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FTInsight April/May 2016

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Invest Sierra Leone

Invest Sierra Leone 2016 Special Opinion To an entrepreneur, neglect naturally means opportunity By Paddy Docherty, Phoenix Africa I founded Phoenix Africa several years ago to build a series of social-impact businesses in post-con f lict countries in Africa. The business model is based on the realisation that countries recovering from civil war or armed insurgency are very often nothing like as dangerous and risky as one would imagine from a casual glance at the newspapers or TV; at the same time, because of the generally negative press (and an unhealthy dose of assumption), these countries are very badly neglected by most investors around the world, and suffer from a lack of inward capital f lows. To an entrepreneur, neglect naturally means opportunity, and my hunch was that post-conf lict Africa – as almost certainly the most forgotten group of countries on the planet – would offer plentiful business opportunities. In the early days of the company, I travelled to many countries on the continent, all at various stages of emerging from conflict, to research where we might go and precisely what we might do. We spent some time on a plan to establish a microfinance bank in South Sudan, before rightly deciding that the politics in the country were too unstable. From a list of other potential investment destinations, Sierra Leone stood out as the clear choice for our first project, and a very attractive place to begin work. It is the perfect fit for the Phoenix Africa model, being both highly neglected by international investors (thus offering plentiful opportunity) and at the same time being politically very stable and wonderfully peaceful and quiet. This is how Lion Mountains Agrico Ltd came into being. From my research trip around the country, the agriculture sector evidently offered much scope for development, especially when considering the enormous amounts that Sierra Leone spends on importing rice, the staple diet. We therefore began planning Lion Mountains with the aim of growing rice for domestic sale: a commercial undertaking that would simultaneously deliver a profound social impact to the local community and go some way to redressing the food security problem that Sierra Leone faces. From my perspective, the single biggest challenge in establishing the company was not to be found in Sierra Leone itself. The most difficult obstacle to overcome is the perception problem – the negative assumptions that many people make about the country, based on dim recollections of news reports from the worst days of the rebel war. Risk analysts sitting in London (who have typically never visited Sierra Leone, of course) are fond of declaring it a high-risk country, and this general perception has retarded investment. It is a tough task to raise money for a Sierra Leonean project. Happily, however, we managed to raise enough money to launch pilot phase operations in October 2014 – during the worst of the Ebola crisis – and are now firmly established as one of the key players in food production and processing, with our headquarters in Bo. We closed our Series A finance in August 2015, and are now working on finalising Series B, an investment that will provide for expansion to large-scale commercial farming. While it is the goal of Lion Mountains to farm rice at scale, the focus of the operation in the first 18 months has been the milling of rice that we buy in from a network of approximately 2,000 outgrowers around Bo District.

By going into the countryside and providing market linkage to many small farmers who have no other route to market, we have been able to both build a business and deliver a valuable social impact: most of our outgrowers are subsistence farmers with no other cash income. Even as we move to large-scale commercial farming over the next year, our Outgrower Programme will expand, and this year we expect to buy husked rice from about 3,000 local smallholders. Besides the milling operation, we have been growing rice, soy beans and black-eyed beans at a small pilot farm in Lugbu Chiefdom, which in the last harvest delivered fully 2.73t of rice per hectare, a very healthy yield for the first full year of operation. While there are of course challenges to operating in Sierra Leone, we are very excited about the enormous potential. Few countries around the world offer the opportunity to go from a standing start to being the dominant player in a sector, but that is what we have under way with Lion Mountains. A key factor in this is our people. Managing Director Mike Gericke – surely one of the most highly experienced farmers working in Africa – has performed miracles on a regular basis to establish operations and make them successful. We are very lucky to have not only Paramount Chief Komrabai, Peter Penfold but also Dr Joe Demby on our board of directors, which has offered us great protection from corruption and helped us to get things done in good time. Lion Mountains has also benefitted from the strong support of the Ministry of Agriculture, including the direct backing of the Hon Minister Professor Monty Jones and Deputy Minister Marie Jalloh. Though the day-to-day challenges remain (power cuts, lack of readily available inputs, poor roads), such support helps us overcome them, and we look forward to collaborating further with the Ministry in the pursuit of our joint goal of food security for Sierra Leone. In the view of Phoenix Africa, Sierra Leone is a highly attractive place to do business. The perception problem and its negative effect on investors has provided us with an exceptional opportunity to become a key player in the agricultural sector. This is available to other entrants too. For those companies that can overcome the financing obstacles and assemble a team that can handle the daily challenges, the country offers plentiful opportunities in several other sectors. With Lion Mountains a key part of our portfolio, Phoenix Africa is committed to Sierra Leone for the long term. We would like to see many other investors seize this chance as well, and work with us to drive the development of this most excellent country. FT Insight 17 Paddy Doherty has two degrees in history from Oxford University, where he also won a Blue for boxing. He was in the oil & gas corporate finance team at PricewaterhouseCoopers in London, before joining the boutique investment bank Global Union (based in Bahrain) as a Director. After leaving the Middle East, he returned to PricewaterhouseCoopers to take up a role as Manager of the regional CEE & CIS energy corporate finance team, based in Prague; before leaving to establish Phoenix Africa. He was on the UK board of Millennium Promise 2010-2015 and a member of the World Economic Forum Global Agenda Council on Fragile States 2012-14. He is currently Chairman of Lion Mountains in Sierra Leone, the first Phoenix Africa business, and a Member of the Private Sector Delegation to the Committee on World Food Security at the UN FAO. www.ftinsight.net

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Leone Sector Insight Economic Governance Freetown Countries Investors Herbert Opportunities www.ftinsight.net