The Urgent Need for Homegrown Venture Capital in Ghana’s Startup Ecosystem
For years, Ghana’s startup ecosystem, like many African nations, has thrived with the help of foreign donors such as USAID, which has funded sectors from agriculture to fintech. However, the abrupt funding shutdown in Kenya, which left over 30 startups struggling, serves as a stark reminder that reliance on external funds is risky. Ghana’s own ecosystem, while vibrant, remains vulnerable to shifts in foreign priorities, making the need for a self-sustaining, locally-driven venture capital system urgent.
The USAID withdrawal in Kenya exposed the fragility of relying on donor funding, as it left many successful startups with uncertain futures. Ghana faces a similar risk, with promising businesses in sectors like fintech and renewable energy still heavily dependent on foreign capital. Despite notable success stories, the ecosystem remains underdeveloped, with local investors still hesitant to back high-risk startups, often preferring safer investments like real estate and government bonds.
In response to this vulnerability, the Venture Capital Trust Fund (VCTF), established in 2004, has played a crucial role in promoting venture capital in Ghana. It has invested in venture capital finance companies (VCFCs) and supported initiatives like the Ghana Angel Investor Network (GAIN) and the Ghana Alternative Exchange (GAX), which provide pathways for startups to raise capital. However, the current local funding infrastructure is not enough to ensure long-term sustainability for Ghana’s growing tech sector.
To ensure a more resilient startup ecosystem, it is vital for Ghana to strengthen its venture capital framework. Expanding VCTF’s funding, encouraging private capital through government-backed guarantees, fostering corporate participation in startup investments, and mobilizing diaspora investments are critical steps. Ghana must act now to build an ecosystem independent of foreign donor cycles, ensuring that when the next funding cuts happen, it will be the locally-backed startups that thrive.
SOURCE: CITI NEWSROOM