Policy makers including African and International Central Banks, Ministries of Finance, Securities and Exchange Commissions, Departments of Trade and Industry and International Development Organisations are important stakeholders in the African private equity and venture capital industry.
Private equity and venture capital are a relatively new source of finance for Africa businesses. Policy makers help create an enabling regulatory and fiscal environment for private equity and venture capital to flourish.
Policy makers around the world have sought to do so (create an enabling environment for private equity and venture capital), in recognition of the potential of private equity and venture capital to stimulate economic growth by financing growing businesses to create wealth, employment, exports, tax revenue, alleviate poverty and other social and intangible benefits.
Examples of initiatives policymakers can take to encourage the growth of private equity and venture capital in Africa are:
- Mobilising funds for private equity and venture capital investment in small and medium sized industries E.g. Nigerian Governments and Bankers Association initiated Small and Medium Industry Equity Investment Scheme (SMIEIS). In this scheme, commercial banks set aside 10% of their pre tax profits for equity investment in small and medium sized industries. The scheme raised 22 Billion Naira as at June 2004, for the industry.
- Tax incentives to investors in private equity and venture capital - E.g. UK government offers 20-40% tax relief on investments up to £200,000 into Venture Capital Trusts (VCT).
Source: http://www.inlandrevenue.gov.uk/budget2004/revbn10.htm
- Recognising private equity and venture capital as an asset class for institutional investors.
- Tax incentives to corporate entities who carry out corporate venturing activities.
- There are also innovative initiatives by the South African, Kenyan and Ghanaian governments to promote private equity and venture capital
To discuss how policy makers can work with the industry to create an enabling environment for private equity and venture capital, email
