Keynote Speech by His Excellency Nana Addo Akufo-Addo, at the 2021 AVCA Conference
I am pleased to join you today at the Annual Conference of the African Private Equity and Venture Capital Association (AVCA), which is being held virtually. The AVCA conference remains a key platform that creates an avenue for countries like ours to network and tap into investible funds to spur growth on the continent, and I am grateful to the Chair, members of the Board, and Chief Executive Officer of the Association for this opportunity.
I commend AVCA for its continuous role as a Pan-African industry body that is promoting and attracting private investment in Africa. It is through associations like yours that Africa is able to paint a better picture of her economic and social landscape to the international community, particularly friends of Africa and investors around the globe.
The theme for this year’s conference, “Resilience, Resurgence, Results”, amplifies greatly the current expectations of the world — the pursuit of a green, resilient and inclusive recovery from the ravages of COVID-19.
Like all economies around the globe, African economies are still confronting head-on the impact of the pandemic, which has brought in its wake political and socio-economic disruptions. We are grappling with significant dips in revenues, spiralling expenditures, collapsing businesses, dwindling household incomes, with many, who were once gainfully employed, now rendered unemployed.
Thankfully, a little over a year into the pandemic, following the introduction of vaccines and strict compliance with COVID protocols, many African countries are slowly returning to states of near normalcy.
However, if we are to be resilient, ensure resurgence, and guarantee results of growth and development for our peoples, there must be closer cooperation and collaboration between the public and private sectors, which, I am confident, will help us sail through safely these turbulent storms.
Ladies and gentlemen, it is noteworthy that Africa’s robust macroeconomic growth, which averaged 4.6% between 2000 and 2016, was a crucial factor in the growth of the continent’s venture capital industry. This growth created a positive environment that catalyzed innovation, entrepreneurship and investment. Predictably, as a result of the pandemic, Africa’s economic growth in 2020 was lower than originally expected. Nonetheless, Africa’s GDP growth was still above the world average in 2019, and it remains the world’s second fastest-growing region.
As the continent moves in search of innovative financing, private equity and venture capital approaches to raising long term capital for development will be very suitable. Having been the source of development financing in most developed economies, this has proven to be the surest way of supporting small and medium scale enterprises to thrive.
We are reliably informed that African private equity fundraisers have been growing in recent years, from US$2.7bn in 2018 to US$3.8bn in 2019, and was projected to increase further in 2020, but for the advent of COVID-19.
For us to continue to grow the continent’s private equity industry, in the era of the pandemic, we need to take the measures that will allow you, in the private sector, to commit funds to the creation of new assets in need of capital.
For us, in Ghana, we have worked to identify some of the constraints inhibiting the market growth of private equity funding in the country, which includes high inflation, the depreciation of the currency, competing government funding cost, financial literacy, family businesses hesitant to cede control to outsiders, valuation issues, and SME financials which are not in order.
Several initiatives have, therefore, been taken to remove these constraints in order to maintain the country as one of the best destinations for investors in Africa. The Ghanaian Government, working together with the Securities and Exchange Commission, began a series of reforms in 2018 to strengthen the capital markets, deepen the range of instruments available for local and international investors, and enhance local investor confidence. Key amongst them include:
- cleanup of the asset management industry, leading to stronger market operators;
- development of a 10-year Capital Market Master Plan, which is currently being implemented;
- the abolition of Value Added Tax (VAT) on management fees on private equities, venture capitals, and mutual funds to encourage institutional and angel investors, both local and foreign, to invest these critical funds for private sector growth and, thereby, create jobs;
- issuance of guidelines on REITs and private funds, and exemption of same from taxes;
- enhancement of the licensing regime, including corporate governance requirements; and
- improved communication on the activities of the industry regulator.
As a result of these far-reaching initiatives, whilst stock market performance worldwide has been muted these past two years, trading volumes on the Ghanaian equity market actually increased to historic levels in 2020, and volumes on the bond market far exceeded past trading volumes. Other initiatives, such as the establishment of a Financial Data Centre and a Domestic Credit Rating Agency, are at various stages of finalisation, and, once completed, will create a more stable financial ecosystem in Ghana.
The Government is also working to position Ghana strategically as a regional financial hub, where both domestic and international investors can gain the greatest exposure to Africa’s growth potential. This initiative is expected to improve our regional integration efforts and create a business-enabling environment for private sector development. Specifically, it will serve as a regional centre to attract foreign direct investment, access cheaper capital for economic agents, strengthen the regional financial sector through expansion in the use of investment banking instruments, increase the general competitiveness of the region, and, most importantly, position the region as a strategic hub for international finance.
This commitment to creating an enabling environment has made Ghana one of the top private equity investment destinations in West Africa, with about US$2.24bn in private equity funds, representing 22% of the total value of US$10.2bn invested in the region, and 11.98% of the total value of US$18.7bn in the continent at the end of December 2019.
Despite the impact of the COVID-19 pandemic, Ghana remains a favourable destination for private equity investment.
Ladies and gentlemen, realizing the vision of a “Ghana Beyond Aid” requires massive investments across many critical sectors of the economy. We need to bring in private investors to become partners in this cause. In Ghana, over 90% of all registered companies are considered SMEs, and they account for approximately 70% of our country’s GDP. SMEs alone have an estimated funding gap of about US$4.8bn, representing 13% of our GDP as of 2019. There are funding gaps of about US$70bn in housing, and an annual infrastructure funding gap of US$1.5bn.
Furthermore, our policies of One-District-One-Factory and the programme Planting for Food and Jobs were premised on providing an enabling environment for private investors to flourish. Many of the companies operating under these initiatives are prime candidates for private equity firms, and help to reduce the problem of limited deals available for investments. To promote this initiative, the Government has passed the Ghana Enterprises Agency Bill and developed a National MSME and Entrepreneurial Policy. A National MSME fund is being instituted to provide funding to qualified MSMEs. We expect these initiatives to lead to the availability of many investment-ready companies, with which AVCA members can partner to scale.
In conclusion, ladies and gentlemen, I encourage all present here to show continually oneness in building the Africa we aspire to see. Let us put in place the financial infrastructure needed to absorb foreign capital efficiently, and undertake speedy policy and structural reform to attract private flows that Africa needs.
Sadly, countries that backtrack on reform will find their access to international capital limited, and what is available to them will be provided on costlier terms. With the power of collaboration, we can build a concerted action on many fronts to attract both local and foreign capital for the continent.
I wish us all fruitful deliberations during this conference. Ghana and Africa need a strong and viable private equity industry, and I believe that the work of AVCA will persist, creating platforms like this to network and leverage on opportunities available, and creating new ones to develop our continent.
May God bless Mother Africa and us all.
I thank you for your attention.