Deepen quality investment co-operation for China-Africa community with shared future in new era
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By Song Lei
In a few days, another Ministerial Conference of the Forum on China-Africa Co-operation (Focac) will be held in Senegal. Under the theme of “Deepening China-Africa Partnership and Promoting Sustainable Development to Build a China-Africa Community with a Shared Future in the New Era”, the conference will chart the course for China-Africa co-operation for the next three years and more to come. Direction will also be given for China-Africa investment co-operation.
China-Africa Development Fund (CADFund), an outcome of Focac, has been focusing on investing in Africa for 14 years, promoting sustainable development in Africa and the upgrading and transformation of China-Africa business cooperation in ways compatible with market operations.
Under the new circumstances, the Fund will follow the guidance of the upcoming conference and play a more effective role as an investment platform. The Fund is ready to respond more precisely to Africa’s needs and make more robust efforts in boosting the high-quality China-Africa co-operation under the Belt and Road Initiative.
Investment co-operation injects strong impetus into China-Africa partnership in the new era
Over the past 20 years, Focac has been driving infrastructure development, industrialisation, and capacity-building for sustainable development across Africa. As a result, Africa’s potential in natural resources, demography, and development has been partly unlocked; the challenges of capital gaps, weak infrastructure, and human resources addressed to some extent; and the process of developing a common market and integration accelerated.
One focus of African countries in enhancing their capacity for home-based growth has been to attract foreign direct investment (FDI) to set up profitable companies and commercially viable programs, which in turn boost local job creation, exports, fiscal revenues and industrial upgrading.
Following China’s policy of upholding sincerity, real results, affinity and good faith, which was put forward by President Xi Jinping, in carrying out co-operation with Africa and in implementing the “10 major co-operation plans” and “eight major initiatives” of Focac, investment has emerged as an important format in China-Africa business co-operation, drawing significant attention from governments, companies, and investment and financing institutions from both sides.
A large number of Chinese companies are transitioning from “entering Africa” to “growing in Africa”; bilateral business co-operation is shifting faster away from trade and engineering contracting to investment and the integration of investment, construction, and operation. According to the Chinese Ministry of Commerce, there are more than 3 500 Chinese companies investing in Africa.
Chinese investments in Africa have been on an upward trajectory from 2007 to 2019, reaching $5.4 billion (R88bn) at the highest point. The stock of Chinese investment has been increasing by the year at an average rate of 21 percent. By the end of 2019, Chinese FDI in Africa had reached $44.3bn, moving up to the fourth place among all FDI sources for Africa. There remains great potential for further growth.
In 2020, with the outbreak of Covid-19 and a slump in commodity prices, foreign investment in Africa fell by 15.6 percent year on year. But China has been fighting side by side with Africa to stem the health crisis and push forward co-operation, especially investment in Africa, against the headwinds. China and Africa jointly held the Extraordinary China-Africa Summit on Solidarity Against Covid-19; all stakeholders worked together to implement the “eight major initiatives” of the 2018 Focac Beijing Summit, with a special focus on healthcare, economic reopening, and the improvement of livelihood, kick-starting a considerable number of projects in Africa. According to the latest statistics released by the Chinese Ministry of Commerce, Africa received $4.23bn Chinese FDI in 2020, up by 56.1 percent year on year. Amid the shrinking global investment in Africa, this figure speaks volumes about the vigour of China-Africa investment co-operation, which is a strong force for China-Africa co-operation in general.
CADFund works hard on Africa’s sustainable development for 14 years
The establishment of CADFund is one of the important measures of the Focac Beijing Summit in 2006, with the aim of encouraging and supporting Chinese enterprises in investing in Africa.
At the 2015 Johannesburg Summit, Chinese President Xi Jinping announced the decision to increase its capital by $5bn to a total of $10bn. As China’s first equity fund investing specifically in Africa, it consistently follows the China’s policy to co-operation with Africa, stays close to Africa’s development needs, follows market principles, and seeks to fill in the funding gaps for China-Africa co-operation programs through direct investment. It has been able to bring Chinese capital, technology, standards, production capacity and managerial experience to Africa, share development opportunities with Africa, and generate local jobs, exports and tax revenues for Africa, thereby realising the goals of mutual benefit and common progress. The Fund has had a good demonstration effect on the joint endeavour of China and Africa to build the Belt and Road and a community with a shared future.
CADFund has committed nearly $6bn for investment in 37 African countries, driving a total investment of more than $27bn from Chinese enterprises. These projects are in the areas of infrastructure, manufacturing, agriculture, and livelihood. The results are convenient and efficient infrastructure in power supply and transport, quality products and technological support, and greater agricultural modernisation and food security. Their direct beneficiaries include millions of ordinary Africans.
While promoting the sustainable growth of local economies, CADFund is also serious about responsible investment, observing ESG standards, and honouring its social responsibilities, which brought about amicable relations with local communities. For example, the Hisense appliance industrial park project in South Africa with CADFund investment, which has been producing locally a large number of energy efficient refrigerators and smart home appliances since 2013, is also a party to the security design of South Africa’s Kruger National Park thanks to its smart technologies, contributing to the conservation of biodiversity in the area.
In Ghana, the Fund invested in a power plant which has been operating smoothly for 10 years in the country, meeting 15 percent of its total power demand with natural gas as the source of power generation. The sisal planting project in Tanzania not only improves sisal growing and processing, but also contributes to poverty reduction by running a poverty alleviation program in the host village. The Mali Humanwell Pharmaceutical project pressed on with production against the odds of instability and the pandemic, providing strong support for the steady supply of basic drugs in a number of countries in west Africa.
Since the onset of the pandemic, CADFund, following the guidance of the Extraordinary China-Africa Summit on Solidarity Against Covid-19, responded to Africa’s needs with its investment resources, helping Africa to fight the pandemic, reopen the most important sectors of the economy, and steady the industrial and supply chains.
Many projects the Fund invested in joined in the fight: Wesizwe Platinum in South Africa and Chery Automobile donated funds and supplies to their local communities. At the request of the host government, Africa World Airlines (AWA) in Ghana successfully brought overseas Ghanaians home despite the challenges of lockdowns in many African countries and strict aviation controls. The agricultural park in Mozambique and power plant in Ghana ensured uninterrupted production to steady food and power supply for local residents.
While contributing to the fight against the pandemic, CADFund looked for new ways to overcome the impact of the pandemic. In light of Africa’s needs on the ground and developments in digitalisation, it expedited appraisals and approvals of a number of priority projects in agriculture, pharmaceuticals, construction materials, and ICT, which led to an increase in Chinese investment in Africa despite the challenging environment. Together with China Telecom, the Fund invested in the development of digital infrastructure in Africa, growing the digital economy and building new infrastructures which benefit Africans through online education and enhanced community connectivity. The Fund co-invested with China Huaxin Cement Company in upgrading the local cement manufacturing capacity, adopting the latest equipment and technologies for environmental protection and green production, which demonstrates its commitment to tackling climate change.
Quality investment promotes transformation and upgrading of China-Africa business co-operation in the new era
In a world that is witnessing profound changes, fragile global industrial and supply chains, travel restrictions, and social instabilities and debt risks in some parts of Africa, considerable risks threaten investment in Africa. Yet at the same time, Africa enjoys many advantages, such as the unleashing of potential from urbanisation and industrialisation, young populations, market demand, and accelerated regional integration.
Globally, a new round of technological revolution and industrial transformation is picking up pace and international consensus is growing on coping with climate change. In this context, China puts forward the policy of establishing a new development paradigm, which mandates opening up on a higher level. This will create more market, investment and growth opportunities for China’s international partners, including Africa. China and Africa will find new joint programs to work on in the conventional and emerging sectors of the economy.
Anti-pandemic co-operation and economic reopening. With the pandemic still ravaging the world, accelerating recovery and protecting livelihoods tops Africa’s agenda. CADFund will step up investment and financing where it is most needed, such as agriculture, healthcare, and industrial and supply chains, to help Africa counter the pandemic and resuscitate the economy. CADFund will also contribute to stronger local capacity for inspection and quarantine and vaccine manufacturing and support livelihood programs.
Faster development of infrastructure and industrialisation. Some estimate that Africa will need an annual average of $600bn of development finance to realise full development. With the African Continental Free Trade Area up and running, Africa needs greater infrastructure connectivity, which translates into huge demand for power grids and networks of transport, information, and logistics. Africa also needs stronger production capacity to meet with the need for intra-Africa trade and exports. CADFund will invest in the construction of modern infrastructure, encourage the integrated model of “investment, construction, and operation”, deepen production capacity co-operation, promote industrial upgrading, and extend agri-value chains to facilitate Africa’s infrastructure connectivity and industrialisation.
Development of ICT and digital economy. Africa has the fastest growing numbers of mobile subscriptions. According to the calculations of the Global System for Mobile Communications Association, sub-Saharan Africa had 477 million mobile subscriptions by the end of 2019, accounting for 45 percent of the total population. By 2025, the figure will top 600 million. Under the China-Africa Partnership Plan on Digital Innovation, CADFund will invest more in Africa’s backbone telecom network and submarine communication cables and promote co-operation in digital infrastructure, digital economy, and online education to help Africa seize the opportunities arising from digitalisation and the use of ICTs. This will help African economies spread their wings and truly take off.
Green and low-carbon development. CADFund will act on the principles of green, low-carbon and responsible investment, better enforce the ESG standards, and direct more resources towards new energy, green and low-carbon technologies. It will work towards building an industrial system that is both good for the environment and meets Africa’s development needs in order to help Africa grow in a green and sustainable way and contribute to the global response to climate change.
Innovation in models of investment and financing co-operation. With the launch of AfCFTA, which is believed to unlock Africa’s market potential, leading economies such as the US and the EU are all increasing their input in Africa. Drawing on its strength in pooling financial resources and ideas, the Fund will explore the possibilities of multi-dimensional, multi-layered joint investment and tripartite co-operation with international institutions and private investors so as to bring together more resources for Africa’s growth and bring about more favourable changes in China-Africa business co-operation.
At the Extraordinary China-Africa Summit on Solidarity Against Covid-19, Chinese President Xi Jinping made this observation, “Given the new opportunities and challenges we face, closer co-operation between China and Africa is needed, more than ever.” Looking to the future, CADFund will follow closely President Xi’s policy instructions on co-operation with Africa and support, serve, and encourage Chinese business investment in Africa in a way that is aligned with the development needs of China and Africa in the new era. The Fund will innovate its approach to facilitate practical, sustainable, and quality co-operation between the two sides to contribute to the development of a China-Africa community with a shared future.
Song Lei is the chairman of China-Africa Development Fund.