Suriname is entering a new investment phase. Offshore oil and gas development, infrastructure, real estate, tourism, agriculture and the growth of local businesses are creating new opportunities for international capital.
But an attractive opportunity is not automatically an investable opportunity.
Between opportunity and investment lies a crucial process: due diligence.
For the Suriname Investment Platform, SIP, due diligence is not a final check before capital is committed. It is an essential part of transforming promising opportunities into transparent and professionally structured investment propositions.
From opportunity to investment proposition
Suriname has entrepreneurs, projects, land, businesses and growth opportunities with significant potential. International investors, however, need more than a compelling story or an attractive financial projection.
They need to understand what they are investing in.
Who owns the company or asset? Who are the ultimate beneficial owners? What is the legal structure? Are permits and contracts in place? Are financial assumptions realistic? Who manages the project? Where will investor capital go? What rights will investors have? And what happens if the project does not develop according to plan?
For SIP, answering these questions is part of making an opportunity investment-ready.
A structured due diligence approach
Investment opportunities considered by SIP are intended to progress through a structured assessment and due diligence process before being presented as investment-ready propositions.
The process starts with an initial assessment of the project, sponsor, market, capital requirement, expected financial performance and principal risks.
Projects progressing beyond this stage can be subject to more extensive due diligence, depending on the nature and maturity of the opportunity.
This may include:
- corporate and ownership verification;
- financial analysis and financial modelling;
- legal and contractual review;
- market and competitive analysis;
- management and trackrecord assessment;
- verification of assets, land rights and permits;
- tax and regulatory considerations;
- governance and potential conflicts of interest;
- country and currency risks;
- scenario and downside analysis.
Where appropriate, external legal, financial, tax and technical specialists can be involved.
The objective is not to eliminate investment risk. That is impossible.
The objective is to identify, understand and evaluate risk before capital is committed.
Due diligence also applies to the investment structure
Due diligence does not stop with the underlying company, asset or project.
The proposed investment structure itself requires assessment.
Before an investment is brought to market, relevant questions include the nature of the investment instrument, investor rights, governance, the role of the project company or SPV, the flow of investor funds and the applicable legal and regulatory framework.
Depending on the structure and circumstances of an individual transaction, Dutch, European and Surinamese legislation and regulations may be relevant.
This can include requirements relating to financial supervision, prospectus rules, investment structures, anti-money laundering, sanctions, investor classification and other regulatory matters.
The applicable framework therefore needs to be determined for each investment structure individually.
Project-specific structures
Where appropriate and subject to legal and regulatory assessment, investments may be structured through dedicated project companies or special purpose vehicles, SPVs.
The purpose is to create a transparent structure around a specific investment.
Investors should be able to understand:
- which legal entity they invest in;
- what the entity owns or finances;
- who controls and manages it;
- what rights investors receive;
- how investor capital will be deployed;
- how reporting is organised;
- how distributions can take place;
- what happens in the event of underperformance;
- how an eventual exit may be achieved.
The precise structure will depend on the project and the outcome of legal, financial, tax and regulatory assessment.
Looking beyond the optimistic scenario
One of the most important principles of professional investment analysis is simple:
Do not only analyse what happens when everything goes according to plan.
A credible investment assessment should also consider what happens when circumstances change.
What if construction takes longer?
What if capital expenditure increases?
What if revenues are lower than projected?
What happens when financing becomes more expensive, an important contract is delayed or currency movements adversely affect the project?
Scenario analysis can provide investors with a better understanding of both the potential and the vulnerability of an investment.
A strong business case should therefore be able to withstand more than a base-case calculation.
Suriname requires local knowledge
Investing in Suriname requires an understanding of the local environment.
Land rights, permits, taxation, currency exposure, banking arrangements, infrastructure, import dependency, labour availability and procedures involving public authorities can all influence the feasibility and financial performance of an investment.
International investors may also need to consider how dividends, interest or capital can be transferred and how contractual rights can be enforced.
These factors do not diminish Suriname's investment potential.
They underline the importance of combining local knowledge with international investment standards.
SIP is positioned at this intersection.
Governance before capital
Professional investors increasingly look beyond projected returns.
They also look at governance.
Who makes decisions? Who can authorise payments? How are conflicts of interest identified? How frequently do investors receive information? What happens when actual performance deviates from the business plan?
These questions should not be answered after an investment has been made.
They should form part of the investment structure from the beginning.
SIP therefore aims to incorporate clear responsibilities, investor information, decision-making processes and appropriate governance arrangements into the structuring of investment opportunities.
The platform is supported by an international advisory network with experience across areas including corporate finance, banking, investment, governance, entrepreneurship and the Suriname market.
Advisory roles are distinct from the statutory responsibilities of management and the governance of individual investment structures.
Transparency about fees and interests
Transparency also means understanding who is paid, by whom and for what.
Depending on the transaction, costs may arise for structuring, legal advice, administration, project development, financial advice and other professional services.
Material fees and potential conflicts of interest should therefore be identified and disclosed as part of the investment process.
An investor should be able to understand not only how much capital is committed, but also how much capital ultimately becomes available for the underlying project.
Know your investor. Know your partner.
Due diligence works in both directions.
Investors need to understand the project, but an investment platform also needs to understand the parties with whom it does business.
Appropriate identification, UBO verification, source-of-funds checks, sanctions screening and other KYC and AML procedures can therefore form part of the investment process.
Similar scrutiny may be required for project sponsors and other material counterparties.
Building investor confidence starts with knowing who is sitting on both sides of the table.
Transparency about risk
Every investment involves risk.
Private-market investments and investments in emerging economies can involve additional risks, including limited liquidity, project delays, currency movements, changing economic circumstances and regulatory or political developments.
Due diligence does not make these risks disappear.
It makes them visible.
That distinction is important.
SIP believes investors should receive sufficient information to make their own informed assessment and, where appropriate, obtain independent legal, financial and tax advice.
No projected return should replace a proper understanding of the risks involved.
Five questions every investor should be able to answer
Before committing capital, an investor should ultimately be able to answer five fundamental questions:
Who is responsible?
What exactly am I investing in?
Where does my money go?
What can go wrong?
What rights and safeguards are built into the investment structure?
If these questions cannot yet be answered satisfactorily, the investment proposition requires further work.
Building the bridge between opportunity and capital
Suriname's economic transformation will require substantial private investment in the years ahead.
There is capital looking for opportunity.
And there are opportunities in Suriname looking for capital.
But international capital does not move on opportunity alone.
It moves when opportunity is supported by credible information, professional structuring, transparent governance and a clear understanding of risk.
That is where SIP aims to make the difference.
Not simply by bringing projects and investors together, but by helping promising Surinamese opportunities progress towards professionally structured investment propositions, subject to appropriate commercial, financial, legal and regulatory assessment.