Bulls n Bears Entrepreneurship Zone :: Mthuli Ncube: A Zimbabwe national venture capital fund?

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Zimbabwe is on the brink of a new era of innovation and economic activity.
Our government’s greatest task will be to promote small- and medium-sized
enterprises and to unlock the creativity and productivity of the population.
This will require specific policy decisions supportive of entrepreneurship
and business development.

In a credit constrained environment such as Zimbabwe, it is not easy for
businesses to secure “patient capital” such as equity finance. On the
contrary, banks are only able to supply debt capital in the form of
short-term overdraft facilities, which require collateral. Collateral may
not be easy to present. One can not successfully re-equip businesses and
start new business ventures in Zimbabwe on the back of short-term overdraft
facilities. Even worse, enterprising youth with brilliant ideas do not have
easy access to such bank finance as they lack the necessary collateral and a
credit record.

We need to develop sources of equity funding, real “patient capital”. This
could be done by creating a national venture capital fund. The fund could be
set up with equity contributions from domestic banks, insurance and pension
funds, and international development institutions such as FMO (Dutch), KfW
(Germany), among others. The Zimbabwe Government will be an orchestrator and
retain a minor equity position so as to contribute to investment policy and
remove bottlenecks. In essence, the fund would be a form of
public-private-partnership (PPP).

A national venture capital fund could be designed so that it could take
equity in businesses and support them in their business development, such as
helping the industry to acquire new equipment. For example, for those
businesses that are exporting, the fund could partner with trade finance
institutions such as Trade and Development Bank (former PTA bank),
Afreximbank and African Development Bank. These institutions offer trade
finance facilities and would be excellent equity partners. Jobs creation can
then begin to happen again in the industry sector, as companies seek to
expand and export.

In its asset allocation, the fund could also target the youth. In fact, 30%
of the portfolio of the fund, as an example, could target businesses being
driven by the youth, in order obviate the need for collateral for access to
finance. As part of the youth entrepreneurship support objective, the fund
could also spearhead the creation of a “entrepreneurship ecosystem”. When I
was dean of Wits Business School, Wits University, I created a centre of
entrepreneurship for training youth on entrepreneurship skills, for
providing a mentorship programme from experienced and retired entrepreneurs,
access to an angel-investor network, and access to incubation services.

Basically, a young entrepreneur would receive training up to the point of
completing a business plan, then they would be sent to an incubator where
they have access to capital from the fund and banks, and access to angel
investors, and mentorship. In South Africa, I also partnered with
municipalities, who then gave the young entrepreneurs business procurement
opportunities in order to help kick-start these businesses. One of the
universities such as University of Zimbabwe or NUST could set up a centre of
entrepreneurship, which will also deepen capacity within the academic
institution, which will then offer the necessary training certificate for
the youth. Incubation services and mentorship programmes would be created
for “entrepreneurship ecosystem”.

There are many policies that government can pursue to support the
development of small- and medium-sized businesses in Zimbabwe, which in turn
support the creativity of the youth and the population at large through
job creation and entrepreneurship.

Professor Mthuli Ncube is a financial, economics, investment, and public
policy expert – and the former chief economist and vice president of the
African Development Bank and Current Finance Minister Of Zimbabwe -
Howwemadeitinafrica



Professor Mthuli Ncube

 

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