GLOBAL SWF’s FUND OF THE MONTH (Aug’23): FSD
Among the newest sovereign wealth funds in Africa, the Fonds Souverain de Djibouti (FSD) can be considered a hidden gem. The fund was established in 2020 to help improve governance and catalyze investments in strategic sectors to build long-term wealth for future generations. We had the great pleasure of speaking with its CEO, Mr. Slim Feriani, about the fund’s history, current status and developments, and future plans.
[GSWF] Analysts usually put all African SWFs into the same bag, but the reality is that they are all very different – what makes FSD unique?
[FSD] Each country and each sovereign wealth fund are unique, and what sets FSD apart is that the fund does not rely on natural resources, and yet, it has a similar mandate to those that do. According to its law, FSD can diversify its risk into up to 60% in assets overseas, beyond its support to the domestic economy. Djibouti as a country presents a number of opportunities – we are inspired by the economic model of Singapore.
[GSWF] Since its inception two years ago, FSD has been busy with investments – what is your main investment criterium?
[FSD] We are a very young sovereign wealth fund but are now able to speak to all players in terms of forming public-private partnerships (PPPs) and leveraging capital and expertise. We normally target 25% capital for FSD, and 75% for external partners, whether domestic or international (it can be more than one). We use common sense and a world-class investment process.
[GSWF] What are the main objectives of Djibouti Vision 2035, and what role will FSD play in it?
[FSD] Our President His Excellency Ismail Omar Guelleh is a visionary leader, who established Vision 2035 in 2014, for us to move forward and keep in mind a manageable horizon of about 20 years, which will hold us accountable. The vision is supported by strong leadership and by our strategic location, and focuses on diversifying the economy beyond the ports and the following objectives:
- Create 200,000 jobs, reducing the unemployment rate from 40% to c.10%;
- Attract 500,000 tourists per year, which is a significant jump from under 100,000 today;
- Promote green energy, which will allow Djibouti to be self-sufficient;
- Become a fintech and data-center hub given the wealth of submarine cables; and
- Leverage our lack of FX risk, given Djiboutian currency is pegged to the USD.
FSD will contribute to these goals by leveraging world-class partners such as Kasada and Accor (Hospitality) or NeoThemis (infrastructure). For example, our local partner GHIH has just finished a ship-repair yard along with our Dutch partner Damen Shipyard.
[GSWF] Do you expect FSD to invest overseas, or is your focus to attract more foreign investment into Djibouti?
[FSD] As Africans, we need to collaborate at domestic and regional level. Every country needs a strong FDI level to become sustainable, and I believe the African Sovereign Investor Forum has become a great catalyst for us. For now, we are focusing on the inbound effort, but we are keeping an eye on opportunities in Africa and beyond that could benefit our efforts and diversify our portfolio in the future.
[GSWF] FSD expects to commit US$ 1 billion in investments up to 2035 – what sectors will you be focusing on?
[FSD] We have built a pipeline of US$ 1 billion in investment opportunities for the next 3 to 5 years. We are focusing on tourism, financial services, digital economy including fintech and data centers, and sustainable infrastructure including green energy and water desalination. The multiplier effect is important too, as we target to provide 25% of the capital and the rest comes from external parties.
[GSWF] FSD has a strong focus on Sustainability – can you please walk us through your ESG efforts?
[FSD] Our mandate is facilitated by our partners’ requirements to pursue ESG goals. In Djibouti and Africa in general, anything that anybody does, helps. You can find all 17 Sustainable Development Goals in our country, and there is no better feeling than FSD contributing to reduce poverty, etc. We do not want to reinvent the wheel, but we consider the E, the S, and the G in any opportunity.
[GSWF] In terms of human capital, how difficult is to hire and retain talent for FSD?
[FSD] Financial capital is important but human capital is paramount. We use head-hunters to find top talent everywhere, and we have just started our second round of key recruiting.
We have received significant interest from both Djiboutian and other African nationals, which is very positive. In our team, we have several team members that come from the Djiboutian diaspora and have returned to participate in this important, collective effort. We are pioneers of the investment management sector in Djibouti.