Distinguished officials and guests,
I am pleased to attend the workshop on investment in African Countries, and discuss the China-Africa Development Fund’s Support for Chinese Enterprises to invest in African countries with you. I will mainly introduce basic information about the China-Africa Development Fund (CAD Fund for short) as well as some thoughts on it:
1.Overview of the CAD Fund
The CAD Fund is one of eight measures for China-Africa practical cooperation announced by President Hu Jintao at the Beijing Submit of the Forum on China-Africa Cooperation in Nov., 2006, and is an equity investment fund established to support Chinese enterprises to undertake their cooperation with and expand their investment in African countries. The fund size will reach USD5b gradually. The CAD Fund was approved to open on Jun. 26, 2007 officially, and the first-stage capital of USD1b is totally contributed by China Development Bank (CDB for short). It is a corporate fund registered in Beijing.
(1)Business features of the CAD Fund
Firstly, the CAD Fund is a direct equity investment fund focusing on Africa. Different from traditional China-Africa economic and trade cooperative modes such as aid and loan, it serves China-Africa economic and trade cooperation by way of direct equity investment, hence an important initiative in China-Africa cooperation.
Secondly, the CAD Fund has to make investments with Chinese enterprises on principle. The launch of the Fund is primarily to support more Chinese enterprises to invest in Africa; therefore, its business orientation is to cooperate with Chinese enterprises to invest in Africa as their partner and financial investor. Of cause, for some investment opportunities with good return, if there is not any proper Chinese enterprise to cooperate temporally, we will consider to make initial participation, and look for Chinese partners in good time.
Thirdly, the CAD Fund sticks to market-oriented operation, follows the principles of self-operation, self-assumption of risks, and market-orientated operation, and decides whether to invest according to investment environment and specific situations of projects in African countries, rather than assigns capital by countries.
Fourthly, the CAD Fund plays a unique role as a bridge and service provider. Currently, some African countries offer a lot of projects needing immediate investment, and expect Chinese enterprises’ support and participation. Some Chinese enterprises are willing to invest in Africa and have possessed certain abilities, but they lack proper investment opportunities. Under such circumstances, the CAD Fund may fully exert its advantages of extensive business scopes, big influences and broad information channels to seek for Chinese partners for African countries, recommend African projects for Chinese enterprises, and play its role as a bridge and information provider, which is also a distinctive feature and critical function of the CAD Fund besides investment.
(2)Business scopes of the CAD Fund
The CAD Fund has extensive investment scopes and mainly invests in agriculture, manufacturing, infrastructure, basic industries, natural resources development, and industrial parks built in Africa by Chinese enterprises, which are benefit for African countries to improve the capability of their economies to “create blood” and enhance sustained development. Such projects, for example, are Shenzhen Energy’s Ghanaian electric power plant project where the CAD Fund holds 40% shares, which will mitigate the lack of power supply at local areas and exert important functions in promoting economic development upon completion, hence highly appreciated by local government common people; the Ethiopian glass plant project where the CAD Fund holds 40% shares, which, upon completion, will end Ethiopian history of incapability of producing glasses; and Egyptian Suez Economic and Trade Park that the Fund and Tianjin Teda Investment Holding Co., Ltd plan to invest jointly as it will have positive effect on enhancing the whole economic developing capacity of Egypt.
(3)Investment structure of the CAD Fund
According to the general operation rule of direct equity investment fund, the CAD Fund usually neither acts as a share controller or the largest shareholder, but mainly as a financial investor of projects it invested. The amount of investment for a single project is usually from USD5m to USD50m, but for key projects, the amount may be increased accordingly. The lasting period for a single investment project does not exceed 10 years usually (the time may be properly extended for key project). With respect to the management of enterprises it invested, the CAD Fund does not participate in their daily operation and mainly exercise the rights of shareholder by dispatching directors, supervisors or financial managers.
In addition, the CAD Fund invests at extensive investment phases. It may make investments in new projects, or share participation or M&A in enterprises at expanding or mature period, or participate in some risk capital investment projects.
(4)Working progress since the establishment of the CAD Fund
Since the operation of the CAD Fund, works has been carried out at all areas and achieved preliminary results under the support of CDB and leaders from relevant departments at higher levels, and with the help of partners and friends. Up to now, six projects have been decided, where the investment will total over USD90m. Further more, there are almost 100 projects under consideration, which lays a solid foundation for future development. The Fund has established strategic cooperation relationship with more than ten Chinese major enterprises including Sinochem Corporation, China National Building Material Group Corporation, China National Agricultural Development Group Corporation, China Nonferrous Metal Mining (Group) Co., Ltd, HNA Group, China Guodian Material Group and YTO Group Corporation, with a view to fully promoting business cooperation with African countries on agriculture, power, mining, tourism, finance and other key areas by virtue of business advantages of these partners.
2.Some thoughts on and advices for Chinese enterprises to invest in Africa
Chinese enterprises are advised to
(1)Fully understand local society and settle down with a serious attitude. African countries have different policies, laws, cultures, social systems and religions; Chinese enterprises, therefore, shall not be satisfied with superficial understanding of these, but have a deep comprehension of local politics, economy, nations, religions, and social situation. They shall not pursue for quick success and instant benefit, expecting to gain tremendous profits at once and leave there, but make a long-term plan.
(2)Make preparations for competition with international investors. In recent years, many countries have attached importance to investment in Africa, which requires us to cooperate with international investors and even make preparations for participating in international competition.
(3)Strengthen their cooperation with Chinese embassies and consulates. When investing in Africa, they may fully take advantage of Chinese overseas organs such as embassies, consult them for some issues and comprehend local policies, so as to avoid problems in businesses and cause negative effects.
(4)Deepen their cooperation with |