Zim govt calls on individuals to help fund startups through national venture capital fund

Everyone knows just how hard it is to raise capital in Zimbabwe. Very few startups or small businesses get funding such that many don’t even try anymore.

Last year, we participated at an event held by the Postal and Telecommunications Authority of Zimbabwe (Potraz) and the International Telecommunications Union (ITU).

The discussion was on how to promote innovation in the country. One of the major reasons for the lack of innovation was noted as lack of funding for startups, even by the government.

However, some government officials highlighted a few government funding projects that seem to go under the radar. It was said, the Infrastructure Development Bank of Zimbabwe has contributed less than US$21m in startup funding.

Potraz’s USF-funded challenges and hackathons were also highlighted. As was the ICT Innovation Drive. Note how there is currently a Potraz ICT challenge accepting applications.

SMEDCO is also funding small businesses, apparently.

The biggest challenge with all these initiatives is a lack of transparency. Each and every one of the above projects are mysteries. No one knows the full impact and reach of SMEDCO, less still earnings and repayments.

Potraz could also do with better transparency. Some hackathon winners have complained of receiving less than what was promised whilst some claim they never got anything.

There is yet another government initiative that few even know about …

The National Venture Capital Fund (NVCF)

The NVCF was launched back in 2021 and aims to help startups and SMEs get funding and strategic partnerships, using the private sector’s knowledge and making it easier for them to innovate and reach customers.

The reason you didn’t know about it is that it hasn’t done anything since inception.

Thanks to the Deputy Finance Minister, David Mnangagwa, we now know a little about why that is.

The NVCF has not been funded by the government and so it hasn’t been able to fund anyone in turn. The government has had fiscal constraints, i.e. it was broke and that’s the reason it never got around to funding it.

Mnangagwa is now calling on the private sector to chip in and help fund the NVCF. The government will not be able to do this alone. Mnangagwa says, “Right now, we cannot fully fund venture capital, so we are seeking strategic alliances with high-net-worth individuals, VCs and asset managers.”

I’m sure that the funding will pour in now that someone with the Mnangagwa last name has called for it. There are plenty of Zanu PF businesspeople that will contribute. I mean, I saw some of these guys throw $5-10,000 each at Macheso just for launching his new album. That’s the right way to use that last name.

Transparency

However, even if the funds come from Zanu-connected individuals, we still need transparency. As we noted above, the government has a bad track record when it comes to that.

Mnangagwa says “The National Venture Capital Company is exempt from the Public Procurement and Disposal of Public Asset Act, allowing it to operate competitively and partner with those who drive entrepreneurship.”

That means they are allowed to operate somewhat in the shadows. However, I think they should take advantage of the freedom to procure without much red tape but should still be transparent in their dealings.

Leadership

Mnangagwa says the funding challenges were secondary to the leadership challenges. The NVCF “Has been stagnant because we did not have a chief executive officer that has private sector experience and understands the needs of entrepreneurs. We are getting there because now we have the leader who is going to push it forward.”

We don’t know who that leader is yet. Will the leader indeed push it forward as Mnangagwa believes? We shall see.

Govt-funded venture capital funds

I would be lying if I said I had high hopes that the National Venture Capital Company will succeed. I would have low expectations if it were any government, more so with the Zimbabwean one.

That said, there have been a few successful government-funded venture capital funds.

• Singapore’s Temasek Holdings and GIC: These sovereign wealth funds have been instrumental in nurturing local startups and expanding their global reach.
• Israel’s Yozma Program: Launched in the 1990s, Yozma combined government funding with private sector expertise, leading to Israel becoming a global tech hub.
• China’s Government Guidance Funds (GGFs): These funds have played a pivotal role in financing innovation and technology startups, contributing to China’s rapid tech growth.

If we look at these funds, we find some common traits:

Strong Governance and Management: Effective and transparent management practices are crucial to ensure funds are allocated efficiently and ethically.

Private Sector Participation: Collaboration with experienced venture capitalists and private investors brings expertise, networks, and additional capital.

Policy Support: Favourable government policies, such as tax incentives and regulatory frameworks, can create a conducive environment for startups. Without policy support, the venture fund will have limited success.

Market Access: Facilitating market access for startups through government contracts or partnerships can help new businesses succeed. Instead of rewarding the likes of Chivhayo with tenders, the government could support startups by giving them business.

Clear Objectives: Defining clear goals and metrics for success to ensure accountability and track progress. The Zim government is not big on accountability and that remains one of the reasons programs like these struggle.

Also read:

• This is what the ‘capital and resources’ landscape looks like in Zim, are startups/innovators being funded?
• The ecosytem that allows Boston biotech startups to thrive has lessons for Zimbabwe
• Here is why Zimbabwean startups struggle to raise capital from international investors