China-Africa Development Fund

Home>Business Overview>Comprehensive Finance Services>China-Africa Development Fund
China-Africa Development Fund

Overview:

China-Africa Development Fund was established in 2006 as one of the eight policy measures proposed by the Chinese government during the Beijing Summit of the Forum on China-Africa Cooperation to promote practical cooperation between China and African countries. Its objective is to support and encourage Chinese companies to invest in Africa. With the initial scale set to be US$ 5 billion, the fund was organized by CDB and started operation in June 2007. It offers a market-based channel to convert foreign reserves into funding sources.

During the Johannesburg Summit of the Forum on China-Africa Cooperation held in December 2015, President Xi Jinping announced that China would inject additional US$ 5 billion into the fund in support of the “10 Cooperation Programs” between China and Africa, raising the fund’s size to US$ 10 billion.

Since its inception, China-Africa Development Fund provided active support for economic and trade cooperation between China and African countries, focusing on a group of agricultural, infrastructure, manufacturing, industrial park and resource development projects. It effectively stimulated Chinese investment in Africa, and contributed greatly to infrastructure construction, technical advancement, exports and employment growth in the destination countries, playing an active role in industry and production capacity integration between China and Africa. The fund is warmly received by African countries and led to enhanced economic and social development in Africa and improved the competitiveness of African economies in the world.

Mission:

As the first Chinese equity fund dedicated to investment in Africa, China-Africa Development Fund is committed to speed up industrialization and agricultural modernization and facilitate independent and sustainable development in African countries, adhering to the China-Africa cooperation philosophy featuring “sincerity, real results, affinity and good faith” and principles of “government leadership, reliance on enterprises as the market players, market-oriented operations and win-win cooperation”. The focus is to solve the three major bottlenecks confronting African economies, i.e. underdeveloped infrastructure and human resource and funding shortages. Investment projects are selected according to “strategic necessity of investment, financial balance of projects and sustainability of corporate development” as the fundamental principles, with priority given to the construction of the “three major networks” (i.e. high-speed rail, motorway and regional aviation) in Africa, industrialization, production capacity cooperation between China and Africa, Chinese equipment manufacturers entering African markets, agricultural projects related to people’s livelihood, resource development and industrial (economic and trade) parks. The mission of the fund mainly involves:

(i) Sharing investment risks with the enterprises and providing credit enhancement for relevant projects based on investment partnership.

(ii) Providing information services and help the enterprises familiarize themselves with the actual situation and investment environment in African countries.

(iii) Bridging the gap between Chinese and African parties as the dealmaker for African investment projects.

Business coverage:

China-Africa Development Fund mainly specializes in: equity investment and investment consulting services; investing in Chinese enterprises operating economic and trade businesses in Africa, African enterprises and projects invested by Chinese companies and other China-Africa development projects; advising various enterprises (not limited to investee companies) on matters such management, consultancy, corporate assets reorganization, M&A and project financing, corporate finance and financial advisory; and other businesses approved by the competent authorities according to relevant laws and regulations. Investments are conducted mainly through:

(i) Equity investment: direct investment in enterprises and projects by acquiring common shares.

(ii) Quasi-equity investment: preferred shares, convertible bonds, hybrid capital instruments, etc.

(iii) Fund investment: as a fund of funds, China-Africa Development Fund invests in other funds in conformity with the state’s diplomatic and trade cooperation policies for African countries.

China-Africa Development Fund exits these investments according to the prescribed exit mechanism and deadlines.

The application process:

China-Africa Development Fund mainly supports Chinese enterprises investing in Africa, and aids African projects to find Chinese partners. The fund is open to all eligible enterprises, and projects may be recommended by governments and relevant organizations. After receiving an investment application from an enterprise, the fund assigns a dedicated liaison officer to follow up and make relevant arrangements, and due diligence and negotiations will be conducted when conditions permit. Once a project has been internally approved by the fund, related legal documents will be executed between the fund and the partners, and funding will be provided based on the schedule agreed upon between the two sides. Post-investment management will be conducted until the fund exits the project.