Venture Capital to invest US$20m this year

The Venture Capital Trust Fund will invest US$20million in small and medium enterprises (SMEs) in different sectors of the economy this year, building on a portfolio of investments currently valued at close to US$60million.

The Fund invested US$8 million in 2012, and a total of US$16 million has been invested in 46 SMEs since its creation in 2004. It is increasingly a key investor in the local agricultural sector through its agricultural value-chain financing of cereals and grains, to provide feedstock for the poultry and brewery industries.

Chief Executive Daniel Duku, speaking to the B&FT after signing a memorandum of understanding (MoU) with the Ghana Institute of Management and Public Administration (GIMPA) to lay the ground for impact investing in Ghana, said the Fund will leverage new partnerships to provide additional support to businesses.

He said the Fund is now turning its attention to impact-investing as investors are no longer considering just financial returns, but also having a positive social and environmental impact in areas where they channel their investments.

The MoU will, therefore, establish a collaborative framework for promoting impact investing as a means of developing a business community of social enterprises to tackle the social and environmental challenges confronting the nation.

“The Trust Fund desires to attract additional private capital to support businesses while providing innovative and effective solutions to social and environmental challenges in the country.

“We hope the pioneering steps we are taking today will catalyse a positive transformation of Ghana’s entrepreneurial ecosystem, where business owners and managers look beyond financial returns to deliver solutions that reflect positively on the communities and societies within which they operate,” he said.

The agreement with GIMPA is expected to culminate in the establishment of a GIMPA Centre for Impact Investing (GCII), which will receive seed-funding from the Fund using a grant from the Rockefeller Foundation.

Mr. Duku said the Fund with support from the Rockefeller Foundation commissioned a comprehensive study of the impact-investing policy environment in Ghana. The outcome of the report will serve as a useful guide for the new centre -- expected to be launched with the full report by the end of next month.

In a world where Government resources and charitable donations are insufficient to address the world’s social problems, impact investing -- that is, investments made into companies, organisations, and funds with the intention to generate measurable social and environmental impacts alongside a financial return -- offers a new alternative for channelling large-scale private capital for social benefits.

With increasing numbers of investors rejecting the notion that they face a binary choice between investing for maximum risk-adjusted returns or donating for social purposes, the global impact-investment market is now at a significant turning point as it enters the mainstream.

Impact-investing occurs across asset classes including private equity, venture capital, debt and fixed income. It is estimated that the impact investment market holds about US$400billion to US$1trillion in investment potential over the next 10 years.

“I think Ghana stands to benefit from about US$10billion to US$20billion of this amount. If you look at the amount of money coming through impact investment, private equity and venture capital, we expect this trend to grow.

“It is this potential that informs and motivates the introduction of impact investing in Ghana as a means to complement Government efforts to address major social challenges by engaging private capital,” Mr. Duku said.

Rector of GIMPA Professor Franklyn Kwabena Manu said the time is past due for academia to step out of the classroom and use its knowledge and expertise to help in development of the national economy.

“The GIMPA Centre for Impact Investing (GCII) is the beginning of one of many active channels that will serve as a beam of light to assist the business community, Government and individuals in identifying projects that can provide measurable social, as well as financial returns,” he said.