Ghana’s ambitions to create a thriving venture capital ecosystem have recently come into sharp focus as the Venture Capital Trust Fund (VCTF) strives to close a significant funding gap for small- and medium-sized enterprises (SMEs). With demand for venture capital far exceeding supply, VCTF says the country’s SME sector requires an estimated $15 billion to meet its financing needs — against a mere $70 million currently available in venture capital funds.

The firm’s General Manager, Percival Ofori Ampomah, at a recent event in Accra outlined an ambitious roadmap to address this shortfall. “We currently do not even have 10 percent of the required capital. As a result, VCTF is aiming to secure $120 million by 2030 to establish a self-sustaining venture capital ecosystem,” Ampomah said, albeit cautiously optimistic. This goal is underpinned by a strategy to secure an additional $10 million annually from the government over the next few years.

Currently, Ampomah noted that the VCTF had already received $40 million from the Ministry of Finance under the Ghana Economic Transformation Project (GETP). This injection has been pivotal in establishing new funds, but the ultimate objective remains the creation of a stable, permanent funding structure to ensure continuous support for SMEs, particularly in high-impact sectors such as agribusiness, technology, and healthcare.

A critical hurdle in Ghana’s quest to create a booming venture capital landscape is the preference of foreign investors to domicile funds offshore, particularly in Mauritius. According to Ampomah, this practice has siphoned a significant portion of investment capital out of Ghana, leaving local stakeholders grappling with limited access to resources. Currently, more than 90% of VCTF funding comes from foreign sources, indicating its reliance on international capital markets and interests, despite the fund’s government-backed appearance.

While local investor interest is gradually improving due to growing awareness of venture capital’s potential, Ampomah said foreign dominance underscores the importance of aligning Ghana’s financial and legal frameworks with global standards to attract more onshore investments.

Established under the Venture Capital Trust Fund Act of 2004 (Act 680), the VCTF has identified legislative reform as a critical step toward sustainability. According to Ampomah, the existing law has become outdated, with references to now-defunct mechanisms like the National Reconstruction Levy. Policymakers are expected to engage extensively in 2024 to update the Act, creating a more robust legal foundation that reflects the country’s current economic realities and growth ambitions.

Despite these challenges, the VCTF has made significant strides in mobilizing capital. In 2023, the fund committed $16 million to initiatives such as the Injaro Investments Limited Ghana Venture Fund, the Industrial Support Fund, Mirepa Capital Ltd SME Fund, and Wangara Green Ventures. This strategic allocation signals a growing commitment to fostering a vibrant entrepreneurial ecosystem.

One standout achievement was the Initial Close of the Mirepa Capital SME Fund I (MCSFI), which raised $10.5 million to support SMEs with patient capital. The fund focuses on light manufacturing, cleantech, and technology ventures, targeting businesses in agribusiness, healthcare, education, financial services, and industrial support. This fund is notable for being anchored solely by local investors, including pension funds — a significant milestone in Ghana’s venture capital history.

The involvement of local pension funds has been a major breakthrough. Injaro Investments, an Africa-focused private equity and private credit fund manager, recently launched its third fund with $20 million in backing from Ghanaian pension funds. 

While the VCTF’s efforts are commendable, the challenge of ensuring a balance between foreign and local capital remains a pressing concern. Establishing onshore domiciliation for funds, updating legislative frameworks, and securing long-term government support will be crucial in building a self-sustaining venture capital ecosystem.

With $120 million as its 2030 target, the VCTF’s success will not only determine the future of Ghana’s SMEs but also shape the country’s ability to compete in the global entrepreneurial landscape. Achieving this vision will require a cohesive strategy that harmonizes local and foreign interests while addressing systemic challenges head-on.