China-Africa Development Fund for Practical Cooperation

China-Africa Development Fund offices in Beijing

General Introduction
China-Africa Development Fund (CADFund) is one of the “Eight Measures” for China-Africa practical cooperation announced by the Chinese government on the Beijing Summit of the Forum on China-Africa Cooperation. CADFund was inaugurated on 26 June, 2007. CADFund aims to encourage and support Chinese enterprises to invest in Africa. At the Johannesburg Summit of the FOCAC on December, 2015, Chinese President Xi Jinping announced an additional US$5 billion for the China-Africa Development Fund, which makes CADFund reach a designed total capital of US$10 billion. CADFund has invested in agriculture, infrastructure, manufacturing, industrial park, resource development, etc. The investments inject vibrancy into the China-Africa economic and trade cooperation in the new era, create positive economic and social outcomes, consolidate the foundation for the development of African economy, strengthen Africa’s capacity to develop on its own and enhance Africa’s competitiveness in the global economic landscape. Therefore, CADFund has won widespread praise from the welcoming African countries and become the main platform for Chinese investment in Africa. China will continue to give full play to CADFund, which supports Chinese firms to invest in Africa and seeks Chinese partners for African projects. Firms meeting the requirements could apply.

1. Nature of CADFund
CADFund is an Africa-focused equity investment fund launched by the Chinese government. It upholds the philosophies of sincerity, results, affinity and good faith in China-Africa cooperation. It operates under the government-guided, company-centered, market-oriented and win-win cooperation principles. It focuses on solving the three bottlenecks (inadequate infrastructure, lack of professional and skilled personnel, and funding shortage) that Africa faces in its course of development. CADFund supports the acceleration of the industrialization and agricultural modernization in Africa, and helps Africa to realize sustainable development on its own. Base on the ten major cooperation programs and three principles for project selection (strategically required, financially balanced, and developmentally sustained), CADFund priorities investments in such areas as Three Networks and Industrialization, industrial connection and cooperation in production capacity, equipment manufacturing, agriculture, livelihood-related fields, industrial park, etc.
(1)Providing capital financing for companies invest in Africa and sharing risks with them.
(2)Providing value-added services and helping companies resolve issues and difficulties in Africa drawing on its expertise on African countries and investment climate.
(3)Linking African projects with Chinese companies and Chinese partners with African companies and projects.

2. Principles of Fund Utilization
CADFund mainly invest in Chinese firms with economic and trade activities in Africa and African firms and projects invested by Chinese firms. CADFund does not seek to control or take majority shares. The investment vehicles include:
(1)Equity investment: directly investment in ordinary shares of a firm or a project.
(2)Quasi-equity investment: preference shares, convertible bonds, other hybrid financing instruments.
(3)Fund investment: appropriate scale of investment in other funds as the fund of funds, as long as in line with the policies of foreign affairs and economic and trade cooperation.

3. Clients requirements:
CADFund mainly supports Chinese firms investing in Africa and seeks Chinese partners for African projects. Any firm that fits the following criteria can apply: a good credit record and at least capacity to investment and finance; a clear equity structure and management structure, good shareholder relations, and transparent balance sheet and creditor-debtor relationships; patented technology or usage rights obtained from other institutions; good market growth potentials and sustainable profitability; a clear Africa strategy and team with African experience; an efficient and experienced management team capable of delivering strategic goals and plans; great influence in the host country and good relations with government and local companies.

4. Application Procedures:
Government and other agencies can recommend projects to CADFund. Enterprises can apply for investment directly. These projects first will enter its the pipeline. When certain requirements are met, due diligence and project appraisal will be conducted. Negotiations come next and a project proposal is written and then deliberated for approval. For approved projects, legal documents will be signed with partners, disbursements made according to the progress, and post-investment management till exit.

Formation: June 26, 2007

Headquarters: Chemsunny World Trade Centre, Chang’an Avenue

Location: Beijing, Peoples Republic of China

Official languages: Mandarin Chinese; English; French

President: Chi Jianxin (迟建新)

Chairman: Zhao Jianping (赵建平)

Website :www.cadfund.com

The China-Africa Development Fund, more commonly known as CAD Fund, is a Chinese private equity fund solely funded by China Development Bank, a Chinese government policy bank. The aim of the fund is to stimulate investment in Africa by Chinese companies in power generation, transportation infrastructure, natural resources, manufacturing, and other sectors.

History

The creation of CAD Fund was announced as one of the “Eight Measures” for Sino-African relations at the Beijing summit of the Forum on China-Africa Cooperation (FOCAC) by President Hu Jintao on November 4, 2006. It was established in June 2007 with US$1 billion of initial funding by the China Development Bank and is envisioned to grow to US$5 billion in the future. The fund entered into its second round of fundraising in May 2010 to raise US$2 billion.

Investments

The fund’s primary purpose is foster Sino-African investment through bridging finance, financial advice, Africa specific managerial advice, and identification of potential investment opportunities as well as connecting African projects to Chinese investors.

As of 2010 the fund had invested in 30 projects in Africa worth around US$800 million. In 2009 alone, the fund invested US$140 million of China’s total US$1.3 billion invested in Africa that year. The fund primarily focused on industrial development. For example, in 2010 it teamed up with several partners by contributing 382.5 million ZAR into a 1.65 billion ZAR investment by Jidong Cement to build a cement plant in Limpopo, South Africa.

The fund has also participated in acquiring natural resource assets by forming a joint venture with China National Nuclear Corporation (then China Guangdong Nuclear Power Group) to acquire most of the Husab Mine for US$996 million in February 2012.

 

CAD Fund to boost footprint in Africa, By Zhou Yan (China Daily)
Updated: 2010-05-28 09:11

The China-Africa Development Fund (CAD Fund), China’s largest private equity (PE) fund focused on African investments, has kicked off its second-phase of fund raising to raise $2 billion over three years, a top fund official said on Thursday.

“The capital-raising plan will be open to qualified entities that have interest in making investments in Africa,” Li Dongya, managing director for operations and management at the CAD Fund told China Daily.

He said the capital raised would be used for infrastructure construction, agriculture, manufacturing and electricity projects.

The fund was started with $1 billion from China Development Bank Corp in 2007, after President Hu Jintao promised to set up the CAD Fund at the Beijing Summit on China-Africa Cooperation in 2006.

The central government plans to eventually expand the fund to $5 billion, but has not set any timetable.

“We have decided to invest around $800 million in 30 projects in Africa, and the initial $1 billion is likely to be used up by the end of this year,” Li said. He added that the fund’s investment in 2009 alone was $140 million compared with China’s total investment of $1.3 billion in Africa last year.

CAD Fund’s direct capital and other domestic companies’ investments facilitated by the fund accounted for more than 30 percent of the country’s combined investments in Africa during 2009, said Li.

The fund made a rare move in media in December 2013 when it was the financial partner in the acquisition of 20% of Independent News and Media SA, a newspaper publishing house in South Africa, for 400 million ZAR.

Figures from the Ministry of Commerce show that bilateral trade between China and Africa rose 76 percent to $27.8 billion during the first quarter of this year compared with the same period last year. China-Africa trade hit all time high of $106.8 billion in 2008, followed by a slump in 2009 due to the global financial crisis.

CAD Fund has teamed up with Chinese companies for investments in Africa and is largely a financial investor. The fund does not hold controlling stakes in any project and limits its holdings between 10-50 percent, said Li.

“Our mission is to encourage domestic companies to invest in Africa and introduce China’s experience during its progress under the reform and opening up policies to the African companies, and also explore new markets for domestic companies in African nations,” he said.

The government-backed PE fund is targeting double-digit returns on its investments (ROI).

“We are a market-oriented fund, but cannot realize profits from each project quickly, given the continent’s unexpected difficulties for foreign investors and the lagging infrastructure facilities,” Li said, adding that the ROI targets are likely to be met over the next few years.

“We are in discussions with over 100 projects currently, and will focus more on agriculture, manufacturing, and infrastructure construction like electricity and harbors in the next phase after the manufacturing sector now,” Li said.

CAD Fund has facilitated projects in Africa, including a glass manufacturer and a cement factory in Ethiopia, a power station in Ghana, and industrial parks in Egypt.