CAD Fund: Investment Bridge

Chinese companies seeking to make an investment on the African continent can find a helping hand in the China-Africa Development Fund (CAD Fund). Since its conceptualization in 2006 and establishment in 2007, the Fund has gradually expanded its presence in Africa, drawing in more investors from China. The Fund has just established its fourth office on the continent, in Ghana.

At the November 2006 Forum on China-Africa Cooperation (FOCAC) summit in Beijing, President Hu Jintao announced the formation of the CAD Fund as a vehicle for supporting Chinese companies to enter the African market. In May 2007 China Development Bank was designated to manage CAD Fund, and in a June 2007 ceremony in Beijing, the Fund was officially launched with $1 billion in funding for its first phase of operations. Since this time, the Fund has greatly expanded its reach on the continent.

CAD Fund's methodology for investing in Africa is to invest as a minority shareholder during the early development stages of a project, with a Chinese company serving as the main investor. In 2009, CAD Fund established its first African office in Johannesburg, and by March of that year the Fund had disbursed around $400 million of its first phase funding on a range of projects ranging from investments in agriculture ventures in Ethiopia, Malawi and Mozambique; a share of a $450 million power station in Ghana; and Egyptian, Nigerian and Mauritian industrial zones.

In 2010 the Fund embarked on a further $2 billion in investment, on the way to eventually reaching the $5 billion mark. In the same year, the Fund opened an office in Zambia to administer investments in Central Africa, and another one in Ethiopia for East African investments. Now, in November 2011, the Fund has just opened its West African office in Ghana, and still to come is an office in Egypt for North Africa. At the launching of the West African office, it was announced that the Fund has a pipeline of over 100 projects, and has already undertaken over 50 projects in 30 African countries. In a notable recent deal where CAD Fund is involved, in August 2011 Chery Automobile, one of China's largest auto manufacturers, signed a strategic cooperation agreement with CAD Fund to set up a joint venture, Chery Overseas Industrial Investment Co. Ltd., with initial registered capital of 1.27 billion yuan ($200 million), to develop Chery's African market entry.

As a bridge to facilitating Chinese investment in Africa, CAD Fund is playing an instrumental role, and its presence is being felt across the continent.

The ChinAfrica Econometer is produced by The Beijing Axis, a cross-border business bridge to/from China in four principal areas: Commodities, Capital, Procurement, & Strategy.

For more information, please contact: Barry van Wyk, barryvanwyk@thebeijingaxis.com

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