13 January 2016
Atta Africa Financial Update
Key commercial and political activity in Africa for private equity investors by DCE Partners, UK Private Equity advisors to Atta.
Executive summary: China's US$60bn Africa commitment.
2015 was a notable year for African-Chinese relations and diplomacy. Officials crossed the Indian Ocean in both directions holding meetings in both; several important memorandums were inked; bilateral agreements were concluded. The culmination was the Johannesburg hosted Forum on China-Africa Cooperation (FOCAC) which brought together delegations from 50 African countries and China.
Since the FOCAC, China’s President Xi Jinping has pledged US$60 billion to African states - most of which is in the form of loans and export credits, only US$5 billion is to arrive as grants and interest-free loans. It is important to note that Chinese aid differs from OECD-defined official development assistance and is often tangled with other financial commitments.
At this stage, US$35 billion will go towards preferential loans, export credits, and concessional loans; US$5 billion will go to the China-Africa Development Fund (a private equity and venture capital investment arm of the China Development Bank); and $5 billion for the Special Loan for the Development of African SMEs. The balance to be used for similar projects.
This is a significant carrot that China is dangling in front of African leaders - allocations will very much depend on bilateral relations between China and individual African countries - African state leaders and other stakeholders will be competing for these sums of money.
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