Congo Hold-up: how to become the entrepreneur of the year in Belgium?
A John Deere brand tractor.
© RFI
Text by: Sonia Rolley Follow
19 mins
The Congo Hold-up investigation looked into the case of Belgian businessman Philippe de Moerloose.
Unknown to the general public in Congo as in Belgium, he has nevertheless benefited from at least 742.9 million dollars in contracts with the Congolese state, recording profits well above average.
De Standaard
survey
, Le Soir,
with Mediapart, PPLAAF and the European network EIC.
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After a ten-hour drive from Kinshasa, we finally discovered them on a track in Kongo Central: the extremely expensive backhoe loaders provided by Belgian businessman Philippe de Moerloose. A group of Congolese workers use them to level a road ravaged by potholes. They spend hours tackling the red earth under a blazing sun. Their task is to improve the access roads, so that the rice fields, planted on the other side of the Congo river in the agro-industrial park of the Nkundi valley, can benefit the rest of the country.
It's a strange contrast. Backhoes, tractors and graders have cost hundreds of thousands of dollars, but the men who use them live in poverty. When we ask if workers are paid, they hesitate to answer, uncomfortable. A supervisor monitors their words. "
Sometimes only,
" admits the older man. He is an experienced worker, he has already worked with the same machines in several other Congolese provinces.
Farther on, in a village, a huge John Deere grader is stationary. The front left wheel punctured a few days earlier. The government contract for the excavators, which our colleagues at the Flemish newspaper De Standaard were able to consult, indicates that the machine cost $ 250,000. “
We still have spare parts,
” says the person in charge of these construction machines. “
But if this continues to happen, we risk abandoning this machine in the bush. These devices are not easy to repair. John Deere engines have electronic components. Throughout the country, there are tractors abandoned for ten years, the population cannot even tinker with them,
”explains the supervisor. "
It's not well thought out
."
Huge profit margins
The Congo Hold-up survey reveals for the first time how the great entrepreneur Philippe de Moerloose got rich in Congo.
This Belgian businessman has consistently made huge profits from the sale of trucks, tractors like Nkundi's, and other heavy machinery and equipment.
The annual reports of the Central Bank of Congo (BCC) and the contracts we have seen show that in fifteen years, De Moerloose companies have received more than $ 742 million from the state.
The Belgian took advantage of the weakness of Congolese institutions to enrich himself to the detriment of the state.
The Congo Hold-up investigation also shows how Philippe de Moerloose maintained close relations with former President Joseph Kabila and his family for years. In particular, he sold a luxurious residence to Joseph Kabila's mother-in-law, a few steps from her villa located next to the Bercuit golf club, one of the wealthiest neighborhoods in Belgium.
Internal documents, invoices from Philippe de Moerloose's companies and copies of contracts signed with the Congolese government, show how the Belgian businessman overestimates the sale price of vehicles compared to the initial purchase price.
John Deere-branded tractors, for example - which haul the red dirt of Kongo Central - were bought for $ 16,625 in India in 2018, then sold in Congo for $ 51,265.
The price is multiplied by three.
On other purchases, the gross profit margin - the profit made on the sale, before deducting operating costs - is even higher.
John Deere-branded tractors were bought for $ 16,625 and then sold in Congo for $ 51,265.
© RFI
We spoke to seven former senior executives at De Moerloose companies and to Congolese sources with knowledge of these transactions. All preferred to testify anonymously. "
De Moerloose made stratospheric profits
," said one of them. But Philippe de Moerloose does not agree with our conclusions. “
We always work with profit margins that
meet
industry and market standards (gross margin of around 25 to 30%),
” he replied.
The Minister of Infrastructures, Fridolin Kasweshi, assures him to be informed "
neither on the payments, nor on the contract concerned
".
He adds that the Roads Office, beneficiary of the equipment, had to carry out the “
necessary checks
” before handing over the contract to him.
Manager of the year
De Moerloose is Belgium's 129th fortune according to the
Flemish
news site
Rijkste Belgen
,
he is little known in his own country. Like many wealthy personalities, De Moerloose has long followed the adage “
to live happily, live in hiding
”. But after the departure of Joseph Kabila in 2019, he really stepped out of the shadows in Belgium for the first time, campaigning for the title of entrepreneur of the year.
The story he tells today looks like a capitalist fairy tale.
Philippe's father, Louis de Moerloose, responds to an ad published in Le Soir in 1970 and leaves with his family for the Congo, to become an accountant in the former colonial textile factory Texaf.
Philippe de Moerloose was then three years old.
He grew up in his "dear Africa", as he would later call it, and was fluent in Swahili.
He then returned to Belgium to study at the Brussels business school Ichec.
In 1991, he founded the import-export company Demimpex.
The Belgian entrepreneur does it with a small starting capital which, which he will present as always lower over the years. In 2007, De Moerloose speaks in an interview of 3,100 euros, in 2013 of 2,500 euros and recently of 1,800 euros.
Over the past thirty years, his business has evolved rapidly. His group, which is now called SDA Holding, will for the first time this year exceed an annual turnover of one billion euros.
De Moerloose has become one of the world leaders in the distribution of trucks, construction machinery and agricultural vehicles.
Since 2015, he has been the exclusive distributor of Volvo Construction Equipment in the Benelux.
It has since moved to the UK as well and promises to take the US and Asian market by storm soon.
In November, the Belgian business magazine
Trends
selected him among the candidates for the title of “Belgian manager of the year” for the second year in a row.
In SMS, Philippe De Moerloose encouraged all the members of his network to vote for him.
In Europe, he rarely mentions the country to which he owes a large part of his fortune: the Democratic Republic of the Congo.
A fortune built in the Congo
De Moerloose's spectacular rise was supported by the spectacular profits he made in the Congo. In Europe, he was always able to quickly repay the debts he contracted to make major acquisitions. Last year, while its sales fell by nearly 187 million euros due to the coronavirus, Brexit, "
socio-political instability in certain African territories
", De Moerloose still managed to reduce its debts of several millions. In addition, he has accumulated significant personal capital, which he lodged in foreign bank accounts, companies in tax havens and in real estate. He has also invested in hotels, in the mining sector and in construction companies.
According to five sources who worked with Philippe de Moerloose, the contracts signed in the DRC were first discussed in person with Joseph Kabila. De Moerloose was invited to his huge property in the N'Sele valley, east of Kinshasa. There, the former president received him on "a sort of throne," according to an associate who attended one of the meetings. The president was friendly with the Belgian and called him "Philippe". According to de Moerloose, this was true, but only because his last name "
is on the one hand difficult for African people to pronounce and certainly not easy to remember. Mr. Kabila calls me '' Monsieur Philippe '' and I always call him '' Excellence ''
", he explains.
In Kinshasa, "Philippe" had a monument to his effigy: a statue of him surrounded by two Congolese employees, one brandishing one of the planes of his airline company Hewa Bora, the other carrying in his arms a 4x4 Nissan. , of the same model as those officially purchased by the State on behalf of deputies and university professors. This sculpture sat in front of the Auto Transport Company (ATC) building. In 2011, he bought this building from his own company and sold it two years later (end of 2013) to
Sud Oil
, a former petroleum products distribution company which at that time came under the control of members of Joseph Kabila's family.
It is officially from this address that those close to Joseph Kabila received nearly 88 million dollars out of the 138 million documented by the Congo Hold-up investigation.
In Kinshasa, Philippe de Moerloose had a monument in his effigy: a statue of him surrounded by two Congolese employees.
© PPLAAF / Mediapart
►
To read also:
Congo Hold-up: Sud Oil, the siphonneuse of the first
circle of Joseph Kabila
Asked about this, Philippe de Moerloose said at the time he "demanded" a copy of the shareholder register: "this did not inform any member of the Kabila family".
The businessman denies having had a relationship with Joseph Kabila that went beyond professional contacts. He says he is not and considered to be a “
politically exposed person
”. He emphasizes that his affairs are regularly checked. "
We confirm that we have never retroceded any commission to third parties on these contracts and we refute any allusion to any corruption that is contrary to the rules of compliance and good governance of our group
."
Joseph Kabila did not respond to our requests for comment.
Volvo and John Deere also did not answer our questions.
“
We have only a limited view of the price the end user pays
,” says Claes Eliasson of the Volvo Group.
“
We take compliance very seriously
.
"
During Joseph Kabila's eighteen-year mandate, De Moerloose was a key player in the vehicle sales market for the Democratic Republic of the Congo.
Its companies are regularly mentioned in the state expenditure reports in the Central Bank bulletins.
Demimpex has received more than 436 million dollars thanks to contracts signed with the Congolese state.
Its companies in Mauritius collected more than $ 128 million from 2011 to 2017. HMIE and D'Angelin Ocean Trade, two companies registered in the British Virgin Islands which belong to De Moerloose, have raised more than 40 millions of dollars. Since 2018, De Moerloose, through a new subsidiary of SDA Holding in Mauritius, has concluded two other contracts with the Ministry of Agriculture, for an amount of 139 million dollars. Total amount of all these cumulative contracts: at least 742.9 million.
None of these contracts resulted from a public tender procedure. Philippe de Moerloose himself recognizes this when he explains to us that he "systematically" resorts to the prior authorization of the Directorate General of Public Procurement Control (DGCMP) which, according to him, "
controlled all aspects of the contract, including the tariffs applied
”. This recourse to a mutual agreement procedure is a common practice in the Democratic Republic of the Congo, but it is widely denounced by civil society, as well as by international institutions.
We have obtained a copy of the 2016 No Objection Notice issued for the last $ 139 million agricultural contracts.
The arguments given by the DGCMP remain poorly supported: "
This is a public-private partnership
," she said.
In addition, De Moerloose's company has "
already supplied machinery to the Congolese state
".
And the “
financing of the contract over an average period of five years is advantageous
”.
Philippe de Moerloose is participating today in the inauguration of the new headquarters of the Central Bank of Congo in #Lubumbashi: a magnificent structure built by Dematco, a subsidiary of our holding African Equities, which will contribute to the economic development of Haut-Katanga #RDC pic.twitter.com/2MJtLT24VF
- Philippe de Moerloose (@P_de_Moerloose) June 1, 2018
Extremely high margins
This practice has given rise to abuse.
Our colleagues from the newspaper
De Standaard
obtained internal documents, tables indicating the purchase prices of this equipment which was resold in the DRC.
We compared the purchase prices and the selling prices for each machine delivered, services and parts provided under the most recent contracts of $ 139 million.
Our analysis shows that in the first tranche of this market, which corresponds to orders placed in August 2018, revenues amounted to 58.5 million and gross profit margins to 36.7 million, or 63% of the total.
This includes the prices of sea transport, but not yet land transport, which according to previous contracts amounts to a few percentage points of the total price. For example, the maize harvesting machines were purchased for $ 64,000. De Moerloose sold them to the Congolese state for $ 456,000. Transportation by sea cost $ 7,500. Domestic transport in Congo is not included in the table. John Deere-branded harvesters, for example, were bought by De Moerloose's company for $ 64,138 each and sold to the Congolese state for $ 456,183.
Contacted, Mr. De Moerloose disputes the authenticity of these internal documents.
He claims his actual margins were between 25-30%.
De Moerloose also gives specific examples of purchase prices for machines, which differ from those shown in our documents.
But the annual accounts of the Mauritian company DEM Equipment dealing with recent contracts of 139 million, show that the margins must be much higher than the 25-30% mentioned by Philippe de Moerloose.
The financial statements for 2018, 2019 and 2020, which can be viewed online at the Mauritius Companies Register, reveal that this company has accumulated a turnover of 102.8 million euros and a gross margin. of 39.6 million, which makes a margin rate of 38.5%.
A cumulative net profit before tax of 40 million was recorded during these three years, on which the company paid 3.4 million euros in taxes.
That makes a tax rate of only 8.7%.
The prices charged by De Moerloose to the Congolese state were also much higher than those charged in other African countries.
Contacted about the prices charged by the Belgian businessman, Patrick Roux, director of the South African company AFGRI Equipment, also representative of the John Deere brand, explains that it is difficult to comment on the price without knowing the details of the transaction.
"
But if the example you give
(75 horsepower John Deere tractor, sold for $ 51,265)
is correct, that would be very far from the norm
."
According to
AG Facts, a South African data company
specializing in agricultural equipment prices, the selling price of these tractors in that country is $ 28,500 each. This is the price excluding VAT that farmers pay. The Moerloose, which sells to the Congolese government, does not have to charge VAT either.
This is also repeated by the former close collaborators of Philippe de Moerloose.
“
We are talking about someone who is not in competition.
He then passes very high and completely off-market prices for agricultural equipment, in one of the poorest countries in the world,
”said a former member of the board of directors of one of De Moerloose's companies, who wishes to remain anonymous for fear of legal reprisals.
“
On top of that, these programs are quite often funded by multilateral financial institutions, and in return he pays almost no tax on the huge profits made, thanks to offshore tax structures.
It is morally reprehensible
. ”
An old practice
Philippe de Moerloose is not at his first attempt. Our colleagues from the
Standaard
also saw invoices from SDIAG, a De Moerloose company in Mauritius, dating from 2011. Fieldking brand five-ton trailers were purchased at the time for $ 2,435 each. De Moerloose sold them to the Congolese Ministry of Agriculture for $ 7,800 apiece: triple the price. And it adds another $ 2,300 per machine for transportation. The margins achieved on machines from SDLG, the Chinese brand of Volvo, were also particularly impressive. Thanks to a table from Demimpex mentioning the 2010 purchase prices, the Congo Hold-up investigation was able to establish that the Chinese excavators were sold to the Ministry of Roads for six times the purchase price. This machine of the LG956L model which cost $ 45,200 was sold that same year for $ 265,900.
Between 2008 and 2010, thousands of John Deere tractors were sold in the DRC. These are the first large contracts with the State in a long series. Joseph Kabila and Philippe de Moerloose together visited the headquarters of John Deere in New Orleans, United States in 2010. On the internet video channel Youtube, there is always a report on the signing of the third edition of these huge contracts , involving 1,500 tractors. "
The order was given by the head of state Joseph Kabila, who is enthusiastic about the idea of mechanizing agriculture in the Congo
", explains the journalist. In this video, the Belgian ambassador at the time, Dominique Struye, expresses his pleasure to see a Belgian company active in the DRC. "
I would even say, which improves relations
", He explains in this video.
Today, these early tractors are difficult to locate.
According to the contracts, they were distributed to provinces.
“
It was just before the 2011 elections
,” said a senior Congolese agriculture ministry official who requested anonymity.
“
Most of these tractors were distributed to MPs
.
"
Contacted, Joseph Kabila did not follow up;
its Minister of Agriculture at the time and former vice-president of the electoral commission, Norbert Basengezi, assures us that a report by the KPMG audit firm attests to “
good management of these tractors
”, while specifying that 'he didn't have time to look for it.
He also refuses to comment on the allegations of overbilling.
“
I was not in the initial negotiations of these contracts,
” he explains.
“
I met Philippe de Moerloose on the day the
contract was signed
”.
Equipment in poor condition
When Philippe de Moerloose is asked about the secret of his success, he invariably insists on the quality of his after-sales service, the excellence of which he praises, which allows him to develop in a market where competition is fierce, with competitors based all over the planet.
Of course, when it delivers Volvo equipment to Europe, the quality of its after-sales service is not in dispute.
In the Democratic Republic of the Congo, we are very far from having the same standards, according to an internal evaluation report that we were able to consult.
In 2012, at the request of Demimpex, a Belgian audit firm examined a series of contracts.
Wrong orders, material in poor condition or never delivered, the conclusions of this report are overwhelming.
Problems were noted with all brands, but the Chinese Sinotruk trucks supplied were found to be particularly failing. These devices cost at least $ 70,000 each, according to the contracts that we were able to consult. The 2012 report attests: the damage has increased. To begin with, the steel parts were already suffering from severe corrosion when they arrived. The odometers turned out to be faulty, the engines poorly assembled, which caused them to break down very quickly. The sills were not suitable for African roads, the driving cabs, not shockproof. In his long response to Congo Hold-up partners, De Moerloose explains that it was “frequent” for the equipment to be damaged during transport,but that it was "formally noted" and the material replaced. "
We confirm that the material delivered was 100% compliant and in perfect condition to the end customer
, ”he assures us.
In January 2019, Joseph Kabila left the presidency and since then, a last contract which was to be signed with the companies of De Moerloose in Mauritius, for an amount of 125.4 million dollars, seems to have been lost in the drawers of a ministry.
Is there any reluctance on the part of the government of successor Félix Tshisekedi?
De Moerloose denies and ensures that the signing of this third amendment to the contract can only take place "
after phase 1 and 2 are in full production
".
According to him, this delay would be normal in order to be able to "
observe the possible successes and failures of the first phases
".
In September 2021, Philippe de Moerloose celebrates the 30th anniversary of his entry into the business world at the Hôtel de Mérode in Brussels.
He has tears in his eyes, his children are seated in the front row, his companion's modern paintings hanging behind him.
"
Our turnover will increase by twenty percent per
year," he promises.
“
In five years, we will have passed the two billion mark.
It's ambitious, I know, but we'll get there
”.
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