Botswana: Chinese equity firm eye Mmamabula

BEIJING: The China-Africa Development Fund (CADF) says it is keeping a close watch on developments at the Mmamabula Energy Project (MEP) with a view to snapping up a stake.

Speaking to Mmegi here on the sidelines of a briefing of African journalists, the Assistant Manager in the Fund’s Southern Africa Investment department, Liu Xiaolei, said they have held talks with CIC Energy in the past and that though nothing has materialised yet, they are still hoping to come on board before financial closure in the lucrative project.

“Initially, we were interested in the Morupule B Power Project in Botswana, but we are told the government was only interested in debt facilities and not equity investment,” Liu said. “We have since engaged the promoters of Mmamabula, CIC Energy, and learnt that they are facing some difficulties. We see it as an opportunity for us to get involved in the project should they fail to reach financial closure within the stipulated time.”

CIC Energy recently announced that they were yet to raise the project money while South Africa’s Eskom was compounding their problems by declining to sign a Purchasing Power Agreement that CIC desperately needs for the project to take off.

With a large purse of $5 billion, CADF has released only $100 million to 20 approved projects across Africa since its inception in 2007. Created by China at the Forum on China-Africa Co-operation in 2006, CADF is the first Chinese equity development fund to assist African companies with equity investment, fund investment, quasi-equity and consulting services.

Its Chief Investment Officer, Wang Yong, has encouraged African firms and governments to make full use of the facility. “Although the fund has no limitation or target industries, it mainly focuses on agricultural projects, manufacturing, resource development and it ranges usually between 5 to 8 years for a single project,” Wang said.

In the past two years, $500 million has been committed on 20 projects, although just $100 million has been released so far. The 20 projects are worth an additional $2 billion in the form of Foreign Direct Investment by Chinese firms,” said Wang. CADF, which is a subsidiary of the China Development Bank, has already opened offices in Johannesburg and has over 40 working teams in Africa.

Projects the Fund has carried out in Africa include a four-star hotel and a glass factory in Ethiopia, the Ghana Power Station which was officially opened in April 2008, real estate projects in Sierra Leone, and contract farming and processing projects in Zambia, Malawi and Mozambique.

“Although the Fund was put in place to strengthen our economic cooperation, we still face some challenges in Africa,” said Wang. “It is usually difficult to find a suitable project to invest in, and I believe this is probably because of lack of information. In this regard, we have our working teams in many countries across Africa as we seek to know what local governments want us to do in priority areas.”

Another problem Wang cited as a hindrance to investment in Africa is lack of infrastructure in most African countries. “It is very difficult for us to have to develop infrastructure first and then profitably carry out a project,” he explained.

Mmegi Online

Post published in: Economy

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