The Venture Capital Trust Fund’s (VCTF) much touted sorghum success story has for the past two years been fruitless, signaling challenging times for the country’s initiative at providing low cost equity financing to businesses.

In 2011, loan repayments by nucleus farmers participating in the Sorghum Value Chain amounted to about GHC370, 000, representing just about 40 percent of total amount due on loans disbursed; indications are that 2012 will register an equally dismal performance.

Officials of VCTF attribute the Sorghum Value Chain failures to huge stock levels in 2010 negatively impacting on the portfolio’s performance.

They are quick to point out that sorghum’s waning fortunes are being compensated for by emerging opportunities in soybean and yellow maize, which have been successfully piloted, with soybean in particular seeing 40 companies and individuals applying for loans in 2011.

However, some investment analysts think that that is not the true picture of VCTF’s Special Purpose Vehicle (SPV) Financing Scheme, by which the Fund provides financing to farmers.

With financing of projects expanding at a rather slower than expected pace while, ironically, operational costs have recorded an upsurge in the past couple of years, there are concerns that management is losing traction.

“Last year I had $5 million earmarked for investment in the agricultural sector, I looked all over for Venture Capital Finance Company. Nobody was willing to take that amount for equity investment in the agricultural sector,” said an investment banker with Databank, intimating that the scheme is not thriving as is being let on.

The prevailing view among analysts is that Management of cash-strapped VCTF is lately not showing much enthusiasm in sorghum, in particular, and the agricultural sector in general. While VCTF’s financing activities has recorded some appreciable growth in the southern sector of the country, where Greater Accra leads with over 75percent followed by Eastern, Ashanti, and Brong-Ahafo regions, deal flow from the northern part of the country has not been encouraging.

Sorghum, largely grown in the three northern regions, could make the big difference if given better attention.

The VCTF, in its 2012 outlook acknowledged that Ghana continues to experience supply gap in cereals and would therefore consolidate and re-align its SPV portfolio to develop a full-fledged agribusiness fund in order to ensure prompt repayment of loans.

However, that is yet to see the light of day. A major challenge confronting the VCTF to date is a sustainable source of funding.

In its 2011 Financial Budget, government allocated GHC10 million to the Trust Fund. The Board had initiated serious engagement with government to deliberate on finding a solution to the problem.

It has also been pursuing other private sector initiatives including a China Exim Bank facility of US$150 million, about which some analysts have expressed apprehensions.

Dr. Sam Mensah, a Senior Consultant of SEM International Associates and CEO for SEM Group, observed at a VCTF Policy Seminar, in September 2012, that private equity funding at this stage of venture capital development in the country could be detrimental to the purpose for which the VCTF was established by government.

“The Fund aims at providing low cost and long term equity, quasi-equity, and debt capital to SMEs to spur the growth of small and medium Ghanaian enterprises; private equity would be interested more in big ticket projects, which currently would be beyond local SMEs.

“It would be more prudent for another round of a major government funding of the Fund to sustain the initial success and allow the first round of beneficiary SMEs to be weaned off the VCFCs, then the returns on those investments could serve as a strong base for the VCTF to continue in its core mandate of growing local enterprises through the provision of soft and patient capital” Dr. Mensah said.

Mr. Daniel Duku, CEO of VCTF has said that although efforts have been made to attract alternative sources of financing, the Trust Fund has been unable to effectively engage other private or sovereign Funds.

He disclosed that due to the nature of the Trust Fund’s establishment, any external source of funding would need to be contracted by the government on behalf of the Fund.

Currently, the VCTF’s Board requires the Minister of Finance’s assent to conclude the US$150 million loan from the Chinese EXIM Bank.