The founder and CEO of Unicon Development, Serge Pereira, talks to African Business about the factors that make it one of Africa’s leading design and construction companies.
Serge Pereira may not be a household name but his company is one of the largest home-grown construction companies in Central Africa with an increasingly continental footprint. The group he runs has 400,000 sq m of projects under construction and he’s considered one of the leading young entrepreneurs from Congo Brazzaville. As with most entrepreneurs, he acquired a taste for business at a young age. As he told us, he can trace his first venture back to when he was a teenager and shocked at the fact that his country was importing tomatoes from Cameroon, making it a premium product. During the summer holidays he started growing them on his family land and convinced the surrounding population of the village of Voca, in the south of the capital, to also grow this vegetable. This first venture taught him a few hard lessons: that even planting tomatoes and getting them to market in a timely manner required hard work and proper systems – organisation, logistics, quality control and proper planning and coordination; and that if the continent was to be transformed, it would have to be a bottom-up approach from within.
Pereira comes from an established family in Congo Brazzaville. After his studies he went on to study finance in the US before joining an investment house. The way capital flowed in the US showed him its power. The difference in the way projects were financed and companies thrived could not have contrasted more strongly with what he saw back home, where projects and ideas seemed to be starved of the necessary funding.
Nevertheless, in 2001 he decided to go home. This is when he set up Unicon, which has become one of the region’s biggest real estate companies. The timing was good, with global economic growth taking off and bringing with it a resurgence in African economic growth driven by stronger fundamentals, a Chinese-led demand for commodities and a surge in construction projects. In this exclusive interview, Pereira shares his insights into the challenges of building a business in Africa and the unique opportunities that this region offers.
Leaving the US to come back to Congo was not the done thing back in 2001. Can you tell us how it all started?
My perception of global enterprise evolved rapidly in the US with the understanding of how financing mechanisms work for global companies. Money was available in large amounts for any project or investment that fit the “profile”. In Africa, we witness the opposite, as there are more projects than funding. But, still, I left my job to start a real estate development company in 2001 focusing on the African market. I realised that the market was virgin and nobody saw its potential. My objective was to deliver to the market products that were in demand but unavailable. Most projects were targeting low-income families and were built either by the government or under subsidised programmes with Chinese builders. I wanted to create products for the middle class that would offer them a new lifestyle. Homes or apartments that are simple but well built, with quality materials, with all amenities that work perfectly – running hot water and electricity – and, of course, all this in inclusive communities (with schools, supermarkets, etc). Communities in which people can live, work and play and be proud to call “home”. Our business model is very simple; our projects need to change the lives of Africans. This is the reason why you see our group involved in the development and construction of several universities, such as the American University of Central Africa in Equatorial Guinea and the Denis Sassou Nguesso University in Brazzaville. These are impact projects that will change the lives of thousands of young Africans.
You have 400,000 sq m of projects under construction. What does that mean in layman’s terms?
It simply means that we are currently constructing 27 buildings that have an average size of 15,000 sq m each.
What do you think is your edge as a company? To what do you attribute your success?
The edge of our company is innovation, to dream big. We work really hard with a team of champions who believe in a mission that is bigger than business. We love our country and our continent and we know it can be transformed, but only by ourselves, by Africans. I believe firmly that the wealth of Africa resides in the transformation of its human capital. We have been able to position our company as a leader in its industry because we understood early on that African consumers not only want but deserve the same quality of products and service as any American or European consumers. We have tackled a niche in which many did not see potential. Because of that, we have faced little competition. We created the demand for products that nobody thought could be available in their local market. To be honest, the market is still wide open in my view. The multinationals are taking the ripest fruits and are more sensitive to “African risk”. We, as African companies, need to take bigger risks because we are here for the long term. We understand the market better, and it is legitimate that we are the ones to control our economies.
Scaling up is difficult. How did you manage to scale up your business?
It is difficult indeed, but when you understand the market and its needs it is not impossible. To have a long-term view is also crucial. We had to diversify and be present in different industries and in different countries. The challenge in our region is that goods can’t be exchanged freely. The legal frameworks are not the same. As an example, we have the two closest capital cities in the world, Brazzaville and Kinshasa, separated by 3km of the Congo river. Kinshasa offers a market with 15m consumers, but goods cannot be exchanged without going through a complicated customs process, which discourages merchants on both sides to invest in large-scale operations.
The advantage that Africa offers, is that it is small, after all. If you do well in one country, it’s easier to establish a regional brand. We have done that.
We have scaled up our business by being innovative and targeting low competition business that have high barriers of entry. However, we had to change many things, from the type of people we hire, to the strategy that became more “glocal” [global but local] and also the way we manage our resources. It’s been challenging.
Access to finance is often cited as a constraint for African business. Has that been the case with you? And part of your service offering now is in the financing space. Can you talk us through that?
Access to financing has been a major hurdle. The local banks have been very prudent on lending. In our industry financing is crucial to sell real estate to consumers. The mortgage market is very weak in Africa and inexistent in some countries. Loan terms are too short and only few people meet the requirements set up by the local banks.
We have to partner with regional banks to offer financing schemes to our customers. Under these programmes, they can purchase an apartment with 80% financing as long as they have a full-time job and minimum income.
Who do you partner with, local or international banks?
Mostly regional banks: banks that have presence in Central and West Africa. Ecobank for example financed a five-star hotel we built in Conakry while Afriland First Bank Group [a regional bank headquartered in Cameroon] financed several of our large projects in Equatorial Guinea.
How do you mitigate risk in what you’re doing, especially as projects are over a certain period of time, and will involve a number of moving parts, not least the import of goods and exchange rate fluctuations?
It’s been very difficult, especially when we work strictly as contractors for governments. We have construction agreements for university projects mostly. These projects bring great challenge for the fact that we are greatly exposed to currency risk and payment delays. We have to borrow money from local banks against certifications to finance our operations, and often find ourselves paying more to the bank then profiting from the project itself. In the current environment, with the oil crisis affecting dramatically our region, we have been facing serious liquidity issues. We think we are in the middle of a cycle and should see the end of the tunnel towards mid-2019. We conduct business mostly in the CFA franc, which has parity with the euro. We work with suppliers that can be paid in euros. We avoid dollar transactions.
One complaint we hear is that there it often takes too long from identifying a project to execution – how can we fast track this?
For our company it’s different. We have a specialised office in Spain. The purpose of this office is to interpret the demand, study, create, and develop projects as fast as possible. This is clearly one of our advantages. We have a team of young creative people that create on demand what most people can only dream about. They have the capacity to deliver on the big dreams we have quickly. It allows us to deliver projects before any competitor. Having a restrained shareholder base also make the decision process much faster.
Do you partner with other contractors on your construction projects?
Of course. We have sub-contractors that are experienced and understand our philosophy. One example is MBTP. It’s a very dynamic company owned by young entrepreneurs that have invested in their business by hiring the proper people but also have acquired the proper equipment to reach the quality we expect to deliver to our customers. They understand the business environment as well, which makes them more flexible with us.
Do you feel African governments are supportive enough of local entrepreneurs and African businesses and businessmen?
In recent years, African governments have realised the importance of the business community and that favouring entrepreneurship is the best way to create jobs. African business leaders are key to the development of our economies. In most African countries, we have not had business schools and most projects conducted by small companies have been opportunistic. I believe that an economic revolution is coming. Governments are investing more in modern universities.
In my country, I can say that the government offers good incentives to local business people desiring to develop opportunities. The problem is that we lack sophisticated entrepreneurs who can survive in a competitive market. Nonetheless, I am very positive that the business environment is changing.
I think governments need to look more “inside” than outside for solutions. Many local companies have not only the capacity but more importantly the willingness to change things at home. This should be considered. In terms of value, how can you compare giving a project to a local company that will hire local workers versus a multinational that will do a job and leave?
You talk a lot about capacity building and the importance of education. How would you describe the quality of cadres that come out of the education system?
In today’s global economy, it is important for any African country to have a capacity-building strategy. In my view it is the key to the development of any of our countries. For too long, we have missed the target when it comes to education. We desperately need to implement university and professional training programmes adapted to our own needs. We are rich countries that need to understand how to transform and value our natural resources but mostly how to prepare our people. The rest will come naturally. Today we notice the impact of the investments some countries did in the education sector. We have more and more people coming from Central and West African universities that have received a good education. They perform well and understand the ecosystem in which we evolve. We need many more.
Is that the main challenge you face – well qualified talent and talent management?
Human resources are definitely one of the main challenges we face. How does an African company look when the key management is European? We must change that. We need to build confidence in our teams in order to build dreams. My philosophy is that we need teams of champions. We must be able to compete globally. Because we are capable. It is much more difficult to be successful in Brazzaville than it is in New York. So if you can make it in Brazzaville, you can make it in New York. We need to build confidence. We need education.
You operate mainly in Central Africa, other than your project in Guinea. Central Africa is often considered a difficult place to do business and one which has attracted the least FDI in comparison to other regions. What’s your experience been like of working in the region?
I operate in Central Africa because it is my region. I live here and my children will as well. I would like to participate in building an environment where our children can grow peacefully. In a socially inclusive community in which they can live happily.
My objective is not just monetary – we ought to build a system that works for us, for the long term. We do need to increase FDI, but for that, our governments need to understand the importance of improving governance and securing the legal framework. A major contract cannot be put in question because there is a change in government. We have seen many times where a change of minister can affect the validity of a contract. Many models that have worked in other regions can be duplicated but they need to be adapted to Africa. Our resources are priceless.
Are you expanding in new territories and into new sectors?
We have signed a very ambitious agreement with the Aston Martin brand. We are developing the Aston Martin Tower in Dubai in collaboration with Luxhabitat, the largest real estate broker in the UAE. We will be building a high rise with a car elevator tower, sky homes, we call them. Buyers will be able to go their apartments on the wheel of their cars. This should be one of Dubai’s most exclusive real estate developments. The joint venture is called LUUN (Luxhabitat-Unicon). We are also looking at agriculture projects in Congo.
You’re involved in the special economic zones (SEZs) that are being developed in the Republic of Congo and the
Democratic Republic of Congo. Can you tell us a little about them, and what these countries are trying to achieve from them?
In partnership with Startstone Group, we are developing two SEZs, in Brazzaville and Kinshasa. The aim of the project is to connect the two cities and create a trade environment that will be run privately. The two governments have shown serious interest in growing the commercial exchange between the capitals.
Our objective is to build two SEZs that will provide support services to the industries being built around the countries and the region. We have been inspired by the SEZs built in the Philippines in the 90s. We believe that they represent a stepping stone in creating a stronger economy for our countries. What the governments are expecting from those SEZs are job creation, increased trade, improvement of their Doing Business rating, and increased FDI.
You’ve been involved in building universities because to some extent education is important to you. One thing is building the hard infrastructure, the classrooms, and another the soft infrastructure – capable teachers. What are your thoughts on the education system as a whole, and what solutions are you seeing that we can adopt and scale up?
The way we have developed education in Africa is no longer up to date. We now need adapted programmes. A university is not just a beautiful campus and spacious classrooms, it needs to include proper programmes and qualified professors.
Education has to be adapted and needs to be adaptive. We need to understand our needs. We must train teachers and pay them well. Many governments don’t take the time to evaluate what the coming generations need to be doing to take our countries to the next level. We have to rely on the millennials to bring us to the next chapter of development. It is imperative to revamp the educational system which is completely obsolete.
We have the responsibility to not only create new programmes adapted to our economies, but also understand what our economies can offer. We must build confidence in our people, momentum. We need to build a fresh system in which the African citizens are the centre of attention, the main concern. We have to give back to our culture, what has been destroyed by centuries of domination.
We have nothing to envy in the West. We should teach our kids to be proud of our culture and show them that the future for them is at home, in Africa. For me, education starts there, knowing who you are.
Entrepreneurship is seen as the only meaningful way to create the millions of jobs that we need to employ the youth coming onto the job market. You have created a platform to support young entrepreneurs. Can you tell us how these platforms work and operate?
We have created a platform to help young entrepreneurs through our Fondation Congo Kitoko, which means “my beautiful Congo”. We help startups in need of support and we provide them with financing of up to $30,000. The idea is to test a new economic system in which we start from the bottom instead of the top.
We want to see the impact of creating small companies that employ eight to 10 people each, but are diversified geographically within the country. We believe we can create an ecosystem which is socially inclusive, in which people in our villages and our cities can be self-sufficient, have access to education and healthcare but also contribute fiscally.
It’s said that businesses in Africa are often like small municipalities, having to provide power, transport, communications and all related infrastructure, which makes life difficult for entrepreneurs. Has that been the case for you, and are conditions getting better?
We largely depend on our municipalities to provide these services. Obviously, in our business we need power and communications, and most of the time we have to invest to be independent. Some countries have made major investments in infrastructure. My country is a good example. The only problem is that local actors are not the ones benefiting from it but multinationals that have come and reinforced their presence in the transportation sector, for example. In telecoms, we are the only local company that has obtained a 4G licence. Things are getting better.
How would you describe the current environment as an investor and businessman? Where do you see your group in five years’ time?
Africa is in. It is clearly the next chapter. It is still difficult as an investor to understand the market or be confident. Political instability and corruption are still a factor in many countries, and regulatory issues need to be resolved. We need to give confidence to those investors coming to explore our markets. Africa represents so much potential but most investors that can play a huge role in transforming our economies still see Africa as too risky. Things are changing. African entrepreneurs are taking control. The next five years will be really interesting. Social media also plays a big role in showing what is happening around the world. We all are becoming citizens of the world and I am very optimistic of the outcome in economic terms. Africa needs to be connected. We need to show the world what we have to offer, we need to be confident of what we represent in the global economy.
We must control our own local economies. How can we justify that in 2018, the largest stakeholders in them are Europeans or Chinese? Our ports, rail roads concessions are managed by foreign companies. We have to start creating local champions. We have to reinforce the implementation of “local content” partnerships to favour local job creation and create serious wealth.
My only wish is that our political leaders come to terms with how to run our economies strategically with a clear plan and vision of the objectives they want to achieve socially and economically. We can no longer wait, we can no longer run our countries on a day-to-day basis and we can no longer delay decisions that will change the path of our history. The time is now.
We need to create more than 400m jobs in the next 20 years. Developing a class of entrepreneurs is key. We see the creation of many incubators with this mission and very nice projects have emerged in several industries. It’s promising. The good news is that we see also more women coming into the market.
Our group strategy over the next five years is to focus on strengthening our core competencies. As an example, we have performed better as a developer than a builder. We have now partnered with companies that are very efficient as general contractors. It gives us more freedom to develop better projects and be more profitable. Also, we are looking at entering into new sectors like financial services (insurance), IT and agriculture.
Some projects are being planned through acquisitions of existing entities and others are startups. We are in the process of giving the management of our hospitality business to a global brand for the reasons I have just stated. In the next five years we want to position ourselves as the largest real estate company in Central Africa, specialising in developing private SEZs. They are key to our economic development and to attract FDI. n
This special feature was produced with the support of BAM Media.