In a bustling corner of Harare, young entrepreneur Gondo Chikosi* pitched his startup idea to a room of potential investors. His company, a fintech platform designed to simplify payments for small businesses, had promise but lacked the necessary funding to scale. Chikosi’s story is emblematic of the broader struggle faced by Zimbabwe’s startups: a wealth of innovative ideas hampered by a dearth of financial backing.
To address this gap, Zimbabwe’s National Venture Capital Fund (NVCF), established in 2021, is actively seeking strategic partnerships with high-net-worth individuals. The fund aims to inject much-needed capital into the nation’s startups and small-to-medium enterprises (SMEs) in exchange for equity stakes. Despite its potential, the NVCF has struggled to gain momentum due to the government’s constrained fiscal space.
“We are getting there because now we have the leader who is going to push it forward,” said Deputy Minister of Finance, Economic Development, and Investment Promotion David Kudakwashe Mnangagwa during a recent event held in Harare.
The NVCF’s renewed focus comes at a critical time for Zimbabwe’s economy. The Reserve Bank of Zimbabwe’s 2022 FinScope MSME survey revealed that the informal sector generates an estimated US$14.2 billion in annual turnover and contributes US$8.6 billion to the country’s GDP. This underscores the significant potential for growth within the startup and SME landscape.
By partnering with high-net-worth individuals, the NVCF hopes to leverage their expertise and resources to support the development of innovative and high-potential businesses across various sectors. As the fund progresses towards operationalization, addressing the challenges faced by Zimbabwe’s startups and SMEs, such as access to finance, regulatory hurdles, and infrastructure constraints, will be essential.
While the government’s initiative is promising, it’s important to note that Zimbabwe has historically struggled with monetary instability and public mistrust. The recent introduction of the Zimbabwe Gold (ZiG) currency, despite government efforts, has faced skepticism and devaluation on the black market. These underlying economic challenges could potentially impact the NVCF’s ability to attract investors and deploy capital effectively.
Zimbabwe, a nation of 16 million people with 65.3% internet penetration, has been conspicuously absent from the African startup scene. The collapse of Harare-based payments startup Payitup, which had secured a $13-million Series-A investment from London’s Thawer Fund Management, is a case in point. The startup folded amidst controversies surrounding the fundraising deal, including allegations of fraudulent misrepresentation.
National venture capital funds are rare in Africa, but where they exist, they have demonstrated effectiveness. Ghana’s Venture Capital Trust Fund (VCTF), for example, committed $14 million to local venture capital funds under the 2024 budget. The VCTF has led successful initiatives like the Initial Close of the Mirepa Capital SME Fund I (MCSFI), which aims to bridge the funding gap for Ghanaian SMEs by providing patient capital support.
Zimbabwe’s NVCF hopes to emulate such successes. The goal is not merely to provide funding but to create a thriving ecosystem where innovative ideas can flourish, contributing to sustainable economic growth. As Chikosi and other entrepreneurs like him wait for the tide to turn, the promise of a revitalized NVCF offers a glimmer of hope in a landscape fraught with challenges.
The journey ahead for Zimbabwe’s startups and SMEs is complex, but with strategic partnerships and effective leadership, the NVCF could become a cornerstone of the country’s startup ecosystem resurgence. For now, entrepreneurs continue to innovate, driven by the belief that Zimbabwe’s potential can be unlocked through investment and support.
*Not real name.