- alternative funding identified to recapitalize the fund
Inadequate financing from the Ministry of Finance has become a bane, hindering effective performance of the Venture Capital Trust Fund (VCTF), the latest Auditor General’s (AG) report has indicated.
A trend analysis of budgetary allocations and funds released to the Trust Fund from the Finance Ministry between 2017 and 2019 showed that no amount was released into the Fund for 2018 and 2019 respectively.
Out of an allocation of GH¢119million in 2017 only GH¢20million was released into the Fund, while no release was made from the GH¢100million allocation in 2018 and GH¢28.5million allocation for 2019.
Audited financial statements of the VCTF for the years ending December 31, 2019 and 2020 concluded that the Fund recorded a loss of GH¢559,170 in 2020 – an improvement compared to the loss of nearly GH¢3million made in 2019. The Fund also has an unredeemed equity of GH¢1.4million owed by the African University College of Communication (AUCC).
The AG however said the seeming neglect of the trust fund by the MoF can be attributed to anomalies; including the Fund’s inability to effectively execute its lawful mandate as the engine of growth for the private sector. The report also maintains that the Fund is unable to attract partnerships with private investors to make it attractive for growth.
“We urged the board of trustees to liaise with the sector minister to set up an alternative statutory funding source for the Trust Fund,” the AG note, adding: “In the interim, the board of trustees together with management should pursue the ministry for release of the allocations into the fund.”
The Fund’s managers have however said they have been engaging the Finance Ministry to work out a sustainable funding model. The engagements have resulted in the Fund’s inclusion in the Ghana Economic Transformation Project as a means of recapitalisation.
Background
The VCTF was established by the Venture Capital Trust Fund ACT, 2004, (ACT 680) to provide financing to SMEs, with the objective of promoting and supporting the private sector as an equal partner in achieving the country’s developmental goals.
The Act stipulates that an amount of money – equivalent to 25 percent of the proceeds from the National Reconstruction Levy with effect from 2003 financial year – will be used to resource the Trust Fund. With the abolition of the National Reconstruction Levy Act, the Trust Fund is now reliant on the Ministry of Finance to fund its operations.
