Investment funds, is the future in DR Congo?

By Christian Kazumba, private sector development expert.

Who does not know the impressive economic potential of the DR Congo, a veritable "continental country" with a subsoil estimated by some at twenty-four trillion dollars and with agriculture capable of feeding nearly twenty-five percent of the population? humanity?

These impressive prospects do not seem, for the moment, to convince Private Equity players to establish themselves there since only one investment fund of international dimension operates there today.

It is clear that some obstacles remain and oppose the rapid development of a sector that is strategic because it is capable of supporting the emergence of local SMEs in search of suitable solutions combining financing and long-term technical support.

Doubts about the viability of the business model With one of the highest fiscal pressure rates on the continent, an exorbitant cost of living making salaries and rents much higher than in West Africa, a mediocre quality of public infrastructure requiring heavy expenditure companies, quickly making the "deals" made profitable seems difficult and uncertain.

A reduced number of “investable” companies Four years spent in the field alongside Congolese entrepreneurs lead me to think that significant shortcomings may appear in terms of project structuring.

Thus, the fundamentals of certain companies, in terms of economic model, mastery of the reference market, operational management, cash monitoring or human capital management often seem fragile and likely to dampen the inclinations of any potential investor. .

In addition, the reluctance of business leaders, leading some much more mature family SMEs, to open their capital to an investment fund respecting market standards can also explain the low number of Private Equity players present in Kinshasa.

Difficulties in defining a coherent company valuation When an investment fund plans to finance a company by taking a stake in the capital, the valuation of the target company is always an important subject on which the number of shares allocated to it in return will depend in particular. The absence of a stock exchange, the low number of similar transactions and the lack of access to reliable economic and financial information make this exercise perilous in DR Congo and undoubtedly more subjective than elsewhere.

Despite these obstacles, international investment funds would do well to increase their interest in the DR Congo, a destination that is sure to present considerable advantages in the near future for an investor looking for substantial returns.

Thus, the strong entrepreneurial temperament of a young and dynamic population, the progress made by the country in terms of risk perception (symbolized by the recent raising of the sovereign rating of the DRC by the international agencies Moody's, Standard and Poor's and Bloomfield ) are worth mentioning.

Moreover, in renewed confidence, international donors are devoting more and more technical, human and financial resources to programs aimed at developing the private sector and the Congolese entrepreneurial ecosystem (for example, a total of four hundred million dollars has been allocated by the World Bank within the framework of the “PADMPME” and “TRANSFORME” projects).

Management companies, investment funds: head for the DRC. The main risk for you would be not to take an interest in it quickly.

Favor the establishment of multi-sector funds that will allow you to benefit from all the diversity of the local ecosystem, by offering investment tickets between three hundred and eight hundred thousand dollars, in perfect harmony with the financing needs of SMEs. with a history and a basic organization. Know how to adapt your financing methods and instruments, as well as your "post-investment" follow-up, and your offer will appeal to a Congolese market that is as specific as it is promising.

About Christian Kazumba

Christian Kazumba is an expert in sub-Saharan private sector development.

Working for eleven years on the African continent, his career has enabled him to evolve successively in Morocco, Mali, Burkina Faso, Togo and DR Congo, in operational or general management positions, in companies in the services.

He also piloted, on behalf of a “Big Four” in the DRC, a World Bank project aimed at setting up SME centers in Kinshasa, Lubumbashi, Goma and Matadi.

He now runs a consulting and investment firm, based in Gabon, mainly targeting the development of the entrepreneurial ecosystem.

Financial Afrik