CDC, the UK’s development finance institution, has announced a US$18.1m investment into Feronia, an agricultural production and processing business focused on palm oil plantations and arable farming in the Democratic Republic of Congo (DRC).
The investment, which enabled a total capital raise of $28.6m, will support the ongoing rehabilitation of an existing 102-year-old plantation business that provides over 3,500 direct jobs. When the plantations were acquired by Feronia in 2009, they were in a state of distress due to severe under-investment during the civil conflict in the DRC.
CDC’s investment is said to help the company accelerate the restoration of its three palm oil plantations, support its replanting programme and increase production efficiencies. A component of the investment will also be used to enable Feronia to further develop its arable farming operations.
“Our plantation business was once a world leader in the palm oil sector in both production and research,” said Feronia chairman Ravi Sood. “We are determined to match and exceed previous production levels and also restore our position as an innovator in the sector. We are equally determined to continue our 100-year legacy of complete integration with the communities we operate in. Our hope is that our commercial success will be part of an agricultural renaissance in DRC.”
DRC is one of the poorest countries in the world in which per capita income is $180. Approximately 70% of the population live below the poverty line and 75% of the population don’t have enough to eat according to the World Bank’s 2013 African Economic Outlook. Despite huge agricultural potential, the country relies on imports for a substantial amount of its food requirements.
Feronia, backed by CDC’s investment, aims to reduce imports of these staple goods and contribute to local food security by increasing the availability of edible oil and crop products to people in DRC. Both the palm oil and the rice and arable crops produced by Feronia are consumed solely within the domestic market.
Past economic and political instability has hindered investment in the agricultural industry, resulting in the decline of established plantations such as those owned by Feronia. However, with an increasing population and economic growth, there is a significant opportunity for patient investing to build sustainable businesses in the DRC
“This is an important investment in DRC for CDC,” said Dolika Banda, CDC’s regional director for Africa. “Feronia’s plantations are at the heart of their communities and it is a highly respected company within the country. One of our key reasons for investing is the depth of experience in both the workforce and senior management team, which is a testament to its 100-year history in DRC. The company has already made significant progress in rehabilitating plantations which were in a state of distress and we believe that the business has substantial potential to be a major contributor to growth and jobs in DRC.”
The company’s principal operations are in Équateur and Orientale, which are two of the poorest provinces within the DRC with extremely limited formal employment. As well as providing 3,500 direct jobs, approximately 45,000 people live in the communities surrounding Feronia’s plantations and rely on the company’s continuing operations. It provides housing for its staff and their families as well as four full hospital campuses, 17 clinics and dispensaries, and 94 schools.
Of the $18.1m, a pool of $3.6m has been ring-fenced to finance the implementation of the company’s Environmental and Social Action Plan (ESAP) which is in place to strengthen business standards and enhance community facilities. Areas covered by the ESAP include workers’ housing, sanitation, schools, medical facilities, health and safety and the implementation of environmental good practices.