Chinese companies are involved in construction projects all over Africa

Much has been written about the increasing involvement of China in Africa. Both the Chinese government and Chinese companies have shown extensive interest not only in Africa’s resources but also in various projects and development opportunities in Africa.

During the Beijing Summit of the Forum of China-Africa Cooperation in 2006, the Chinese President publicly committed the country to a new form of China-Africa strategic partnership, a partnership that promoted common development. One of the specific measures he proposed was the creation of a China-Africa Development Fund.

The China-Africa Development Fund (CADFund) opened their first office in Africa earlier this year and TradeInvestAfrica took the opportunity to pose some questions to the regional project manager, Mr Zhengyi Lv.

Congratulations on opening up an African office for the China-Africa Development Fund. What is the role of your office in South Africa?

The China-Africa Development Fund (CADFund) is the first equity investment fund in China focusing on investment in Africa. It was established in June 2007 with committed funding of USD 5 billion.  CADFund is a key component of the Chinese government’s forging of the Sino-African New Strategic Partnership.  CADFund is expanding its presence in Africa with representative offices, the first of which was formally established in Johannesburg, South Africa in March 2009. 

We pay great attention to industries and sectors with tremendous capacity for African economic development such as agriculture, power, construction materials, machinery manufacture, industry, mining and the creation of business parks.

Which projects are you are already funding in Africa?

By the end of 2008, CADFund had invested nearly USD 400 million in over 20 projects, which in turn will facilitate investment by Chinese enterprises to the value of about USD 2 billion in Africa.  The following are projects that we are already funding in Africa:

i)  CADFund co-operated with China Colour-Cotton (Group) Co. Ltd, Qingdao Ruichang Cotton Co. Ltd and Qingdao Huifu Textile Co. Ltd to carry out cotton planting and processing in the mode of “company + farmer” in Malawi and Mozambique. This should eventually provide employment for nearly 100 000 farmers.

ii)  Ethiopian leather processing project – CADFund’s investment should effectively drive the development of the local stockbreeding industry and improve the processing capacity of stockbreeders in Ethiopia.

iii)  CADFund, together with the Shenzhen Energy Investment Co. Ltd, invested in the Ghana Power Station. It has a capacity of 560 000kw and the total investment was USD 450 million.
 
iv) CADFund co-invested with CGCO in a glass factory with an annual yield of 40 000 tons in Ethiopia.

v)  CADFund has decided to invest about USD 20 million in projects for machinery manufacture and is currently researching a further 10 projects covering transportation equipment such as agricultural and project machines, motors and motorcycles as well as home appliances.  CADFund is co-operating with YTO on machinery and trade projects and promoting the co-operation with domestic enterprises like Chongqing Lifan.

vi)  CADFund has decided to invest over USD 100 million in three industrial park projects: Egyptian Suez Park, Nigerian Lachish Trade Zone and Mauritius Tianli Park.

Will you focus your investments on particular countries in Africa and particular sectors?

CADFund invests mainly in projects in African countries in which Chinese enterprises can also participate.  The amount of investment is determined according to investment potential of projects and is not divided equally amongst the various countries in Africa. 

We are focusing on the following industries:
• Agriculture and

• Manufacturing industries (both of which are crucial to the economic recovery and development of African countries);

• Infrastructure and underlying industries such as electric power and other energy facilities, transportation, telecommunications and urban water supply and drainage;

• Natural resources such as oil, gas and solid mineral resources;

• Industrial parks established by Chinese enterprises in Africa.

Has the global economic crisis affected the willingness and ability of Chinese companies to invest abroad?

The whole global economic crisis has affected investment readiness to a certain extent but we don’t want to comment too much on this matter. 

Do you welcome approaches from African companies and investment promotion agencies that have projects requiring investment or are you only accepting applications from Chinese companies that are interested in specific projects?

CADFund invests in projects in the following basic modes:
• CADFund, Chinese enterprises and/or African enterprises contribute together to establish a joint venture for investment in African projects.  The enterprises could be registered within Africa or abroad.

• CADFund directly invests in Chinese-funded enterprises or companies with direct Chinese participation, which are registered in Africa and invest in projects in Africa.

• CADFund directly invests in Chinese enterprises registered in China, which invest in Africa.

• CADFund invests in joint stock with projects and enterprises with major assets in Africa but registered outside of Africa.

• CADFund directly invests in African projects involving international financial institutions.

• CADFund establishes funds to invest in African projects involving domestic and foreign institutions.

What are the main criteria you look at when deciding whether to fund a particular project?

The Fund’s investment standards include the following:
• Policies and regulations – projects shall abide by China’s foreign and economic policies towards Africa, meet requirements for encouraging and regulating enterprises to make foreign investment and co-operation and conform to relevant laws, regulations and policies.

• Partners – need to complement CADFund’s objectives, have advantages, investment experience in Africa, good human resources, strong management capability and a good team. The partners should also be qualified, leading enterprises in the industry with long-term and clear development strategies in Africa.

• Projects – should have promising market prospects, rapid and steady growth potential and the ability to generate a good cash flow. Projects should also be capable of promoting local economic development and should contribute to the improvement of people’s living standards.

• Environmental and social responsibilities – regard for local customs and conventions, conformance to local labour protection and environmental protection standards are considered important.

Will you only be funding private sector Chinese companies or are you assisting Chinese government agencies as well?

We provide funding to both private and state-owned Chinese companies.

How much information on Africa and African business news is available in China? (In other words, is the average Chinese business person familiar with the investment potential in Africa?)

Access to information around the world is simple and easy nowadays as people can make use of the internet or any multimedia.

For further information on the China-Africa Development Fund visit www.cadfund.com.