Democratic Republic of Congo palm oil firm gets backing from ESG-focused fund, development banks

Feronia is listed on the TSX Venture Exchange

Development finance institutions and an ESG-focused private equity fund are backing a sustainable palm oil firm in the Democratic Republic of Congo.

They are putting funding into a company called Feronia, which is listed on the Toronto Stock Exchange’s Venture Exchange, the market for emerging companies.

The most recent transaction was the closing of a final tranche of a US$3.2m private placement with the African Agriculture Fund (AAF), a Mauritius-based fund run by Africa-focused private equity firm Phatisa.

In total Feronia has issued US$15m in debentures in a process kicked off last November – when CDC Group, the UK development finance institution, said it would lead the offering with a minimum US$10m investment.

Feronia said the proceeds would enable it “to deliver better environmental and social standards for workers and the local population through improved community engagement and environmental practices, upgraded community facilities, such as greater access to clean drinking water, and better workers’ housing and sanitation”.

At the heart of Feronia is the Plantations et Huileries du Congo business founded in 1911, which was acquired from Unilever in 2008 in the wake of civil war in the central African country.

The AAF, which had a final close in mid-2013 at US$246m, was launched in 2009 as a “coordinated response from a pool of European and African development finance institutions” with the aim of making a positive impact on African agriculture.The fund features a ‘technical assistance facility’ that supports capacity building for small and medium sized enterprises (SMEs) that is funded primarily by the European Commission. The fund’s investee companies must adhere to social and environmental codes of conduct.

Feronia itself has an environmental and social management programme in place; it is working towards certification by the Roundtable for Sustainable Palm Oil (RSPO) and is implementing IFC/World Bank standards for environmental and social sustainability. Its oil palm replanting programme is “brownfield” with no reliance on deforestation.

In December last year it secured a US$49m term facility agreement with four Development Finance Institutions, Germany’s DEG (lead arranger), the Netherlands’ FMO, Belgium’s BIO and the Emerging Africa Infrastructure Fund.

Feronia chairman Ravi Sood said at the time: “In rebuilding a 104-year old business, we are playing a key role in driving sustainable growth in the communities in which we operate and providing an essential product across the DRC.”

Phatisa is chaired by Valentine Chitalu, the former head of the Zambia Privatisation Agency and Central African Director for CDC Capital Partners. Its joint managing partners are Duncan Owen who was MD of Unilever in Zambia and Business Director – Africa at CDC Capital Partners and Stuart Bradley, who is also ex-CDC.