Tawanda Musarurwa Senior Business Reporter
Government says it has engaged the International Finance Corporation (IFC) over a possible investment into the National Venture Capital Fund.
Last November Treasury announced plans to set up a National Venture Capital Fund that would work to provide venture capital financing to start-ups and small to medium enterprises with strong growth potential.
Secretary in the Ministry of Finance and Economic Development, George Guvamatanga, told the Parliamentary Portfolio Committee on Youth, Sports, Arts and Recreation that the engagement with the IFC also extended to managing the fund and/or provision of technical support.
The IFC is an international financial institution, (an arm of the World Bank) that offers investment, advisory and asset-management services to encourage private-sector development in less developed countries.
“A tele-meeting was held with the IFC where technical support was requested. Discussions are also underway on the possibility of considering IFC as a potential investor,” said Mr Guvamatanga.
“This can be done at many levels. The IFC can come and invest in the company or it can be a fund manager and can take shares directly in the investee companies in partnership with the National Venture Capital Company. The IFC is also able to provide useful technical assistance as the institution has deep global understanding of private sector investments.”
At least $500 million has been set aside by Treasury for the establishment of a National Venture Capital Fund to finance start-up projects by the youths.
With the informal sector increasingly growing in significance for the Zimbabwean economy, the need for venture capital for start-ups has become more apparent.
In Zimbabwe there were venture capital firms, which were mainly independent partnerships or private equity funds and most of them shut shop due to the economic downturn and only a few continue to exist.
Government has also held talks with entities such as the Empowerment Bank, Women’s Banks, Small and Medium Enterprises Development Corporation (SMEDCO), CBZ, Financial Securities Exchange (Private) Limited (FINSEC) and Norfund as possible fund managers.
Said Mr Guvamatanga: “Empower Bank, Women’s Banks and SMEDCO are Government owned entities that have experience in aspects of venture capital, as well as lending. The entities have shown enthusiasm to participate as partners of the fund. In this regard, resources will be set aside for these Government entities to spearhead support to the identified investee companies whilst the other processes are being put into place.
“As Treasury, we are calling on Empower Bank, Women’s Banks and SMEDCO to identify projects that are commercially viable which will yield desired returns to the Fund. We need to note that the resources will be exchanged for shares that will be held by the National Venture Capital Company on behalf of the Government.
“With regards to other Fund managers, the Ministry through the Steering Committee is assessing various proposals. Appraisal of the potential Fund managers and partners will be done and the envelope of resources will be apportioned accordingly.
“It is envisaged that The Fund managers will be remunerated on the basis of performance of their portfolio. The model of the NVCC is evolving in nature. Once the company is well established, the investee company or other shareholders can buy out the Government shareholding for value. The revenues receivable by Government will be used to plough back into the Fund.
“Government has also invited FINSEC to make a submission following previous engagements. A meeting was held where FINSEC proposed a model that the Fund could adopt. This is still under evaluation.”
In another key development towards the establishment of the fund, the Finance secretary said steps have been taken to incorporate it as the National Venture Capital Company (NVCC), a private limited company wholly owned by the Government.
- “The Steering Committee has been in consultation with relevant Government departments to facilitate the registration of the entity. Currently, work is underway to identify a consultant that will draft the Articles and Memorandum of Association. The drafts will be presented to the legal advisors for guidance and advise. Once these internal processes are complete, the project will be submitted to the Registrar of Companies.”