Plantations et Huileries du Congo
PHC is an established oil palm business in the DRC.
Amount
€ 9,741,280.77
Type of investment
Debt
Development impacts
- Local economic growth
- Food security & rural development
- Promotion of ESG best practices
Beneficiary locations
Investment field
Enterprises
Activity
European DFIs sell debt in Plantations et huileries du Congo SA (PHC)
The Development Finance Institutions (DFI) BIO of Belgium, CDC of the UK, DEG of Germany and FMO from the Netherlands have announced today that they will cease to be Lenders to PHC, the operating company of three longstanding palm oil plantations in the Democratic Republic of Congo (DRC). The group of DFIs have sold their respective debt interests to Maku Holdings, an affiliate of Kuramo Capital Management.
Kuramo Capital Management is an African-led investment company and has been a significant PHC investor since 2017.
The lenders will explore if proceeds from the transaction can be used for the benefit of local communities near the Boteka, Lokutu and Yaligimba regions in which PHC operates. This potentially includes suplimenting the implementation of the mediation outcomes, facilitated by the Independent Complaints Mechanism (ICM).
The conclusion of the role of the group of DFIs as lenders to PHC is an important step in the company’s long-term and ongoing rehabilitation, which began in 2013 when CDC first committed capital to the business and continued in 2015 when BIO, DEG and FMO became lenders. Since then, PHC, the former subsidiary of Feronia Inc., has been brought back from the brink of collapse. The production of crude palm oil and palm kernel oil, which is all sold domestically in the DRC primarily as cooking oil, has risen and thus the company’s ability to employ thousands of people has been significantly improved.
PHC has, since the initial investment by the DFIs, implemented requirements stipulated in an Environmental and Social Action Plan (ESAP) which was contractually agreed between the company and the DFIs as a condition to their investments. PHC has continued to make significant progress with the implementation of the updated ESAP of 2020. The company has also spent over $7 million on medical and educational facilities and on clean water provision since 2013.
PHC will continue implementing its ESAP following the transaction. Furthermore, the ongoing mediation process with local communities will continue. This process was initiated in 2018 by representatives of local communities through the Independent Complaints Mechanism (ICM) from DEG and FMO. The ICM will continue to receive funding to facilitate this mediation process independent of the DFIs ceasing to be lenders.
The Independent Expert Panel (IEP) of the ICM is composed of social and human rights experts with a proven track record in mediation and remediation. The IEP has now appointed a credible and experienced mediator who has been approved by both the representatives of local communities and the company.
For more information about the transaction and Kuramo Capital please contact Barney Gimbel at barney.gimbel@fgh.com.
PHC has over one hundred years’ history and has three remote plantations in Lokutu, Yaligimba and Boteka, each located hundreds of kilometres from the nearest city and without any substantial infrastructure. After the government, PHC is the largest employer in the DRC, with around 9,000 permanent and temporary employees.
Feronia bought PHC from Unilever in 2009. At that time PHC was nearly extinct as a business, after having suffered years of underinvestment and disruption caused by conflict in the DRC. The two periods of major conflict, between 1996 and 2003, severely affected operations. Subsequently, while the business resumed operations, it went into a period of decline due to underinvestment and lack of strategic support from its parent company. During this period, the local senior management, many of whom still work for PHC, and a core staff of approximately 3,000 people kept the business running to the best of their ability, often at great personal risk.
Without Feronia’s intervention to buy PHC, and the subsequent investments from development finance institutions (DFIs) like BIO, it is highly unlikely that this historic company employing thousands of workers in a region where there is virtually no other formal employment would have survived.
In July 2020, KKM, a minority shareholder in Feronia, became majority shareholder through the injection of fresh capital. This gives PHC the necessary means to become a sustainable and profitable business.
As part of the agreement:
- KKM will invest further capital into PHC’s operations
- Feronia Inc will cease to exist on the Canadian stock market – significantly reducing the company’s administrative cost base
- The DFI group of investors (CDC, FMO, BIO and DEG) will remain lenders to PHC
- The ongoing Independent Complaints Mechanism mediation process for those communities that have expressed concerns about Feronia will continue with the support of KKM, CDC and the other DFI lenders
- ESG spending to improve working conditions, enhance the local environment and provide education and medical facilities will be maintained by KKM and be independently audited.
The summary of the latest ESAP can be found on the website of PHC.
Development impacts
-
Local economic growth
Employment effects as PHC is by far the biggest employer in the area. The transaction secures 3,632 permanent and 2,000 seasonal jobs (1,000 full time equivalents). PHC estimates that a total of 45,000 people benefit economically and socially from its activities.
Net Export Effects: DRC is a major food importer, incl. palm oil. PHC’s production will substitute current imports
-
Food security & rural development
Local production of high-quality oil
Project will lead to important increase in local palm oil production capacity.
The transaction improves the access of the population in the DRC to goods of basic needs (food security / edible oil)
-
Promotion of ESG best practices
Lenders put in place an extensive action plan focusing on employment conditions, OHS, community involvement, health, education, etc.
Lenders put in place an extensive action plan focusing on protection of biodiversity and forests, waste management, etc.
Read impact and news about this project
News
A statement on the completion of the restructuring of Feronia / PHC
30-11-2020
In July it was announced that Feronia was facing bankruptcy and was to undergo a financial restructuring in order to secure the long-term future of PHC, its palm oil business located in the Democratic Republic of the Congo. On November 23rd, 2020, the formal restructuring agreement between the company and its lenders was signed.
News
Feronia/PHC - BIO’s mission is to invest in the most difficult places and circumstances.
25-11-2019
On the 25th of November, Human Rights Watch published a report on Feronia / PHC, and the DFIs who invested therein. Here you can find a joint statement from CDC Group, BIO, DEG, and FMO in response to the HRW report.
View more of our investments in this region
Financial Institutions
BRAC International Finance
12,815,000.00
Liberia, Sierra Leone, Tanzania, Uganda
08/11/2024
Debt
