According to the State Statistics Service, the volume of direct foreign investments to Ukraine over the first half of the year amounted to $1,259 billion. Despite the low investment attractiveness, some international companies are still willing to invest in Ukrainian projects. Nevertheless, we should not forget about the Ukrainian capital and internal capacities. Chernovetskyi Investment Group is an international company that belongs to the Ukrainian Stepan Chernovetskyi, one of the ex-owners of “PRAVEX Bank”. In his interview for “Ukrainian news”, he told how he evaluates the investment prospects in Ukraine, which spheres of capital investment he considers the most promising and attractive. He also spoke about the controversial allegations of the Spanish law enforcement agencies and about the role, his father, Leonid Chernovetskyi, the former Kyiv mayor, plays in his business.
What is the total investment portfolio of CIG at the moment?
Today, our portfolio comprises more than 10 projects, and the total amount of investment into them is tens of millions of dollars.
The total turnover of the companies in which we invested will reach about 100 million dollars in the next year.
We invest in e-commerce, e-health, food tech and agricultural companies in Ukraine, Eastern Europe, and India. Many of our projects have the potential to expand to the Western Europe markets.
What are the plans to increase the portfolio for the next two years?
I am interested in IT; I want it to develop in Ukraine. I see the great potential in those industries where IT penetrates into the traditional practices, like agriculture.
In addition, we are planning to increase our investments in health and education. We are also considering a potential partnership with several foreign venture capital firms in the next year.
We are definitely going to provide relevant information about the development of our initiatives.
What is the CIG investment portfolio in Ukraine?
As I said, CIG investment portfolio is the projects related to e-commerce, e-health, agriculture, and food tech. We are willing to invest in Ukrainian projects and try to develop promising international startups in our country.
I think we show good results.
One of our most interesting projects is a Ukrainian grocery delivery startup Zakaz.ua. The project team quickly became the leader of online grocery delivery in the Ukrainian market. Now Zakaz.ua operates in eight Ukrainian cities and we plan to expand the service’s geography. In the nearest future, the service is going to enter one of our neighborhood markets. Within the last three years, the company’s turnover grew by 100% annually, and that is just the beginning.
Eda.ua is another Ukrainian startup dealing with the food delivery from cafes and restaurants. Recently, Eda.ua merged into the Baltic company Foodout Group. Now it is one of the largest food delivery services in the Eastern Europe.
One more very interesting Ukrainian startup is Doc.ua, free online service for the search of the doctor and making appointments. And it is number one in Ukraine now.
Moreover, our portfolio includes Kray Technologies startup manufacturing drones for agricultural companies. Primarily, it targets the large markets of the US and Canada, but we expect that these drones will also be demanded in India as it is another global agribusiness center. In addition, Ukrainian agricultural holdings are interested in this startup. Now, Kray Technologies is getting ready for commercial launch and for sending the drones to the first customers.
Rate the investment climate in Ukraine. How effective are the government’s reforms? Or do you think nothing has changed fundamentally?
Ukraine is a decent country with great potential. And it’s not just pretty words: I say it as an investor. The experience of the past years shows that high tech can really develop actively here.
Unfortunately, the current situation in Eastern Ukraine cannot but affect the economy. Nevertheless, it is important to pay attention to the positive dynamics and the right reforms. One of them is a very successful Prozorro e-procurement system (we, actually, were among the donors to this program investing $100 thousand), health care reform or waste management reform. All of this greatly improves the investors’ confidence in our country.
I told just the same to the Austrian business publications when had the interview with them recently.
Ukraine is slowly but steadily returns to GDP growth. Personally, I often meet with European and American investors, funds, organizations, and can see their interest. This is a good trend.
Now let us focus not on feelings but on the numbers. Today, we have 100 thousand IT-professionals, 80 percent of them are proficient in English. The export market of IT services accounts for about $ 4 billion, holding the third place in exporting sector, following the traditionally very large metallurgy and agribusiness. Optimistic projections indicate that these figures will have doubled by 2020.
3G and 4G were introduced in record time in Ukraine; a number of Internet users is constantly growing. The country is struggling with piracy: a consumption of to-be-paid content is growing; several pirate services were closed recently. I do predict that within five years, Ukraine will have its own IT-company with a market capitalization greater than 1 billion euros (and there will be three or four such companies).
What Ukrainian projects are the most profitable? What are the most promising?
At this stage, investments in the IT sector are the most promising. Currently, it encompasses literally everything: agribusiness, medicine, logistics, and finance. We are witnessing how technology is changing the world.
That is why traditional sectors that grow and change with the help of the IT tools seem the most promising to me.
There is a huge potential in the projects based on the mobile-first principle and focusing on communication with their consumers through mobile apps. The Internet has become mobile indeed. People order food and call a doctor using their phones. Mobile projects will be most in demand in the near future.
Game elements and interactivity are very important for them. They can attract a wider audience around the world shortly.
In any case, the most lucrative projects are those selling their solutions worldwide and not focusing on the domestic market only.
Do you plan to invest in the banking business in Ukraine? Why?
As for my work in the banking business, it was an interesting and valuable experience for me at that time, but I do not plan to invest in it.
I started to work at the bank when I was 19, while at 21 I became a head of the department. I established and ran a very successful consumer crediting direction (under my leadership, it showed thousands of percent growth rate, having around 600 offices and more than 5 thousand consumer crediting points at the time of the bank sale). When I took up the Chairman of the Supervisory Board post, I realized that it was the time to take on something else.
The wish to make investments in the IT appeared long before the creation of the CIG. After a successful and rather unique bank sale (one of the most successful bank sale transactions at that time), I got the necessary capital and was able to fulfill my dream.
What did inspire you to run the CIG R&D LAB program and support Ukrainian polytechnic universities?
Based on my observations, the quality of IT education in Ukraine is all right. The number of engineers and IT-specialists and their popularity among foreign companies speak for itself. We realize the worth of such specialists in the country and therefore adhere to the so-called IT-patriotism. We strive to ensure that talented professionals work not only as the outsource specialists but start their projects and manage them in Ukraine.
That is why we started the CIG R&D LAB program. In 2017, we started a collaboration with the Odesa National Polytechnic University, announced a contest, and selected several projects that had been receiving scholarships and mentor support from CIG experts for 10 months.
Among them were such interesting projects as the control system of electronic locks and access rights, the information system for the educational process of the гniversities, the eye-tracking system in medical research. At the end of the year, the winning project was chosen – inverter voltage regulator. The creator received from UAH 500 thousand on the further development of the startup from our fund.
This year, CIG has also started cooperation with the National Technical University “Kharkiv Polytechnic Institute”.
CIG R&D LAB is not a charity project. This program benefits everybody: for young students, it is a chance to find funding for their ideas and high-paying jobs; for the country as a whole, it is an investment in professionals and business development; for us – as there are interesting projects for the future investment.
We hope to expand this program to other universities over time.
In the summer of 2016, you were detained in Spain. Does Spanish judiciary still have questions to put to you? Were any assets arrested? What has happened to your property in Spain?
What happened in 2016 in Spain is still a huge shock for my family and me. Especially, for my children.
The main issue of the Spanish judiciary is allegations of money laundering. These are absurd charges. We should not forget that it is not that easy to make any investment in Spain in fact. Everything was done through the Spanish banks that had been conducted compliance procedures for several months.
After my arrest, we immediately filed an appeal, four boxes of documents, explained the legal origin of the money. A month later, the court of appeal consisting of three judges heard the appeal and released me unconditionally without any restrictions. Meanwhile, due to secrecy, my lawyers did not see the materials that were in the case and were available to judges.
If you think about the essence of the charges, what is money laundering? It means that before there had been the illegal obtaining of capital being spent. What kind of money laundering is being referred to; everyone knows that I sold a big bank? What is the point in laundering $ 10 million (as stated in the indictment), if there was $750 million on which tax had already been paid?
Recently, my lawyers filed in three big reports to the court, fully confirming the legitimate origin of money. International auditors and lawyers drafted those reports for about a year.
The case in Spain is not closed yet due to certain formal procedures that need to be accomplished, and we cannot affect the reducing of the time.
However, I am very optimistic. It is far-fetched, and I am sure it will be closed soon.
For the seizure of assets: a business I had a share in was arrested. It is not a great deal of money but the restaurant that I have invested in is closed, and many people lost their job.
Do you visit your villa in Barcelona?
I have never had my personal villa in Barcelona. The house in which I was arrested in 2016 was rented for the summer.
Does the Spanish case affect your business?
No, the case does not affect my business neither in Ukraine nor in other countries. The Spanish case is far-fetched and was puffed up by media in due time. As you can see, my business is growing actively. I am sorry I have to waste my time and energy on these baseless accusations.
If you mean my investment in Spain, it was just an investment, not an operating business that I run.
Is your father a member of your company or your investment advisor?
CIG is entirely my company, my initiative. I have been pursuing this goal since I worked at the bank. My father is not a member of CIG and does not affect the business in some other way. At the same time, we are very close, and I am very grateful to him for many things in my life.