FACRA, a public venture capital fund, provides financial, technical and management support to small and medium-sized businesses in Angola. One of the largest venture capital funds in Africa, FACRA offers a financing alternative for local entrepreneurs, particularly those with innovative projects. Teodoro Poulson talked to The Worldfolio about FACRA’s goals and how it hopes to contribute to Angola´s economic diversification.
First of all, we would like to talk about your overall view of Angola. Before one decides to invest in a country, there are different variables to take into consideration, beyond the economy and finances. Do you think that political stability may be a factor in the growth of the number of new companies in Angola?
Precisely. In my opinion, peace is one of the most important factors in the development and growth of a country. In order to grow and reach a state of development, a country needs peace and harmony, and needs its population to feel at ease and know that free circulation of people and goods across the country truly exists. This is what attracts investors, boosts the confidence of the country’s international creditors, and shows that the country—in this case, Angola—has a higher organizational index. We are more stable because of this period of peace over the last approximately 10 years, that things are working very well and that what is happening is an example to be followed by the whole of Africa.
Globally, we have seen that start-ups are playing a more important role in technological development. What is the role played by FACRA in making it possible for the country to join this global trend? Can we say that FACRA is a driving force for innovation in the country?
It’s true, FACRA is focused on innovative projects. Why? Because innovation guarantees the sustainability of these projects. An innovative project with broader acceptance in the short, medium and long term attracts the confidence of people, because it is something that did not exist before in the market. This is why we are focused on innovation as a goal, because it generates added value for the product, strengthens the diversity of the economy, and expands the job market.
You mentioned sustainable long-term development, and another key concept that we must talk about is economic diversification. What is the estimated impact? What is needed for the country’s diversification?
We hope that, by 2022, we will at least reach a level of employment above 500,000 jobs, and a contribution to the country’s GDP of about $10 billion. This is our primary objective and we are working to achieve these goals.And since we have a 10-year mandate, our main guidelines are aimed at reducing poverty, replacing imports with national products, and generating an expanded offer of goods and services for the population.
In the past, you´ve talked about the importance of filling the gap between the large international companies that have been opeating in Angola for over a decade and the micro-compànies that work in isloation. What is FACRA´s investment strategy to support the growth of these micro-companies?
FACRA supports the growth of companies. Our objective is that these micro, small- and medium-sized businesses may grow, generate added value, and develop a revenue structure capable of ensuring their own sustainability. Not only during the period of investment by FACRA, but also later, in their regular daily operation, so that they continue to grow and thereby help to achieve the goals set by the government and which I just mentioned: diversifying the economy, generating jobs, reducing imports and replacing them with national production. Our greatest interest is boosting their growth, not only financially, but also in terms of know-how, through capacity-building and management support, to create the dynamics required for them to continue progressing and generating that development.
In this context of promotion of small and medium-sized businesses, could FACRA be considered an alternative to conventional financing by the banking system? What are the advantages?
FACRA has a lot of advantages because it is much more than just financing. It invests financially, but also provides management support. Therefore, FACRA is different from conventional financing. Because a bank will only give financial support, and that’s it. FACRA isn’t like that: it accompanies management and creates institutional forms of support that promote the growth of the company. FACRA also does not charge interest, it takes on a business as its own, participates in its management, becomes a partner in the project, and later sells its participation—this is FACRA’s investment. Bank loans, on the other hand, are a different form of financing, which charges interest and, in a way, hinders the rapid growth of companies.
With the future establishment of the stock market, there is a potential for profit from IPOs (Initial Public Offerings). What are the other exit strategies for FACRA to get a return on its investment?
Good question. Our priority is to be the promoter, the owner of the project. Our primary intent is to sell our participation to the business promoter. Only in the event that the promoter is not interested, or does not have the capacity to buy our participation, will we resort to the alternative method, which would be the stock market.
But we will only use the stock market as a last resort. Our primary intent is to sell our participation to the business promoter. Because, in general, the promoter is the one that started the project, and we always give priority to the business promoter.
Considering the challenges of Angola, which is ranked 179th in the World Bank report on the Ease of Doing Business, what is the direct or indirect role that these institutions can play in the growth, improvement and transparency of the Angolan financial sector?
FACRA follows internationally accepted rules of governance. FACRA is an institution that always values transparency and clarity in all our operations. We are well trained and have a specialized team that deals with these projects; we are audited and accompanied by equally accepted and recognized international accounting firms. This means that we use and stand by very stringent criteria in our operations. We have no issues with regard to transparency.
To conclude, what is the most rewarding aspect of your work? And what is your dream with regard to the development of small businesses in Angola?
The most rewarding part is seeing companies grow and produce, seeing the Angolan people produce what is consumed in Angola. This is our greatest satisfaction, as an institution and as a citizen of Angola. We want Angola and the Angolan people to be able to work to produce the goods and services required for local use. Therefore, our greatest challenge, our greatest desire, is for Angola to start consuming more national products.
Because Angola has the potential, has the capacity, has sufficient natural resources to produce goods and services, not only for the Angolan people, but also to export. So, we want to reverse our role as importers and become exporters. Not just of oil, but of other goods and services.