China-Africa fund starts to raise further $2 billion

The China-Africa Development Fund (http://www.cadfund.com) has started to raise its second round of capital, aiming to raise $2 billion over three years, according to a report in China Daily (http://english.sina.com). The report cites Li Dongya, managing director for operations and management at the CAD Fund, which is China’s largest private equity (PE) fund focused on African investments.
The report quotes Li as saying: “The capital-raising plan will be open to qualified entities that have interest in making investments in Africa.” The capital raised would be used for infrastructure construction, agriculture, manufacturing and electricity projects.
The fund was started with $1 billion from China Development Bank Corp in 2007, after President Hu Jintao promised to set it up in 2006 at a Beijing Summit on China-Africa Cooperation. It aims to expand to $5 billion overall and has opened offices in Johannesburg and this year in Addis Ababa (see our previous report on the fund). CAD Fund has facilitated projects in Africa, including a sheet glass manufacturer and a cement factory in Ethiopia, a thermal power station in Ghana, iron ore in Liberia and industrial parks in Egypt.
Li apparently said: “We have decided to invest around $800 million in 30 projects in Africa, and the initial $1 billion is likely to be used up by the end of this year,” Li said. He added that the fund’s invested $140 million in 2009 alone (China’s total investment in Africa was $1.3 billion in 2009). CAD Fund makes direct capital investments and facilitates investments by other domestic companies’ investments, totalling more than 30% of China‚Äôs combined investments in Africa last year.
The fund does not hold controlling stakes in any project and limits its holdings between 10%-50%. Li said: “Our mission is to encourage domestic companies to invest in Africa and introduce China’s experience during its progress under the reform and opening up policies to the African companies, and also explore new markets for domestic companies in African nations,” he said.
The government-backed PE fund is targeting double-digit returns on its investments (ROI).
“We are a market-oriented fund, but cannot realize profits from each project quickly, given the continent’s unexpected difficulties for foreign investors and the lagging infrastructure facilities,” Li said, adding that the ROI targets are likely to be met over the next few years.
“We are in discussions with over 100 projects currently, and will focus more on agriculture, manufacturing, and infrastructure construction like electricity and harbours in the next phase after the manufacturing sector now,” Li said.
China and Africa rose 76% to $27.8 billion during the first quarter of this year compared with the same period last year, says China Daily, citing figures from the Ministry of Commerce. The high point for China-Africa trade was $106.8 billion in 2008, followed by a slump in 2009 due to the global financial crisis.

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