Private equity firm transforms palm oil business in Sierra Leone

With an investment injection of $20m plus and ongoing support from Phatisa agri specialists, Goldtree has been completely transformed. It now has a mechanised, safe and hygienic processing mill supported by office facilities, a canteen, workshops, stores, a quality control laboratory, holding tanks and a fleet of vehicles. While presently managed mainly by expat staff, the aim is to transfer skills so local employees can run the business.

“A development equity opportunity such as Goldtree is the perfect place for development finance institutions which want to invest in a way that generates returns and sustainably uplifts communities – rather than simply donate,” says Owen. “Besides providing them with performance which could be over 20% per annum in the medium term, development equity is transformative. A project such as Goldtree has created a meaningful rural economy in the Daru area. We hope that a lost generation affected by civil war now has opportunity and prospects.”

The expected investment horizon for AAF’s investment in Goldtree is until 2020 when at time of exit, the business should be solid, sustainable and pleasingly profitable. Over that period annual crude palm oil output should rise to 18,000 tons, supplying domestic and regional markets.

Sustainable factors

In line with global trends of increased accountability, private equity investors and particularly those in development equity are demanding high standards from their fund managers on sustainable ESG factors (environment, social and governance). AAF is able to demonstrate the many ESG qualities of Goldtree to its governmental and development finance institution investment partners.

Its own relatively small plantation is leased from the local community and provides them with a secure rental income. AAF follows an ethical code for land acquisition and land use in its projects, realising the political and social sensitivities of property when owned or used by foreign investors. Land must also be used sustainably and primary forest should never be destroyed.

In buying fruit from outgrower farmers in the nearby 40km radius, Goldtree generates income for close to 20,000 people on a seasonal basis. Paying a monthly local wage bill of around $60,000, the company is a strong catalyst in transforming Daru and its economy.

With a focus on environmentally friendly business methods, the mill is energy self-sufficient, reusing fruit fibre from the milling process. Waste water is treated before being irrigated onto plantations as a fertiliser or recycled into rivers.

Goldtree ensures that workers prioritise safety, for example, by using personal protective equipment. Good corporate governance structures include anti-bribery and corruption policies and social impact measurements include offering the outgrowers a fair and transparent price formula for their products.

Supporting all AAF agri investments is a Technical Assistance Facility, funded primarily by the European Commission. In the Goldtree project, this facility is helping outgrowers improve their yields through training on effective replanting, growing and harvesting. For example, by safely using sickles on poles for cutting bunches, farmers no longer have to climb tall palms as part of a dangerous and slow harvesting process.

“Development equity is exceptionally hard work,” says Owen. “Businesses are based in remote geographies and very young markets where skills and infrastructure are lacking. The challenges can be huge. But you commit to a long term vision and stick to that goal. The rewards for everyone are worth it.”

* Development Equity (DevEq) equals PAT (profit after tax) times a constant (x) plus impact (i) to the second power.