CAD Fund

The China-Africa Development Fund (), more commonly known as CAD Fund, is a China Government Guidance 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. In 2015, China announced its plan to expand the CAD fund to $10 billion.

Investments

The investment mechanism of the China-Africa Development Fund operates primarily through the following processes: adhering to the principle of marketization, the Fund independently selects investment projects based on the investment policy set by the board of directors; It autonomously decides whether to invest and determines the scale of investment in line with the relevant investment decision protocols, aiming for long-term returns. Investments are allocated based on project merit rather than by country; the primary recipients of support are Chinese enterprises engaged in economic and trade activities in Africa or projects funded by these enterprises; targeted sectors include those crucial to the economic recovery and development of African countries, such as agriculture, manufacturing, and infrastructure that directly impacts people's livelihoods. The Chinese government has also implemented several preferential policies for the China-Africa Development Fund, including exemptions from corporate income tax on earnings generated from investments in Africa.

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.

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.

Examples of other equity investments

* China-Africa Xinyin Investment (35%)
* Huayou Cobalt (, 7.59%)
* Africa World Airlines

Grants and other activities

The China Africa Development Fund provides support in connection with the overseas special economic zones that Chinese enterprises have established in Africa. Although the Chinese government generally takes a hands-off approach to the development of these zones, leaving it to Chinese enterprises to work with host countries to establish them, the CAD Fund provides support in the form of grants, loans, and subsidies.

Specific current involvement

The CAD Fund has completed over 60 projects, but also acts as a resource to organize the independent investments of Chinese firms. Sometimes these projects have very few funds directly from the US$10 billion allocated for the CAD Fund, but benefit from the CAD Fund's logistical experience and monitoring in order for investments to flow with greater efficiency.

Ethiopia

The CAD Fund in Ethiopia targets agricultural and rural development. In 2009, in a joint venture with the Xinxiang Kuroda Mingliang Leather Co. Ltd, the CAD Fund invested roughly US$27 million towards a large leather product factory close to Ethiopia's capital, Addis Ababa. The Fund has also helped establish Ethiopia's special economic zone in collaboration with Chinese companies called the Ethiopian Eastern Industrial Zone (EEIZ). Wherein several independent investment projects are undergoing with potential for large job creation for the local population.

Ghana

The Cad Fund's main investment in Ghana are power plant construction and developments. Most notable is the Asogli power plant in Tema. This plant is the first private owned electricity producing plant in Ghana, using natural gas.

Kenya

The CAD Fund helped organize over US$16 million in investments towards hydro-power plants as well as several infrastructure improvements. The fund will also support the organization of several Chinese firms with the construction of a large port in Lamu as a part of the Lamu Port Southern Sudan-Ethiopia Transport Corridor project (LAPSSET).

South Africa

The CAD Fund opened an office in Johannesburg which brought investments in the mining sector by Chinese companies as well as venture projects with South African companies. The largest single investment by the CAD Fund in South Africa occurred in 2010 through their support of the Jidong Development Group which invested roughly US$52 million towards the creation of a cement plant. The CAD fund also directly invested several million USD towards several renewable energy projects. The Fund has also worked to establish and promote the Coega Industrial Development Zone in Port Elizabeth to stimulate further independent investments and job creation.

Zambia

The bulk of the CAD Fund's investments in Zambia are centered around cotton cultivation projects as well as copper mining projects.

Liberia

In 2007, the Liberian government opened an open-pit iron ore mine in southwestern Bong County for public bidding. The contract was eventually awarded to China-Union (Hong Kong) Mining Company Limited. However, due to a lack of follow-up operations, the company invited the China-Africa Development Fund (CADF) to participate in the project, selling an 85% stake to the Fund. In 2010, CADF subsequently sold a 60% stake to WISCO International Resource Development & Investment Limited.

See also

* Belt and Road Initiative
* Africa–China relations
* China-Africa Economic and Trade Expo

References

External links

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Private equity firms of China
Africa–China relations
2007 establishments in China
Government-owned companies of China