London-listed financial firm agrees Africa partnership

London-listed asset management company Investec has signed an agreement with China Africa Development Fund in Changsha, known as CAD Fund, to co-invest into projects in Africa.

The news, announced on Thursday, makes Investec the first private sector company to sign such an agreement with CAD Fund, and is a major statement of confidence in the financial returns of infrastructure and other projects in Africa.

It comes days after the Forum on China-Africa Cooperation in Beijing earlier this week, during which China's President Xi Jinping announced a $60 billion funding package to aid Africa's development.

John Green, deputy CEO of Investec Asset Management, said the agreement is "a concrete example of how the private sector can collaborate in helping to drive productive investment into Africa.

"Outcomes (of the investments) include not only furthering China-Africa trade cooperation, cross border capital flow and the development of the continent’s economy, but also the creation of positive social outcomes," said Green.

Zhou Chao, vice-president of CAD Fund, said the new partnership highlights the "huge potential" for investments in Africa. "We are optimistic about being able to effectively identify project opportunities that are of common interest," he said.

CAD Fund was set up by China in 2007 to focus on investment in Africa, and is funded by policy bank China Development Bank. So far it has invested a total of $4.5 billion in 91 projects in 36 countries.

But such public sector investments are insufficient compared to Africa’s total financing needs, highlighting the important role private sector investors such as Investec can play.

According to the latest estimate by Global Infrastructure Hub, a G20 Group initiative, a total investment of $2 trillion between 2018 and 2040 is needed to meet Africa's growth demands. At the current investment trajectory, Africa could experience a 40 percent shortfall in the necessary funding.

No specific co-investment projects between Investec and CAD Fund have been announced yet, but key areas of focus include agriculture, infrastructure and manufacturing.

Green added that Investec believes its investments' return will also "benefit from the impact of China's Belt and Road Initiative on Africa's growth and the investment opportunities it creates".

The China-proposed Belt and Road Initiative seeks to strengthen global connectivity and development through infrastructure investment. Although many such projects are physically located in developing countries, London's asset managers and professional services companies are increasingly providing funding and other support to Belt and Road projects.

Investec's collaboration with CAD Fund is the latest example. Previously, Standard Chartered Bank said it will provide at least $20 billion of finance for Belt and Road projects by 2020.

British legal firm Linklaters has given legal advice to more than 40 Belt and Road deals while Herbert Smith Freehills has advised Belt and Road projects in more than 30 countries.

"This partnership (between Investec and the CAD Fund) is yet another example of the global reach of the UK's financial services sector, and the growing opportunities for UK and China to work together," said John Glen, the UK’s economic secretary to the treasury.