Bloomberg News

China-Africa Fund Finds Investing Harder Than Expected, CEO Says

December 06, 2011

Dec. 6 (Bloomberg) -- The China-Africa Development Fund has found investing in the African continent more difficult than expected after committing almost all its first $1 billion, Chief Executive Officer Chi Jianxin said in an interview.

The state-owned private equity fund, which began in June 2007, has not been able to exit any of its investments to realize a profit, Chi said yesterday in Beijing. It is still seeking a “beneficial result” in the long term, he said.

“When we started, we didn’t have investing experience in Africa, and we hoped to have a quite good profit in three to five years so we could exit investments,” said Chi, who first visited Africa in September 2007 after becoming chief executive. “But we’ve seen it’s not so easy as that.”

The fund may consider future investments in building materials, infrastructure, mining and agriculture, Chi said. China is Africa’s largest trading partner and has signed agreements worth billions of dollars with African governments, seeking natural resources to feed its economic growth in exchange for building roads and railways, and nurturing a market for its products.

The fund, China’s largest African private-equity investment vehicle, hopes to raise money in the market in the future, Chi said. It plans to get its next $2 billion from parent China Development Bank Corp., he said.

“High Risks”

“We very much hope that in the future we can raise money from the market but from the current situation, because African investment is long-term and has high risks, that is difficult,” Chi said.

Chinese President Hu Jintao announced the fund at a meeting of China and African leaders in 2006 with a target of $5 billion. The Beijing-based fund has helped Chinese companies build a power plant in Ghana, a port in Nigeria and cotton farms in Malawi and Mozambique. It does not take controlling stakes in projects.

Trade between China and Africa rose an average of 28 percent a year between 2001 and 2010, the Ministry of Commerce said last month.

Chi said the next $2 billion of funding will probably be completed by the next Forum on China-Africa Cooperation, which should be held before the end of 2012.

“From a point of view of a money manager, the more simple the funding, the better,” Chi said. “We think CDB investment is the simplest.”

The fund generates enough cash flow to maintain its operations and has made a small profit so far, Chi said. The Chinese government doesn’t interfere with the decisions of the fund, he said.

The fund opened its first West African office on Nov. 11 in Ghana, its fourth regional site in Africa. It has offices in South Africa, Ethiopia and Zambia.

Beijing-based China Development Bank has lent $7 billion to more than 30 countries in Africa, Wang Yuan, the bank’s chief economist, said Nov. 5.

--Henry Sanderson, Michael Forsythe. Editors: Nicholas Wadhams, Peter Hirschberg

To contact Bloomberg News staff for this story: Henry Sanderson in Beijing at hsanderson@bloomberg.net; Michael Forsythe in Beijing at mforsythe@bloomberg.net

To contact the editors responsible for this story: Shelley Smith at ssmith118@bloomberg.net; Peter Hirschberg at phirschberg@bloomberg.net


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