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Finatrade Holdings Limited
Summary of Proposed Investment
This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.
FINATRADE Holding SA en liquidation
Wholesale (Including Grocery and Farm Products)
Date SPI disclosed
November 1, 2007
Projected board date
December 3, 2007
Signed: March 31, 2008
Approved: March 31, 2008
View Environmental & Social Review Summary (ESRS),
Finatrade Holdings Limited (FHL or the Borrower), incorporated in Cyprus, consolidates 27 companies (jointly Finatrade or the Group) operating in Ghana and 6 other West African countries in soft commodity (rice, sugar and vegetable oils) and fast-moving consumer goods (FMCG) distribution. Finatrade is also involved in cocoa beans origination in Ghana. The project intends to provide support for the Group’s new strategy and fund its 2008-12 regional expansion in Ghana, Senegal, Niger, Togo, Benin, Burkina Faso and Nigeria, including financing capital expenditures for logistics, funding incremental working capital needs, and refinancing existing debt. Through the project, Finatrade aims to leverage its local experience to support the rapid growth of food and beverage consumption in West Africa.
Project sponsor and major shareholders of project company
The project sponsor is Finavest Limited. Finavest Limited, which holds 100% of FHL’s shares, is owned by five individual shareholders.
Total project cost and amount and nature of IFC's investment
The total project cost is estimated at $86 million. The proposed IFC investment of $20 million is in the form of A and C loans for IFC’s own account.
IFC investment as approved by Board
20 million (USD)
IFC Investment (million USD)
* These investment figures are indicative
Location of project and description of site
The project will be implemented in Accra, Tema and Kumasi (Ghana), Lagos (Nigeria), Maradi (Niger), Dakar (Senegal), Ouagadougou (Burkina Faso), Lomé (Togo) and Cotonou (Benin).
Anticipated development impact of the project
The project supports Finatrade’s West African expansion from its base in Ghana, which will help address important needs of the region. In addition to financiers, major beneficiaries of the project are expected to be Group employees, regional consumers, and governments:
- Employment generation
Finatrade currently employs more than 3,000 staff. As the Group expands its operations in West Africa, it is expected to create 300 direct additional jobs in a region with high unemployment rates. Finatrade offers excellent work and training opportunities as well as salaries significantly above market.
- Consumer benefits: Food supply and quality
West Africa remains a deficit market for some key commodities such as rice and sugar. The project will ensure a steady supply, consistent quality, and better safety of the products in which Finatrade trades for regional consumers as a result of the Group’s branding and packaging-for-retail strategy.
- Private sector development
Finatrade specifically sought out IFC as a financial partner to support the implementation of its long-term strategy. One key objective in seeking the LDC/IFC investment is to also formalize the relationship with LDC, which would strengthen a regional private sector player.
- Regional integration
The project will develop Finatrade’s West African import and distribution infrastructure. In particular, the Group is planning to build a regional distribution platform in Lome, Togo’s free zone. The project will put Finatrade in a position to identify competitive produce and processed food in the region and bring them to West African consumers, which is a difficult endeavor currently. The managing partners see such a development as a way to improve the Group’s image in the region.
The project’s gains are expected to provide tax revenues to local governments throughout West Africa in the form of corporate income tax paid by the FHL’s subsidiaries in the region, and various other taxes and fees. The Group’s transparent reporting ensures that the profits it makes are adequately taxed.
IFC's expected development contribution
- Enhancing financial discipline
Finatrade has long relied on its commercial partner, LDC for access to finance and risk management. Partnering with IFC provides Finatrade an opportunity to experience a more rigorous approach to financing, which is new to the Group. The lessons learned will help improve corporate governance and sustainability in difficult times, and prepare for a potential initial public offering, the Group’s objective by 2012.
- Providing long-term capital for growth
IFC’s investment will allow Finatrade to access long term funding. Longer term financing is critical to the success of the Group’s strategy of branding and packaging-for-retail soft commodities throughout the region, which requires more working capital and logistic investments than Finatrade’s short- to medium-term loans can support. IFC’s long-term debt and quasi-equity financing of up to 7 years will better match Finatrade’s West African ambitions.
- Mitigating political risks
The Sponsors understand the risks of doing business in West Africa beyond their traditional country of operation i.e. Ghana. IFC’s investment in the project offers the Group certain protection from arbitrary political action and encourages its long term commitment to expanding in multiple and, in some cases, frontier countries in West Africa. The success of Finatrade’s West African expansion may encourage other companies to participate in regional investments.
- Sustaining high environmental, social and safety standards
IFC’s appraisal identified that the Group needs to create a central environmental, social and safety management function. Although Finatrade has already demonstrated its adherence to strict standards by working on the implementation of a quality management system based on ISO 9001, IFC will ensure that the management of environmental, social and safety risks is proactive and conforms to international standards.
IFC’s participation uniquely provides the backing of an independent, global financial institution that can weather the potential cycles of the region’s trading business and provide political risk protection. This role is valued highly by both Finatrade and LDC, as evidenced by their joint invitation to IFC. Without IFC, Finatrade would be reliant on restricted financing tied to a core strategic trading partner, which ultimately limits its own governance, flexibility, and independence.
Environmental and social issues - Category B
As a result of IFC’s appraisal of the project, the following key environmental and social issues were identified:
- corporate health, safety and environment management systems;
- general housekeeping in the maintenance and refueling of trucks; and
- truck highway safety.
These issues can be addressed through known procedures, practices and technology. Although IFC’s review indicates that the Group needs to create a central environmental and social management function, the current management structure has been able to address truck fleet management issues, the one potential off-premises environmental risk, in ways acceptable to IFC. Thus, this is a category B project under IFC’s Environmental and Social Review Procedure.
Additional information about the environmental and social review of the project may be obtained from the Environmental and Social Review Summary for the project, which is available on IFC's website.
For inquiries about the project, contact:
Ramzi Nahas, Secretary General and Legal Advisor
22 Spintex Road, P. O. Box KIA 30443, Accra-Ghana
Telephone: +233 21 810161
Fax: +233 21 810160
The environmental documents will be made available at the following location:
21 Spintex Road
For inquiries and comments about IFC, contact:
General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
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