Phoenix Africa’s Sierra Leone rice farming project, Lion Mountains, has raised $550,000 in a Series A round of funding, with the company targeting a total fundraise of up to $28m over the next two years.
The Series A funding follows the delayed but successful launch of pilot operations in October last year following the Ebola crisis in the country. Pilot operations were funded by $250,000 raised from Phoenix Africa shareholders, principally Sir Mark Moody-Stuart, ex-chairman of Shell.
“Despite the alarmist coverage, it was perfectly practical to travel and do business [in Sierra Leone],” Paddy Docherty, chief executive of Phoenix Africa, told Agri Investor. “The single biggest challenge is the negative perception of Sierra Leone,” he said.
The $550,000 will be used to expand the rice mill and purchase more vehicles.
The company was originally targeting $1.1 million for the first round of funding, but reduced the amount once it became apparent it didn’t need as much to become economically self-sufficient, Docherty said.
Intending to mill only its own rice, Lion Mountains soon realised there was huge pent-up demand from local communities. “There is no cost effective route to market for most farmers with spare rice. We were astounded at the volume we were able to source from our out-grower network.” This demand, says Docherty, “meant that the milling programme was more profitable than we could have imagined,” enabling it to reduce its projected early funding requirements.
Docherty said the company is making healthy margins of approximately $300 per tonne of rice milled.
The company is now targeting a Series B round of funding in the region of $5million to $6million, which will enable the company to add 1,000 hectares of rice production, according to Docherty. A Series C round will follow in 2017, with the company targeting $22 million to expand operations through to 2023 and beyond.
It is estimated that Sierra Leone spends around $350 million every year importing rice, against a gross domestic product of around $4 billion. In a country with perfect conditions for growing rice, there would appear to be great potential for Sierra Leone to reduce reliance on imports. “The scale of the import substitution opportunity is significant,” said Docherty. “Such scale means there is certainly space for other players.”