Sponsored

Cabo Verde – China Africa Development Fund

Cabo

Download the full whitepaper here.

As explained in earlier articles and a White Paper on Tourism Investment, Cabo Verde is becoming more interesting for both international visitors and tourism investors. As the number of visitors increases, in part as a result of cancellations in sun and sand destinations such as Turkey and Egypt, investors are sensing opportunities. At the end of May, investors from the China Africa Development visited Cabo Verde, presented the Fund and expressed interest in tourism projects.

map

Apparently, the Fund is seeking to ride a wave of interest in hotel expansions, which as explained in previous articles, increased by 84% from 5891 to 10,839 with the number of beds increasing by nearly 60% from 11,397 to 18,188 between 2010 and 2014. The Fund’s interest follows the July 2015 launching of the Macau Legend Development (MLD) company, which reached an agreement with the Government of Cabo Verde to develop a world-class integrated leisure, tourism and entertainment complex on Santiago Island.  For now, according to Cabo Verde Investimentos, Cabo Verde’s investment promotion agency, the Fund is exploring investment in part of the MLD project on Santa Maria Island, as well as other opportunities.

After a presentation by the Fund on Tuesday, May 31st in Praia, Júlio Morais, the President of CI – Agency Tourism and Cape Verde Investment, announced that the Fund is willing to fund a minimum of US$25-million worth projects in Cape Verde, mainly in tourism. The MLD project will require US$250 mn in investment. So, at this point, they really just appear to be “testing the waters” of tourism investment opportunities, although David Chow, CEO of MLD who participated in the meetings, said at a press conference that “[e]ven with the presence of China/Africa Development Fund, of investment in the tourism sector, I’m trying, together with the Prime Minister, to speed things up and make some facilities for the promotion of the tourism sector.”

cdbThe Fund is the private equity and venture capital investment arm of the China Development Bank, one of the main investment vehicles for Chinese Government investment in Africa, having already invested in 84 projects in 36 different countries amounting to US$3.2 billion, although nothing yet directly in tourism. It is a positive sign though that tourism is appearing on their “radar.” Prior to the Cabo Verde visit, the Fund delegation also visited the Seychelles to also explore tourism investment opportunities. David Chow’s investment in Cabo Verde could help encourage the Fund to invest more in the country’s tourism.

The Fund resulted from 2007 Beijing Summit of the Forum on China-Africa Cooperation. It aims to encourage and support private sector Chinese investments in Africa.  The Fund was expanded to a total of $10 billion in available capital at the Johannesburg FOCAC Summit in December, 2015. So far, most of their investments have focused on agriculture, infrastructure, manufacturing, industrial parks, and  extractive industries.  

2015forum



The Fund operates as an equity investment fund, which focuses on addressing inadequate infrastructure, lack of professional and skilled personnel, and funding shortages. It supports the acceleration of the industrialization and agricultural modernization, thus venturing into tourism development is a new area for the Fund. They select projects based on what is “strategically required, financially balanced, and developmentally sustained.” Aside from providing capital financing for companies to invest in Africa, the Fund also endeavors to link African projects with Chinese companies and Chinese partners with African companies and projects. 

Chinese investment has been flowing into Africa well beyond the Fund though. Following the December 2015 Forum, the Washington Post reported that as much as US$60 billion in investment was pledged for Africa. Most of the announced amount will come in loans and export credits. Only $5 billion is to arrive as grants and interest-free loans. In addition, the China Development Bank has $5 billion for the Special Loan for the Development of African SMEs.

 

What could this mean for Cabo Verde tourism?

cabo

If the official and private sector Chinese investment flow into Cabo Verde – as stimulated by the Fund and MLD – then there could be a much-needed reversal of the low level of FDI flows into the country in 2015. For 2015, the World Bank reported both a slowdown in economic growth and foreign direct investment despite tourism growth. With the multiple projects highlighted in the third article in this series and the Fund interest in Cabo Verde, although small at this point, these numbers are expected to be better in 2016.

The World Bank also approved a US$5 MN loan  to help create the conditions necessary to increase investment into and diversification of the tourism sector. The project will primarily support the strengthening of CI-ATIC, as well as other agencies involved in the tourism sector (Agency for the Development of Enterprises and Innovation [ADEI] and Central Tourism Authority). At the national level, the project will provide technical assistance and support to the MTIBD on policy development and monitoring and project coordination as well as in starting up the operations of CI-ATIC. The project will also benefit ADEI, in coordination with the Central Bank of Cabo Verde (Banco de Cabo Verde [BCV]) to implement business environment reforms, including the setup of an insolvency framework and facilitate the establishment of a movable collateral registry.

So, with increased interest in tourism development and investment from the World Bank, the China-Africa Development Fund, and private sector investors, Cabo Verde is increasingly well positioned as a sustainable destination for tourism investment and becoming an even stronger tourist destination.

- Scott Wayne, Tourism Investment Advisor to Questex

Boa Vista and Maio Islands Tourism Development Corporation – “Sociedade de Desenvolvimento Turístico das Ilhas da Boa Vista e Maio, SA” (SDTIBM) – is a limited liability company jointly owned by the State of Cabo Verde and the Municipalities of Boa Vista and Maio. SDTIBM manages and promotes private sector investment and sustainable tourism development in six tourism development zones (ZTE) on these islands. All ZTE land planning has been completed – an advantage for investors. SDTIBM sells land in stunning waterfront locations in the ZTE’s that is well served by local road and utilities networks. Over 90% of the ZTE land remains available for development with Maio almost completely undeveloped.

This article is brought to you by Cabo Verde, and was produced in partnership with HOTEL MANAGEMENT’s sales team. HOTEL MANAGEMENT’s editorial team played no part in developing the article.