Full-Report-on-Venture-Capital-Fund.pdf

Full-Report-on-Venture-Capital-Fund.pdf - FULL REPORT...

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FULL REPORT
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1 Prelude: Private equity and venture capital finance represent critical components of any financial sector as they provide support to business ventures which would generally be too risky for normal commercial banks. This report: 1) provides a short summary of the nature of private equity and venture capital finance; 2) Brings together Namibia’s experience to date with this kind of finance; 3) Examines Namibia’s policy, regulatory and tax environment; 4) Looks at exit options available; 5) Reviews which international and domestic providers of finance are active; 6) Identifies different models of private equity finance provision; and 7) Summarises relevant data and research conducted in Namibia. The results of a ground-breaking survey of 100 Namibian medium-sized businesses are presented which suggest that the need for “patient capital” is especially acute for start-ups and during the first three or four years of existence. The challenge for any private equity manager will be to profitably invest and manage relatively small amounts of capital over a larger number of businesses. If this challenge can be overcome, the eventual rewards are likely to be high.
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2 Contents 1. Introduction .............................................................................................................................. 4 2. Fundamental Characteristics of Private Equity and Venture Capital Funds ... 6 2.1 The J Curve ........................................................................................................................ 8 2.2 Financial Structure of a Private Equity Venture Capital Fund ...................... 9 3 The Importance of the SME Sector ................................................................................ 11 4 A Short History of Private Equity Finance in Namibia ........................................... 13 4.1 Namibian Harvest ........................................................................................................ 13 4.2 GIPF and the Development Capital Portfolio .................................................... 13 4.3 Stimulus Investments ................................................................................................ 14 4.4 GIPF’s Unlisted Investment P rogramme ............................................................ 14 4.5 Development Bank of Namibia ............................................................................... 15 4.6 Namibia Development Corporation ..................................................................... 16 4.7 SME Bank ........................................................................................................................ 16 4.8 Other Investment Vehicles in the Namibian Market ...................................... 16 4.9 Conclusions .................................................................................................................... 17 5 The Namibian Policy Environment for Private Equity .......................................... 18 5.1 Vision 2030 (2004) ..................................................................................................... 18 5.2 National Development Plan 4 (2012) .................................................................. 18 5.3 Industrial Policy (2012) ............................................................................................ 18 5.4 Namibia Financial Sector Strategy: 2011-2021 (2012) ................................ 19 5.5 Conclusions .................................................................................................................... 19 6 The Namibian Regulatory and Tax Environment .................................................... 20 6.1 Corporate Entities in Namibia ................................................................................ 20 6.2 Regulations 28 and 29 ............................................................................................... 22 6.3 Taxation ........................................................................................................................... 23 7 Exit Options in Namibia ..................................................................................................... 24 8 International Development Finance Institutions and Private Equity .............. 27 9 Local Providers of Private Equity Finance ................................................................. 29 9.1 Stimulus Investments ................................................................................................ 29
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3 9.2 The Namibia Procurement Fund ........................................................................... 29 9.3 The Desert Stone Fund .............................................................................................. 30 9.4 VPB Namibia Growth Fund ...................................................................................... 30 9.5 Venture Capital Namibia Pty (Ltd) ....................................................................... 31 9.6 Namibia Venture Capital (Pty) Ltd ....................................................................... 31 9.7 Namibian Diamond Fund (IHN and PSG Capital) ............................................ 32 10 Private Equity Fund Models in Namibia ...................................................................... 33 11 Data and Research on Namibia’s Medium -Sized Business Sector ..................... 36 11.1 National Enterprise Establishment Census 2009 ....................................... 36 11.2 Development Bank of Namibia .......................................................................... 38 11.3 Conclusions ................................................................................................................ 39 12 Results of Private Equity Survey .................................................................................... 39 13 Further Considerations and Overall Conclusions .................................................... 41 Appendix 1:The Namibian Policy Environment for Private Equity Appendix 2:International DFIs and Private Equity Appendix 3: Data and Research Appendix 4: Experts Interviewed and Consulted Appendix 5: Results of Private Equity Survey of Medium-Sized Businesses
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4 1. Introduction
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