Cabo Verde expects to increase to 500 million the Sovereign Private Investment Guarantee Fund

10 September 2019

The Sovereign Private Investment Guarantee Fund (FSGIP) approved by the Government of Cabo Verde is expected by 2025 to have a capitalisation of US$500 million as a result of the participation of private entities.

The FSGIP decree law, made available by Legis-PALOP+TL, stipulates that the Fund will function as a state guarantee mechanism for the capitalisation of companies, including those in the financial sector and capable of providing access to the capital market, particularly foreign ones, to Cape Verdean companies committed to internationalisation.

FSGIP issues Capital Representative Securities (TRCS) which are the exclusive property of the State, inalienable and the sum of their value is equal to the value of subscribed and paid-up capital stock through the Directorate-General of the Treasury.

The State issues Capital Mobilisation Income Securities (TRMC), new financial instruments that are freely tradeable perpetual nominative securities, whose overall issuance value is equal to the value of the Fund’s capital stock and entitles holders to dividends following the annual results of FSGIP.

Legis-PALOP+TL also reported that FSGIP “aims to become the cornerstone of the Cape Verdean financial system,” with an initial share capital of 100 million euros, of which 90 million were immediately allocated by the state, from the International Support For Cabo Verde Trust Fund, and the remaining 10 million euros from the proceeds of TRMCs being placed in the securities market by the Directorate-General for the Treasury.

The TRMCs are issued in series of 100 thousand escudos (about 900 euros) or multiples of this value, identified by their respective issue date, allowing foreign investors to contribute to the fund’s capitalisation by acquiring them and are an alternative for the Cape Verdean diaspora to apply their savings.

Income from TRMC from dividends distributed by the Fund is exempt from income tax and any form of taxation, including capital gains from the disposal of TRMCs.

FSGIP is expected to be operational by 2020, and its immediate objective is to expand its share capital to US$200 million or more (about 180 million euros), as a result of the first issue of TRMC following the approval of this Law.

As a result of Cabo Verde’s partners joining the initiative alongside the private and domestic private sector, it is expected that over the next five years, the Fund will have capital of about US$500 million or more (about 450 million euros).

The law stipulates that the FSGIP may never be rated lower than “A” by financial rating agencies, with a view to minimising the associated risks. (Macauhub)