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.