Zimbabwe: National Venture Capital Seeks Investment Proposals

20 September 2021

THE National Venture Capital Fund (NVCF) says it is seeking investment proposals from potential investors with projects that can stimulate economic growth, create new employment opportunities and localise production.

The establishment of the NVCF was announced in the 2020 National Budget with the aim of assisting start-ups and other small firms to access working capital and funding for technology improvement among others.

"Priority is given to projects with the capacity to create new employment, generate foreign currency through exports, substitute importation, promote women and youth entrepreneurship, projects with high technological impact as well as projects with an internal rate of return of more than 15 percent and a good developmental impact," NVCF said.

It said the venture fund would typically invest as an equity partner in order to strengthen the business of investee companies and will therefore seek to take shareholding dependent on the business valuation of targeted entities.

Analysts believe the equity financing model has an advantage in that it puts no obligation to repay the money acquired through it.

Whereas debt financing involves the borrowing of money, equity financing involves selling a portion of equity in the company.

In May this year, Treasury successfully operationalised the NVCF, which saw about $300 million being disbursed to different entrepreneurs and start-up innovators.

Initially, the Treasury had earmarked $500 million by February 2020 to ensure provision of affordable loans to young entrepreneurs as part of measures to catalyse economic growth and create more job opportunities.

In establishing the NVCF, which is a key intervention under the five-year National Development Strategy 1 (NDS1: 2021-2025), the Government has underscored the need to encourage entrepreneurship by the youth and women, and particularly helping start-ups to grow and generate new employment opportunities.

Financing start-up businesses is crucial for Zimbabwe, which has more than three million SMEs, of which 15 percent are formally registered, contributing about 50 percent to the country's Gross Domestic Product (GDP).

It is estimated that about 75 percent of the country's workforce is employed by SMEs.

Finance and Economic Development Minister Mthuli Ncube last year pledged to engage potential fund managers locally and abroad who have capacity to fund and invest in companies.

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