UK Government lays out new targets for CDC

The development-focused fund of funds has received a revised investment remit from its shareholder the UK Government, which will redirect investment from China and Latin America to Sub-Saharan Africa.

CDC, which invests around $1 billion in emerging markets-focused funds annually, will increase its investment into Sub-Saharan Africa following a Government review of its investment guidelines.

The new guidelines from the Department for International Development (DFID) require at least half of the fund of funds’ investments to be directed to Sub-Saharan Africa. Previously the fund could divide this 50 percent between Sub-Saharan and South Asia.

Furthermore, the new guidelines sharpen CDC’s focus on the poorest nations. Formerly the fund invested up to 70 percent in countries with a lower gross national income (GNI) per head than $1750. This has been altered to an allocation of 75 percent to countries with per capita GNI of $905 or less.

One upshot of the revised guidelines will be a reduced exposure to Latin American nations and China.

In related news, Richard Gillingwater, the Dean of Cass Business School in London, has been appointed as chairman of CDC, succeeding Sir Malcolm Williamson.

CDC initially announced a strategy shift in July, after the organisation had faced criticism that it had become too commercially focused. A radio programme broadcast by the BBC pointed to the group’s use of UK tax payers’ money to back a Nigerian shopping centre as an example of a project only likely to benefit the country’s affluent.

Further to the revised remit, CDC has committed $210 million to five new African funds: $100 million to ECP Africa Fund III; $75 million to Aureos’ Africa Fund; $15 million to the Atlantic Coast Regional Fund; $75 million to African Lion Fund III; and a $5 million direct co-investment alongside Africa Lion Fund III in mining company Copperbelt Minerals for exploration and development in Congo and Zambia.

With $1.9 billion invested in sub-Saharan Africa, CDC is the region’s largest private equity investor.