A number of Small and Medium-sized Enterprises (SMEs) in Ghana are to benefit from financial support following African Development Bank’s approval of a US$15 million contribution to a new equity investment fund, which targets raising a total of US$150 million for SMEs in English speaking West African countries.
This is being spearheaded by Verod Capital Growth Fund III, a private equity fund that seeks to make investments in high growth middle market segment companies to promote the industrialization drive in the region which also includes Nigeria, Liberia, Sierra Leone and The Gambia.
Reports indicate that the fund’s investments will be in companies in consumer driven sectors including light industrials, fast moving consumer goods, education, financial services and agro processing and the ticket size for each investment will be between US$5 million and US$20 million.
This equity fund is expected to assist in accelerating investments in SMEs in the region which would in turn result in scaling up of beneficiary local businesses. This will enable SMEs to handle a growing amount of work or sales in a capable, cost-effective manner, as well as create new jobs.
This important measure is part of concerted effort and policy framework by the Bank and stakeholders involved to ensure that the private sector – which is regarded as an engine of growth, largely contributes to regional economic growth by assisting respective countries take advantage of the soon to be implemented new trade policy – the African Continental Free Trade Area agreement (AfCFTA) which is expected to boost trade and create jobs on the continent.
According to the Bank, the fund will provide a mechanism for growing SMEs in the region to promote the industrialization drive.
In Ghana, it is estimated that SMEs contribute more than 70 percent to Ghana’s Gross Domestic Product (GDP) and account for 92 percent of businesses. Thus, based on such important contribution, any financial support like this will come as a measure to boosting the private sector.
The Bank is noted for putting in place pragmatic measures to assist in boosting the capacity of SMEs on the continent in accessing credit and financial support.
Last month, the Bank signed a US$50 million risk participation agreement (APR) with investment and corporate bank Natixis to promote investment and trade financing in key economic sectors such as agribusiness and industry as well as promoting diversification of the economy, generating growth, jobs and additional tax revenues for several African states. This investment drive is expected to benefit African commercial banks and SMEs by guaranteeing them better access to financing their foreign trade operations.
By Dundas Whigham