Government seeks high-net-worth partners for startup fund

The National Venture Capital Fund (NVCF) was established in 2021 to provide capital to small and medium-sized enterprises (SMEs) and start-ups that will be funded by the government.

Deputy Minister of Finance, Economic Development and Investment Promotion David Mnangagwa said the Treasury Department is seeking to forge strategic alliances with high-net-worth entrepreneurs to launch a fund to support startups.

The National Venture Capital Fund (NVCF) was established in 2021 to provide capital to small and medium-sized enterprises (SMEs) and start-ups that will be funded by the government.

However, almost three years later, the government has still not provided funds to the NVCF due to financial constraints.

A venture capital fund is a pool of money used to invest in startups and small, early-stage companies with high potential, typically providing equity in exchange for shares.

Responding to concerns expressed by entrepreneurs and start-ups during a panel discussion at the 7th Sadc Industrialisation Week held in Harare last week, Mnangagwa said start-ups need to develop their ideas and businesses.

“The national venture capital company, launched in 2021, aims to support startups and small and medium-sized enterprises (SMEs) through financing and strategic partnerships,” Mnangagwa said.

“It was at a standstill because we didn’t have a CEO who had private-sector experience and understood the needs of entrepreneurs. We’re moving in that direction because we now have a leader who can drive it forward.”

The Reserve Bank of Zimbabwe’s FinScope 2022 survey of micro, small and medium-sized enterprises (MSMEs) showed that the informal sector has an estimated annual turnover of $14.2 billion and a gross domestic product value of $8.6 billion.

It is estimated that there is US$2.5 billion in cash circulating in the informal sector, which is home to start-ups and small and medium-sized enterprises, despite the fact that this sector is unbanked.

“At the moment, we cannot fully fund venture capital, so we are looking for strategic alliances with high-net-worth individuals, venture capitalists and asset managers,” Mnangagwa said.

“The National Venture Capital Company is exempt from the Public Procurement and Disposal of Public Assets Act, which allows it to operate in a competitive manner and cooperate with entities that drive entrepreneurship.”

He added that the government was also committed to supporting SME participation in capital markets.

“We support young people and their future careers through this venture capital space. While there is a distinction between startups and SMEs, we see them as young entrepreneurs who need funding and support. There are mechanisms to get funding and support from development partners,” he said.

“Our capital markets are not structured to serve special interests, but the Second Republic is working to change that. We are creating a financial architecture that serves the government, the people, and the business community.”

However, he noted that there is an information gap regarding some of the opportunities for small businesses and individuals to participate in capital markets.

According to Mnangagwa, these opportunities include ETFs, C-Trade and real estate investment funds.

“We have encouraged the Securities Exchange Commission of Zimbabwe and the Zimbabwe Stock Exchange to campaign and educate citizens. Our C-Trade platform allows young people to participate in the stock market on their phones,” the deputy minister added.

In the same panel, managing director and board member of infrastructure development company Bigen Global, McLean Sibanda, said there was a need to develop policies that promote innovation and enable SMEs to thrive.

“Policy certainty is key for startups and SMEs to thrive. We need to differentiate between SMEs and startups because not every small business is a startup,” he said.

“Startups are human organizations designed to create something new in conditions of extreme uncertainty, as defined by Eric Reese. They use technology and innovative practices to deliver value.”

He stated that the regulatory environment does not have to be too restrictive to create favorable conditions for startups and small and medium-sized enterprises.

“Financing instruments such as gap financing, research and development (R&D) incentives and the development of supply companies can help. We also need to enable access to markets and increase investment in R&D,” Sibanda added.

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