Martin Kadzere Senior Business Reporter
THE China-Africa Development Fund, China’s largest private equity fund focusing on African investments, has moved to buy a significant shareholding in Cottco Holdings Ltd through its wholly-owned subsidiary China-Africa Cotton.
According to sources, terms of the negotiations between the fund and Cottco, have been agreed on, although they are still in the early stages.
“The terms for kick-starting the negotiations have been agreed on and Cottco, by nature of its listing status has already advised shareholders to that effect,” said one source.
“But at the moment, there isn’t much as the talks are still at early stages.”
On June 5, Cottco advised shareholders that it was in negotiations which, if successfully concluded, “will have a significant impact on its operations and share price”.
Cottco chief executive Mr Collins Chihuri said since the company issued a cautionary statement, he was not authorised to publicly disclose the nature of the transaction.
A director at CADFund, a Mr Chakanyuka said “probably the deal is happening at a shareholders’ level.”
Following the unbundling in February this year, Cottco replaced AICO Africa Holdings listing on the Zimbabwe Stocks Exchange.
Before the unbundling, AICO owned 100 percent in Cottco, 49 percent in Olivine Industries, a fast moving consumers goods company and 51 percent in Seed Co, a ZSE- listed firm.
The National Social Security Authority is the major shareholder in Cottco with 22,2 percent, Stanbic Nominees owns 20,2 percent, while Old Mutual has 13,7 percent.
Cottco is the largest cotton company in Zimbabwe, supporting more than 200 000 small-scale farmers.
The fund’s primary objective is to serve Sino-African trade co-operation through market-based mechanisms by reducing risk to Chinese investors in Africa. The fund does this by providing bridging finance, financial advice, Africa specific managerial advice, and identifies potential investment opportunities, according to Wikipedia.
It helps African projects find suitable Chinese investment partners while aiming at investing in low risk projects which provide sustained and consistent returns over a long period.
This is partly done with the objective of helping Chinese firms operating in Africa to expand their market share, get closer to consumers, or secure natural resources. In Zimbabwe, it started operations last year as a registered cotton merchant.
The fund was established in June 2007 with $1 billion of the initial funding by the China Development Bank and is envisioned to grow to $5 billion in the future. The fund entered into its second round of fund-raising in May 2010 to raise about $2 billion.
As of 2010, the fund had invested in 30 projects in Africa worth around $800 million.
In 2009 alone, the fund invested $140 million of China’s total $1,3 billion invested in Africa.