case for strengthening VCTF and other local funding sources is clear:
Increased Capital Allocation: VCTF’s funding must be expanded to ensure it can back more venture funds that target high-growth sectors like fintech, agritech and health tech.
Government-Backed Guarantees: To encourage more private capital into venture investing, the state must be willing to provide guarantees or risk-sharing mechanisms that make startup funding less daunting for local investors.
Corporate Participation: Large Ghanaian companies need to do more than sponsor hackathons; they must actively invest in startups that align with their industries.
Diaspora Investment Mobilisation: Structured mechanisms should be put in place to channel remittances into venture capital, giving the Ghanaian diaspora a stake in the country’s innovation economy.
The USAID funding freeze in Kenya is not an isolated incident, it’s a sign of things to come. Ghana has a choice: build an ecosystem that stands on its own or continue gambling on the goodwill of foreign donors.
Because when the next funding cut comes, the start-ups that survive won’t be those waiting for a new USAID – they’ll be the ones backed by a Ghanaian venture capital system that actually believes in them.
