Recent years’ development of China-South Africa economic and trade relations has expanded the trade in services between the two countries from traditional areas into modern trade in services covering finance, environmental engineering, transportation, sales, tourism, communications, education, commerce, social services, healthcare and agriculture, showing an improving structure of trade in services and diversified development of types of services.
China-Africa Development Fund
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 in November 2006. CADFund aims to support Chinese enterprises to develop cooperation with Africa and enter the African market. CADFund was inaugurated on June 26, 2007. Its first-phase funding, USD 1 billion, was provided by China Development Bank (CDB), which will eventually reach USD 5 billion. At the Johannesburg Summit of the FOCAC in 2015, China announced an additional USD 5 billion for CADFund, which makes CADFund reach a designed total capital of USD 10 billion.
(1) Orientation of CADFund
a. To guide and encourage Chinese enterprises to invest in Africa
b. On the premise of not increasing debt burden of Africa, CADFund will provide capital financing and take market-oriented means to enhance self-development capacity of Africa.
(2) Investment style and industries
Launched by the Chinese government, CADFund is operated by CDB based on business principles with an aim of mobilizing more social funds to invest in Africa by providing capital financing.
Graph: Investment Style of CADFund
Source: The Seminar on Investing in South Africa held by South Africa Embassy in Beijing which members of the research team attended
Four priority investment industries of CADFund
Graph: Investment Industries of CADFund
Source: The Seminar on Investing in South Africa held by South Africa Embassy in Beijing which members of the research team attended
CADFund mainly participates in investments in greenfield projects, developing projects, mature projects (via M&A) and some VC projects.
(3) Business overview and a decade's performance of CADFund: CADFund played a strong role in encouraging Chinese enterprises to enter the African market and effectively enhanced self-development capacity of African economy. Investment overview: it has invested in 90 projects of nearly 40 African countries for over USD 4.4 billion and promoted Chinese enterprises to invest in about USD 20 billion in total in Africa./
(4) CADFund in South Africa
Representative Office in South Africa is the first office of CADFund. In Africa CADFund has the largest number of investment projects. As of now, CADFund has invested in 10 projects in South Africa with a total investment amount of USD 3.486 billion, USD 580 million of which came from CADFund. The projects cover such industries as manufacturing, infrastructure and natural resources.
a. Manufacturing: CADFund works on turning from “Made in China” to “Made in China and Africa jointly”, encouraging enterprises from advantageous fields such as auto, electrical equipment, machinery, cement, glass to invest in Africa and start businesses there, promoting manufacturing localization and investments in industrial parks, and building industrial chain and supporting industrial system in Africa. For example, Hisense family appliances park in South Africa, the cooperation outcome of CADFund and Hisense, has an annual production capacity of 560,000 televisions and 450,000 refrigerators. FAW's auto assembly plant in South Africahas an annual output of 5,000 trucks. Jacob Zuma, Former President of South Africa, described it as building “Detroit of South Africa”.
b. Infrastructure: CADFund invests in fields of port, aviation and power to help African countries improve their infrastructure and investment environment. For example, CADFund cooperates with the following companies on overseas infrastructure platform: China Gezhouba Group Overseas Investment Co., Ltd., China Civil Engineering Construction Corporation, China Telecom, China ENFI Engineering Co., Ltd., Changjing Survey, Planning, Design and Research Co., Ltd. and Jointo Energy Investment Co., Ltd. Hebei. CADFund and 6 large / medium-sized Chinese enterprises jointly established China Overseas Infrastructure Development and Investment Corporation (COIDIC). As the domestically first platform focusing on preliminary development of overseas infrastructure, COIDIC has a total equity size of USD 500 million and supports establishment of high-speed rail network, highway network, regional airlines network and industrialization in Africa. GCL-Poly solar farm project is a bid winner of the first round of energy development in South Africa, including 2 grid-connected solar farms. Each has a capacity of 75 megawatt, totaling 150 megawatts.
c. Natural resources: CADFund promotes cooperation on resources, upgrades supporting infrastructure and community development. For instance, the PMC project of HBIS Group controls over 1.3 million tons’ copper and 240 million tons’ magnetite in South Africa. CADFund has exited from this project. Jinchuan-Wesizwe platinum project (Wesizwe is a listed company in South Africa) controls about 450 tons’ platinum metals. This project has a construction period of 5 years. Once completed, it will produce 350,000 ounces’ platinum metals annually.