Established in June 2007, the fund is one of the eight measures announced by the Chinese Government at the Beijing Summit of the Forum on China- Africa Cooperation (FOCAC) in 2006, which were designed to enhance China-Africa cooperation.

As a financial investor, CADFund has joined with Chinese companies to invest in Africa in areas of agriculture, infrastructure, manufacturing, energy, resources and more recently in the culture and communication sectors. Four regional offices in South Africa, Ethiopia, Zambia and Ghana have been set up to facilitate CADFund’s business in southern, eastern, central and western Africa.

Developing African economies

Tracking CADFund’s projects, it can be found that the fund has focused on projects that develop agriculture, manufacturing, infrastructure, basic industries, resource sector cooperation and industrial parks run by Chinese companies in Africa. These sectors all play an important role in restoring and developing the African economies.

By the end of 2013, CADFund had had decided to invest in 75 projects in 31 African countries, with a planned investment reaching $2.8 billion. The fund’s investments can further generate more than $15 billion in secondary investments by Chinese companies. To date, the fund has invested more than $2.1 billion.

According to estimates, when all 75 projects are put into full operation, they can cumulatively provide the African market with about 150,000 automobiles, 400,000 televisions, 600,000 refrigerators, 300,000 sets of air-conditioners and more than 2 million tons of cement. More than 7 million local people will directly benefit from the projects.

In South Africa, the South Africa Electric and Home Appliance Industrial Park, jointly invested by Hisense Group and CADFund, has built up production lines that can produce 400,000 green refrigerators and 400,000 3D high definition televisions annually. The industrial park not only boosts the manufacturing level of the country’s household appliance industry, but also creates 600 direct and more than 2,000 indirect jobs in the local communities. The production base will also promote growth of supporting industries in the surrounding areas and the establishment of a hi-tech park in the future.

CADFund’s regional office in Ethiopia established in 2010

Investment diversity

In Malawi, Mozambique and Zambia, the CADFund along with various Chinese companies have invested in improving the cotton processing industry to help 110,000 families increase their income. The project plans to construct a complete textile industry chain to further lift the local cotton processing ability. China-Africa Cotton Malawi Ltd., the largest cotton processing enterprise in Malawi, provides 1,500 jobs for locals and 100,000 farmer families with capital and technological aid.

In Ghana, CADFund, together with the Shenzhen Energy Investment Co. Ltd., has invested in the Ghana Power Station. The first phase of construction, with a capacity of 200,000 kw, has already gone into commercial operation. Now the power station is working on the second phase of construction, which will add a capacity of 360,000 kw. The power station employs more than 200 local people, generates more than 1 billion kwh of electricity every year and accounts for 15 percent of the total electricity supply in Ghana.

CADFund is also one of the investors of Ghana’s Africa World Airlines (AWA). It is China’s first aviation project investment in Africa. Since its launch in September 2012, the airline has opened two domestic lines and regional flights to Nigeria and Sierra Leone, with an occupancy rate above 70 percent. The company plans to open regional air routes connecting Ghana with other cities in West Africa. President John Mahama of Ghana said the airline has not only provided travel convenience but also stimulated Ghana’s economy. He said that it has played an important role in improving the local investment environment and driving the industrial development in the surrounding areas.

CADFund is also involved in projects operating digital television and multi-media systems in Africa. To date, television programs of invested media have been transmitted in 10 African countries, covering 2.4 million families in 45 cities.

Chi, the fund CEO, said that CADFund would continue to focus on opportunities in improving the livelihood of Africans and promoting local economic development, while further exploring new cooperation opportunities with Chinese and African companies.

Growth and challenges

Chi said that over the last 10 years, the African economy has maintained a rapid growth momentum. The economic structure of the continent has shifted from a previously resource-export driven model to an economy driven by domestic and international demand. This growth and transition opens huge demand for investment.

According to Chi, China’s direct investment in Africa totals $2-3 billion each year, accounting for 5 percent of the FDI the continent attracts annually. As Africa is in the initial stage of industrialization and urbanization, China’s products, technology, production and management experience are applicable. Chi said that after more than six years of investment experience in Africa, CADFund has realized that there is a great potential in China- Africa cooperation.

To date, the CADFund has raised $3 billion in the first and second phases, with an aim of eventually raising $5 billion. Although a third round of fundraising is planned, Chi said that even after the fundraising goal is realized, it still won’t meet market demand.

As the CADFund grows, China faces many challenges such as stronger international competition in Africa. Western countries, Japan, South Korea, India and others are all expected to increase their investment in Africa. The unstable situation in some African countries also adds to the market risk. A lack of infrastructure and transportation facilities, as well as inconsistent water and electricity access often delay completion of projects and raise costs.

However, the biggest challenge is probably from the Chinese companies themselves. Lack of overseas business operation experience and knowledgeable managers who can speak foreign languages, understand local laws and investment environments are a cause for concern.