The resurgent Venture Capital Trust Fund is not only providing financing that ensures the commercial growth and sustained viability of beneficiary SMEs; it is actually establishing a new financial industry that enables SMEs to access equity finance rather than inordinately expensive debt finance. TOMA IMIRHE examines the potential for this to re-invent the growth trajectory of SMEs in Ghana
One of Ghana’s most strategically important state institutions, the Venture Capital Trust Fund VCTF, has under the radar of public attention, resumed its pivotal role in the financing of startup and early stage small and medium sized enterprises in the country. Most importantly it is the only state-owned financing institution which directly invests and mobilizes equity capital into needy and deserving SMEs rather than the relatively high-cost debt capital which has led to an inordinately high business mortality rate among SMEs that over rely on such high-cost debt.
Established by the Government of Ghana in 2004, it had suffered severe funding shortfalls by the middle of the last decade which seriously hampered its activities.
Since the beginning of the current decade however the VCTF has been revitalized, not just through renewed support from the Government of Ghana itself, but even more pivotal from the World Bank which, in recognition of the key role the institution can play in facilitating sustainable business growth among the country’s start up and early-stage SMEs provided a total of US$47 million in new financing in 2019. Of this, US$40 million is for Investments, US$5m is for Technical Assistance and US$2m is for Institutional Capacity development.
This new financing is already being used by the VCTF to take Ghana’s venture capital and equity financing industry to a whole new level.
“This support has significantly increased VCTFs capacity to anchor new funds” said Yaw Owusu-Brempong, VCTF’s Chief Executive Officer. “Currently, six additional venture funds have been anchored with some more to be anchored in the coming months. The funding has also helped us acquire the services of professionals in our activities and has also increased our work with sister organizations and industry stakeholders”.
For the year 2024, the Trust Fund would target to deploy up to USD18m. This will go into up to between three to five funds. The sectors targeted include agribusiness, education, manufacturing, healthcare, technology (Fintech and Agritech) among other priority sectors set by the government.
These new venture capital funds are coming at a crucial time when commercial lending is at a low -especially for medium to long term tenors – and interest rates on loans are too high for many businesses to use such financing and remain viable on a sustainable basis.
To be sure, even before these new venture capital funds are fully set up, there are plenty already up and running that have provided huge amounts of direly needed equity capital for start-up and early-stage SMEs that are thriving commercially in ways that would not have been possible without venture capital equity financing or even with relatively high-cost debt financing. These are funds that are financial partnerships between the VCTF itself and various financial institutions which have contributed to funding the various venture capital funds.
Most importantly, the VCTF’s strategy of partnering specialist financial institutions and investment management firms is attracting far more privately mobilized capital into the venture capital funds than the VCTF itself could possibly afford – indeed five times as much currently.

So far, VCTF has invested a cumulative GH¢173.2 million into 13 funds, with most still actively investing in SMEs. A particularly exciting aspect is the leverage achieved – for every GH¢1 invested by VCTF, up to GH¢5 in additional funding is mobilized, resulting in a leverage ratio of 1:5.
“The leveraging ratio is 1:5 presently” affirms Yaw Owusu-Brempong (CEO). But the potentials are even greater. “This could increase further with more engagements with local investors like the pension fund managers and other Local Partners” he asserts. “With our leveraging ratio, further funding to the Trust Fund would help us to crowd in more private sector funding.”
Effectively this is a call to action for institutional investors such as insurance firms and pension scheme managers who have large caches of medium to long term funds and are seeking returns that can grow over time as SMEs financed with venture capital gain ground commercially. To be sure there are lots of opportunities; according to the last ecosystem review carried out by Boston Consulting Group, SMEs in Ghana face financing constraints resulting in an estimated funding gap of US$15 billion per annum.

Importantly, with venture capital serving as start-up and early-stage capital, venture capital financing comes with a clear exit strategy so that beneficiary companies can eventually continue on their own.
“Exit proceeds become part of VCTFs investible funds, available for commitment in subsequent funds” explains Percival Ofori Ampomah Esq. (General Manager). “The exit methods that have primarily been used are trade sales, self-liquidation and management buyouts.”
But perhaps the longest lasting legacy of the VCTF’s pivotal efforts towards providing relatively low-cost, long-term equity capital for budding SMEs in Ghana will be the creation of a venture capital and private equity industry that is entirely private sector owned and managed, and therefore sustainable beyond government’s developmental efforts. Here the VCTF has promoted the industry and provided assistance and guidance to fully privately owned industry players operating independently.
“There is an inflow of privately owned Venture Capital funds that have no direct participation by VCTF “affirms Percival Ampomah.”
The government’s reinvigorated support for VCTF and the renewed focus on developing a vibrant venture capital ecosystem signify a promising future for SME financing in Ghana. With continued commitment from the Ministry of Finance and effective policy initiatives, we can look forward to a sustainable framework that allows SMEs to access equity capital more readily. The proliferation of privately-owned venture capital funds operating independently is a testament to the success of VCTF’s efforts in nurturing this industry. As this sector continues to gain momentum, SMEs can anticipate a broader range of financing options, fostering their growth and contributing to the nation’s economic development.

Venture Capital Trust Fund is serving as the vehicle through which the Government of Ghana, with ongoing assistance from the World Bank, seeks to create a vibrant venture capital and private equity industry that can facilitate the use of equity finance to drive start-up and early stage small and medium-sized enterprises (SMEs). This holds the potential to create financially sustainable SMEs whose commercial fortunes are not imperiled by the high-interest costs and short tenors that commercial debt financing in Ghana brings with it.

Indeed, it is instructive that the early-stage success rate of SMEs that have benefitted from financing through the VCTF and its partner investment firms has been significantly higher on average than that of their primarily commercial debt counterparts and they have enjoyed faster growth too, evidencing the superiority of equity over debt particularly in Ghana’s high-interest cost, short loan tenor environment.

But even as available venture capital financing still lags far behind the needs of SMEs in Ghana, the potential for closing the estimated USD15 billion annual shortfall is in part because of the inadequate amount of specialist expertise available.  The venture capital industry in Ghana is a young one that only started with the establishment of the VCTF itself less than two decades ago. Indeed, the state-owned institution itself has had to play the primary role in achieving the requisite critical mass of professional expertise required for the industry to thrive and expand.     

“The development of homegrown human capital is crucial to the success of Ghana’s venture capital industry” notes Percival Ofori Ampomah, the VCTF’s General Manager. “Human capital comprises the knowledge, skills, and expertise of individuals, which are essential for effectively managing, investing in, and growing businesses. In the context of venture capital investing, having a pool of talented professionals who understand the local market dynamics, regulatory environment, is vital for making informed investment decisions and supporting the growth of early-stage businesses.”

This informs the institution’s concerted efforts to train a crop of professionals in this relatively new field of financial activity in Ghana.

One of the programmes through which the VCTF has been doing this is the Venture Capital Analyst Programme, VCAP, which is a platform for tertiary institution graduates with passion for this emergent new field of finance   to take a great step in building a career in venture capital or private equity. The programme offers participants the opportunity to work with VCTF and alongside other partnering financial institutions (GPs) to learn, among other things, how to originate deals, conduct due diligence on them and negotiate terms between the various parties involved.

“Ultimately this enables them to subsequently engage in careers as GPs or founders/promoters to help develop great value and outcomes, post-investment,” enthuses Percival Ampomah.

“The first cohort of nine persons has successfully gone through the program with five of them having been retained by some of the fund management firms,” he reveals.  “The second cohort of 10 persons is also currently underway.”

The programme is expected to help bridge the professional skills gap in the Venture Capital/Private Equity ecosystem. But the VCTF knows this will by no means be enough and so it is making some other crucial efforts as well.

One is its new capacity building initiative, known as the Fund Manager Development Programme, FMDP.

The FMDP is intended to build capacity and increase the number of local fund managers in the Venture Capital/Private Equity industry in Ghana. These are the professionals who actually manage the funds mobilized from the private sector for equity investments in promising SMEs. It is also intended to seed and support building fund managers in their fund-raising process. This is crucial in that presently privately sourced equity capital accounts for about four-fifths of the cumulative equity investment being made under the framework designed and led by the VCTF itself and improved institutional capacity has the potential to increase this contribution further.

Instructively, these initiatives by the VCTF are already yielding palpable positive impacts on the industry in Ghana.

“The human resource development initiatives by VCTF are positively transforming the capacities and impacts of Ghana’s Venture Capital and Private Equity industry” affirms Percival Ofori Ampomah. “By nurturing a pipeline of skilled investment professionals through programs like V-CAP and the Fund Manager Development Program, VCTF is building the human capital necessary to drive the growth and success of the industry. This is directly benefiting VCTF’s own operations too by equipping it with the right talent to source deals, conduct due diligence, and manage investments effectively.”

Ultimately though, professional skills capacity building for the industry must be a shared responsibility with the financial services industry as a whole and government itself weighing in on a collective effort.

To this end VCTF’s management wants government and the industry’s other stakeholders to pursue efforts on several fronts.

One is providing funding and policy support to scale up initiatives like VCTF’s ongoing training programmes. Another is encouraging collaborations between academic institutions and the Venture Capital/Private Equity industry to develop relevant curricula and facilitate knowledge exchange

A third is the offering of incentives and enabling environments to attract and retain top talent in the industry. Then there is the need for promoting awareness and interest in Venture Capital/Private Equity careers among the youth to build a robust pipeline of future professionals.

Crucially the VCTF itself stands ready and able to coordinate efforts in these regards by the various stakeholders, in its vital role as the foundation upon which this relatively new but crucially vital industry is being built.

“VCTF can play a key role in advocating for and coordinating such efforts to strengthen the human capital foundation of Ghana’s venture capital ecosystem” enthuses Percival Ampomah.

Indeed, that is a role it is already playing and which is enabling the industry to grow, even as the VCTF looks forward to much faster expansion of the sector going forward.

Ghana’s Venture Capital Trust Fund has gone beyond its own equity financing of early stage SMEs – in collaboration with private investors – to engage in several key initiatives aimed at creating a self-sustaining, private sector led venture capital and private equity industry. TOMA IMIRHE examines what it is doing and how its efforts will impact corporate Ghana. 

The Venture Capital Trust Fund has mobilized some GHc278.277 million which is currently invested in start-up and early stage small and medium sized companies which have illustrated clear commercial viability and the managerial capacity to fulfill their economic potentials. Importantly, this specialized state-owned financial institution has succeeded in mobilizing five times as much from commercial financing institutions and fund management firms as it has put up itself.

This is crucially important because the financing that the VCTF has mobilized is equity capital, rather than debt and this is critical in an economy where debt is the preferred mode of business financing for entrepreneurs but the debt tends to be too expensive and short tenured to support economic viability. Instructively the Ghana Stock Exchange has not attracted nearly as many equity capital seeking companies as was anticipated over its nearly three and a half decade history and the Ghana Alternative Exchange GAX, which was established specifically for SMEs that do not qualify for listing on the GSE itself, has attracted more long term debt issuing companies than equity seeking ones.

This means that the VCTF has effectively opened a new door for SMEs with regards to relatively cheap and long tenured financing which vastly improves their chances of growth and sustained commercial viability – one which has the potential to bring about a paradigm shift for the better in how corporate Ghana approaches the issue of business financing.

Most importantly though the VCTF is acutely aware that for corporate Ghana to benefit fully from its cutting edge activities it needs to nurture a vibrant venture capital and private equity industry which ultimately will no longer need the industry development role played by the state through the VCTF itself. This it is doing with similarly exemplary skill and commitment to that with which it is partnering commercial fund managers to provide the equity capital that is propelling lots of early-stage SMEs on a fast-tracked trajectory of growth and sustainable profitability.

“The objectives of VCTF’s advocacy efforts are to expand and deepen the venture capital and private equity (VC/PE) industry in Ghana” asserts Yaw Owusu-Brempong, the institution’s Chief Executive Officer. “VCTF has played an instrumental role in developing the VC/PE ecosystem through various interventions:”

Indeed one of these is the: establishment of the Ghana Angel Investor Network (GAIN) in 2011 to promote angel investing as an alternative financing source for startups. This has mobilized astute relatively high network investors who can recognize an outstanding equity investment opportunity in an early stage SME by formally organizing high-net-worth individuals to invest in and mentor entrepreneurs.

Instructively GAIN is the first angel investor network in Ghana and aims to promote angel investing as a source of early-stage financing for startups. VCTF’s role in creating and supporting GAIN has been crucial in catalyzing the angel investing landscape in the country.

Another is the VCTF’s pivotal technical and financial support for the creation of the Ghana Alternative Exchange (GAX) to facilitate SME listings and access to capital, both equity and debt, by companies that are not large enough or old enough to list on the GSE itself.

Then there is the VCTF’s hosting of industry events that have attracted more venture capital and private equity firms to Ghana. Add to this the state institution’s helping establish other industry institutions like the Ghana Venture Capital and Private Equity Association (GVCA), Impact Investing Ghana (IIGH) – which currently manages GAIN – and the GIMPA Center for Impact Investing (GCII); all of which are serving as platforms for the industry to collaborate, network and expand its capacities.

The biggest and most important of these industry groupings is the Ghana Venture Capital and Private Equity Association (GVCA) which was established with the support of VCTF.  GVCA is an industry association that brings together Venture Capital and Private Equity fund managers, investors, and other stakeholders in the ecosystem. Its objectives are to promote the development of the industry, advocate for favorable policies, and facilitate knowledge sharing and networking.

Confirms Yaw O.-Brempong, CEO: “VCTF played a catalytic role in the creation of GVCA by being the key sponsor and continues to be involved in its management and activities, leveraging the association as a platform to drive its advocacy agenda”.

He enthuses that these efforts have placed Ghana on the Venture Capital and Private Equity map in Africa and laid the groundwork for a more vibrant and structured industry. “Going forward, VCTF aims to continue playing a catalytic role in further developing the ecosystem through policy advocacy, capacity building, and facilitating more private capital mobilization.” he assures.

Another key intervention being made by the VCTF towards developing a self-sustaining, private sector led venture capital and private equity industry in Ghana is its efforts in support of the drafting and subsequent passage into law of a Limited Liability Partnership Act.   

“VCTF is providing technical inputs towards the development of a Limited Liability Partnership (LLP) Act in Ghana” reveals Yaw O.-Brempong, CEO. “This legislation is expected to strengthen the regulatory environment for Venture Capital and Private Equity activities by establishing a dedicated legal framework for these investment vehicles.”

Indeed, equity fund managers and investors alike agree that the impending LLP Act will help address current challenges around taxation, asset class categorization, and the requirement for all Venture Capital funds receiving tax breaks to be legally registered in Ghana.

“VCTF’s involvement in shaping this Act is crucial, as it will create a more enabling environment for the growth of the VC/PE industry” asserts Yaw O.-Brempong, CEO.

At the same time the VCTF is actively and concertedly engaged in strategic efforts to raise awareness about venture capital and private equity as alternative financing options, targeting both potential investors, entrepreneurs and SMES. It is doing this by organizing workshops, SME round table discussions, conferences, media campaigns, and other outreach initiatives to educate key stakeholders and generate greater interest and participation in the Venture Capital and Private Equity ecosystem.

Crucially, the VCTF is relying on partnerships and collaborations with other stakeholder institutions to install a vibrant, self – sustaining venture capital and private equity industry for the benefit of corporate Ghana and the wider economy.

“In a broader context, VCTF collaborates with relevant government agencies, industry associations, and development partners to drive its advocacy agenda and mobilize resources for the VC/PE ecosystem” explains Yaw O.-Brempong, CEO “This includes policy support, funding, and joint initiatives to promote the industry and attract more investors and entrepreneurs”

Ultimately the VCTF’s efforts are bearing palpable fruit. The venture capital and private equity industry is quietly but rapidly growing as exemplified not only by the sharp growth in local capacity and activity but the expanding presence of and investments.by major international private equity funds in Ghana as well.