Companies conducting trading<sup>102</sup> must have US$1 million minimum capital from a foreign participant and must employ a minimum of 20 skilled Ghanaians.<sup>103</sup> These rules make the required financing gap for foreign participation in PE/VC higher, which could possibly lead to less financing from foreign sources for smaller companies. On the other hand, the Act does provide exemption from import duties for manufacturing companies, which could direct more investment from foreign sources to this sector.<sup>104</sup>

# **Legal/ regulatory framework guiding domestic institutional investors**

The legal/ regulatory framework for domestic institutional investors does not encourage investment in private equity or venture capital; in addition, despite local financial institutions having benefited from early experience co-investing with VCTF in venture capital, domestic institutional investors are not comfortable with the asset class.

# **Pension funds**

The National Pensions (Amendment) Act, 2014 (Act 883) was published in the official gazette in December 2014, establishing modifications to the National Pensions Act, 2008 (Act 766).<sup>105</sup> Act 766 was passed on 12th December 2008 to establish a three- tier pension scheme and a Pension Regulatory Authority which approves, regulates and monitors pension fund managers, trustees, custodians and other pension-related entities. The three-tier system established the following:

- **First tier:** Basic national social security scheme, managed by SSNIT, which is mandatory for all employees in both the private and public sectors

- **Second tier:** Occupational (or work-based) pension scheme, managed by private pension fund managers<sup>106</sup> , which is mandatory for all employees<sup>107</sup>

- **Third tier:** Voluntary provident fund and personal pension schemes, managed by private pension fund managers.

There are 25 corporate trustees, 51 pension fund managers and 16 custodians in the industry as of November 2014. The second and third tiers of the pension system have a total of 248 registered and approved pension schemes.<sup>108</sup> Ideally this three-tiered pension fund system, which ended the monopoly of SSNIT as the state social security vehicle, and increased the size of the private pension market, would have provided a basis for more pension fund investment into private equity and venture capital in Ghana. However, the investment guidelines do not allow for pension funds to invest in private equity or venture capital. The Investment Guidelines for pension fund managers (NPRA/GD/INV/01/11) under the Act 766, require that pension

> 102 Enterprises that buy or sell finished goods.

> 103 The previous GIPC Act required minimum capital for foreign investors of $10,000 for joint ventures with Ghanaians and $50,000 for enterprises wholly owned by foreigners. Trading companies required minimum foreign equity of $300K and had to employ at least ten Ghanaians.

> 104 Section 26 (2) of Act 2013, Act 865: “An enterprise whose plant, machinery equipment or parts of the plant, machinery or equipment are not zero-rated under the Customs Harmonised Commodity and Tariff Code Schedule to the Customs, Excise and Preventive Service Management Act 1993 (PNDCL 330) may submit an application for exemption from import duties and related charges on the plant, machinery or equipment, or the parts of the plant, machinery or equipment to the centre for onward submission to the minister responsible for Finance.”

> 105 AXCO 2015 “Insurance Market Information: Life & Benefits”.

> 106 The private sector manager is licensed by SEC and registered with the Authority.

> 107 There have been delays in implementing this tier since not all employers have signed up with the pension schemes.

> 108 AXCO 2015“Insurance Market Information: Life & Benefits”.

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