DRC leadership in action
As part of our initiatives to fund and develop infrastructure in Africa, we recently visited the Democratic Republic of Congo (“DRC”), what we believe to be the heart of Africa, on the invitation of the Minister of Finance, His Excellency Minister Henri Yav Mulang following the request of Snel, the national power utility. In our delegation were Michael Tichareva representing National Standard Finance and Juan Gossmann, Fred Stewart and Dominic Sumaili representing the Stewco Group, an implementing agent for large projects in Africa.
We were hosted by Snel throughout our stay with the Executive Chairman, Joseph Makombo Monga Mawawi, and the CEO Eric Mbala, leading the delegation. We met a number of other Government and business leaders, including the Governor of the Reserve Bank, Mr. Leogratias Mutombo, the Deputy Chief of Staff of Cabinet responsible for economic development and infrastructure investment, Honourable Celestine Hortense Mukalay Kionde, the Secretary General of Government, Honourable Xavier Bonane Ya Ngazi and the Land Affairs Minister Honourable Minister Dieudonne Bolengetenge Balea. We also met representatives of two local banks, UBA and Standard Bank.
We wanted first-hand experience as we look at a U.S. $810 million power transaction for the rehabilitation of the Kinshasa power network and the rehabilitation of Zongo 1 Hydro Power Station being undertaken jointly by Snel and the Stewco Group. We also had the opportunity to visit the countryside for a full day where we went to Zongo 1 Hydro Power Station and had lunch at a local Safari in Zongo.
We must say that we were pleasantly surprised with our experience in DRC. We were well received. There is great disparity between what we often hear about DRC being a very risky and difficult investment destination and what we experienced on the ground. We felt it is important to report the great story as there is certainly significant progress in the business environment in DRC, with the Minister of Finance announcing significant progress made in meeting the country’s fiscal reform targets. There is still a lot to do, but DRC is certainly open for business and improving very fast. Everyone we met pledged their support, and the Minister of Finance, in particular, agreed to work with us to provide what we need to secure risk mitigation coverage from the Multilateral Investment Guarantee Agency (“Miga”) of the World Bank Group and any other multilateral and bilateral organisations that may participate in the project.
The Reserve Bank Governor, Leogratias Mutombo pledged his commitment to see the country progressing, indicating that, with appropriate Government approvals, they will do everything in their power to promote foreign investment into the Country. This is the attitude that we require and, with this level of commitment, we are firmly focused on progressing this and other investments in the DRC in support of the governments vision for the future of DRC.
Major Power Project Coming to DRC
In terms of the power project itself, it involves replacing obsolete power distribution equipment within Kinshasa, ranging from cables to sub-stations to improve reliability of power supply at an estimated cost of U.S. $567 million. It also involves the first phase of installing prepaid metres in Kinshasa at an estimated cost of U.S. $100 million to improve Snel’s revenue collection capacity that is currently poor at only 35%.
Then the Zongo 1 Hydro Power Station was built in 1955, so it is very old. It currently has only 2 units working, producing 31 MW instead of all the 5 units working to produce a total of 75 MW. Rehabilitation will replace all the equipment at the power station at an estimated cost of U.S. $143 million. These projects are expected to improve the power situation in Kinshasa and improve quality of life of people as well as achieve increased economic growth. We are currently in discussion with Miga for the required guarantees as this is a priority project for the Country in line with the World Bank Group Country Assistance Programme for DRC.
Stewco and Snel are the real drivers of this power project in a Public Private Partnership arrangement. In discussing with the Stewco executives whose company has been operating in DRC officially since May 2012, they confirm that they have indeed seen many changes but this visit has been the most pleasant experience during their entire tenure. National Standard was the very reason Stewco started talks with Snel in May 2012.
Since then, there have been two cabinet changes and the Stewco executives believe that the Government has made great strides in changing the lives of its people. Stewco notes that major infrastructure is required in roads, rail and harbour, which will lower transport costs and make exports such as timber and other resources cheaper. It will also make imports cheaper. These observations are in line with observations by the World Bank Group in crafting the Country Assistance Programme for DRC. More entrepreneurs are required to unlock the country’s potential to implement these projects and stimulate economic development, a comment also made by the Reserve Bank Governor.
These projects are complex and require the full cooperation of the Government at all levels in order to succeed. They require an enabling environment. We are excited to say that we received exceptional support in support of the innovative solutions being implemented by Snel and Stewco and funded by National Standard.
We believe that the power deficit situation in Nigeria and many other African countries could easily be resolved if there is such commitment and cooperation across all spheres of Government. DRC itself has the capacity to power much of Africa with potential for at least 100,000 MW of clean energy and our involvement in DRC is in line with our objectives to support regional integration for infrastructure investment to improve quality of life.
Russell Duke is Chairman & Managing Principal at National Standard Finance, LLC. Mr. Duke can be reached at RDuke@NatStandard.com.
Michael Tichareva is Principal & Managing Director of Africa operations at National Standard Finance, LLC. Mr. Tichareva can be reached at MTichareva@NatStandard.com.
The website can be accessed here: www.NatStandard.com