Goldman Sachs alumni bet on Mozambique gas boom

By TOM BOWKER
Bloomberg

Two former Goldman Sachs employees have set up a merchant banking and advisory operation in Mozambique, betting that the country’s resource wealth will propel some of the fastest economic growth on the continent.

Rafael Sarandeses, 36, and Goncalo Neves-Correia, 34, have founded ThirdWay Africa Partners with Alejandro Tawil, a former partner at Oppenheimer & Co., who is chairman.

The firm, run out of offices in London, Madrid, and Maputo, the southern African nation’s capital, intends to invest in Mozambique companies that can take advantage of laws on local content, and which could later become potential targets for buyout firms.

The world’s biggest natural-gas discovery in a decade off Mozambique’s northern coast could relieve widespread poverty in a country where 90% of people exist on less than $2 a day. The economy, which the World Bank estimated at $15.6 billion in 2013, may expand 10-fold by 2035 as Mozambique becomes one of the three largest liquefied natural gas (LNG) exporters, according to a Standard Bank Group Ltd. forecast.

“We were both in banking and looking for a new challenge, something to build,” Sarandeses, who was born in Spain, said in an interview in Maputo on Feb. 25. “You start looking at what are going to be the key things that are going to have an effect on shaping the way the world is in the next 15 years, and where in the world you can try to tackle those plays with the most upside.”

Racing Driver

Sarandeses joined Goldman Sachs in London in 2005, after 10 years as a professional racing driver based in Spain. He left the bank in 2009 to run foreign exchange sales for Morgan Stanley in southern Europe.

Neves-Correia interrupted his banking career for a Harvard Business School MBA, where he was a George F. Baker scholar, an accolade for students who earn their degrees with high distinction. Aside from Goldman Sachs, he has worked for McKinsey & Co. and was head of JPMorgan Chase & Co.’s European strategic investments operation.

Tawil, 55, born in Argentina, spent more than 25 years working in international financial markets. He led led a group of prominent Latin American families in putting together one of the earliest multi-family offices in the region. Tawil has been involved in Mozambique projects since 2008, when he joined a group of investors developing a coastal resort venture.

ThirdWay Africa plans to invest in Mozambican companies providing services to foreign investors in the gas industry, which by law have to source goods and services locally.

‘Lottery Ticket’

“All those foreign companies coming to the country to invest are going to need products and services that do not exist right now,” Sarandeses said.

Mozambique published a law in December that sets the terms for gas projects in the Rovuma Basin led by Anadarko Petroleum Corp. and Rome-based Eni SpA to proceed. The country has about 7 trillion cubic meters of reserves, according to the state oil company. LNG is gas chilled to a liquid state for transport by sea.

While the companies are still to make a final decision to invest, Mozambique’s government says growth has already accelerated and estimates it at almost 10% in 2014.

“This country is going through a transformation, it’s a once-in-a-lifetime opportunity with a lottery ticket called gas,” Sarandeses said.

Political Risks

For Mozambique to fulfill its potential, the government of President Filipe Nyusi, elected in October, will need to improve conditions for business, said Anna Rosenberg, the head of Washington-based advisory firm Frontier Strategy Group’s Sub- Saharan Africa research practice in London.

“Outside the oil and gas space, the government seems to have little understanding that it is competing with many African markets for investors,” she said in an e-mailed response to questions on March 4.

While the government believes Mozambique’s high growth rates are enough to attract investors, it is vying with more than 50 markets across Africa, “so it will have to put greater effort in attracting investors,” she said.

Lower oil and gas prices may also threaten expectations among the Mozambique populace of a resources bounty, according to Aon Risk Solutions, a unit of Aon Plc. In a report published March 4, Aon included Mozambique in a list of 12 countries where lower oil prices are expected to raise political risks.

Neves-Correia’s family has been involved in business in Mozambique since before it won independence from Portugal in 1975 and he sees his knowledge of the country as a selling point.

‘Real Experts’

“There are plenty of pan-African private equity funds or players in the investment world that have Mozambique on the map, but don’t have the language skills or the relationships at the local level to be real experts,” he said.

ThirdWay Africa intends to raise funds to invest in assets in industries including food, forestry, housing, and financial services and later attract buyout firms. Right now, Mozambique lacks “an opportunity for private equity that needs to have an asset with some track record,” Sarandeses said.

Selling to private equity is “probably going to be the exit strategy for most of our investments and for our investors, and that’s one very clear way we’re seeing that the game is going to be played,” Sarandeses said.

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