US$ 1 Billion Belt & Road Africa Fund Launched

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The South African businessman Iqbal Surve is to head up a new Belt & Road Africa Fund, financed by China. The fund was officially launched at the annual World Economic Forum (WEF) Summer Davos Meeting, which is currently underway in Dalian. Surve is the Chairman of South Africa’s Sekunjalo Group, a VC firm that also owns a significant stake in South African media. He has also instigated the Belt & Road Africa Business Council, due to be launched in September, and was a past chairperson of the BRICS Business Council for South Africa. South Africa has signed off an MoU with China concerning the Belt & Road Initiative and is one of the equal partnership members of the BRICS grouping, along with Brazil, China, India and Russia.

The fund will focus on investments in Africa, which will include co-investments in infrastructure, technology, eCommerce, artificial intelligence (AI) and the beneficiation of the resource industry in Africa. Additionally, the fund will serve as a co-operation platform between business sectors in China and Africa.

Surve commented at the launch “The discussions that we’ve had with Chinese businesspeople, state-owned enterprises and family offices, have resulted in the establishment of this fund. Africa is ready to grow and is heading towards a $5 trillion economy. The Chinese have seen how China was able to grow from 1980 when China made up only 2 percent of GDP when compared to today, where China makes up 19 percent of the global GDP. This fund is a great boost for the development of Africa.”

The fund will announce the sectors in which it will make the investments as well as the format of these investments in September this year.

This is an interesting time to be involved in African trade as the continent has just agreed and implemented the African Continental Free Trade Agreement (AfCFTA) which has effectively abolished tariffs on 90% of all intra-African traded products, having a significant positive impact on both African businesses and international companies with subsidiaries there.

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The fund will also be of interest to African businesses whose countries have signed off a Double Tax Treaty with China. Such treaties often provide for lower tariffs on traded goods and can also assist with reducing profits tax via substituting it for withholding taxes at a lower rate. Such mechanisms need to be built into trade contracts before they are executed, and provided to the Chinese and African tax authorities. Professional assistance is recommended.

The introduction of the Belt & Road Africa Fund comes at a vital time for African-China trade. Volumes have increased by 30% the last two years and reached US$200 billion in 2018. The fund will help provide the infrastructure costs needed to further expand this trade figure. African companies and Governments may also refer to advice concerning handling Belt & Road project contracts in the article “Best Practice & Negotiating Issues When Handling Belt & Road Initiative Projects” in addition to advise over raising capital from China in the article “Sourcing Chinese Capital For Belt & Road Projects”

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