CDC INVESTMENT WORKS

CDC Group – Its Achievements and How it Helps Businesses

CDC Group is a Development Finance Institution that focuses on increasing capital flow in emerging markets, primarily Africa and South Asia. The objective is to help developing countries invest in financially viable projects that will help reduce poverty levels while improving their economic prospects. Developing countries have fragile markets and often rely on the support of Development Finance Institutions. 

This UK based investment company has been investing in developing countries for more than 70 years. So far, because of easy access to capital from CDC, businesses have benefited from the better cash flow, which has helped businesses to remain afloat even in a tough business environment. Although providing financing is the core foundation of the CDC, it also strives to support the fight against climate change and help developing countries meet the United Nations Sustainable Development Goals. 

CDC identifies and invests in sectors that are likely to cause an economic evolution through job creation. Sometimes some of these sectors are high risk, and would normally not be seen as a worthwhile investment by other investors. However, DFIs have highly skilled personnel who carry out a comprehensive assessment, including mitigating measures, which will help minimize losses and ensure the businesses that benefit from the investment are successful. 

The investment projects undertaken by CDC are usually long term, considering it takes years to realize the impact of some of the projects. Rather than focus on the outcome, CDC ensures it selects the right management teams and, at the same time, raise social, environmental and governance standards to guarantee success. 

Africa takes the greatest share of the CDC investments at 49%, followed by South Asia at 37%. CDC has other investments in the rest of the world, which is about 14% of its portfolio. Most of the investment has been on infrastructure and financial services at 23% and 24%, respectively. Health, real estate. Agriculture, Education, and Manufacturing are also sectors that have benefited from projects supported by CDC investments. 

How CDC Benefits from the Investments 

Although CDC is committed to improving the livelihoods of people in emerging economies, it is also a business that expects to see a return of its investment. A project is only considered a success if it improves the quality of life of the targeted population, and a financial return is realized. CDC Group follows specific steps that help the experts track the viability of the investment throughout the cycle. They include;

Research and provision of financial support to businesses. With adequate capital, businesses can increase their output and employ more people. For example, in 2017, CDC released an additional $690million to 338 and 715 businesses in South Asia and Africa, respectively. 
The businesses tapped are usually those that provide essential goods and services. Such goods and services have a high and quick return on investment because demand remains high irrespective of the season. For instance, the 2017 investment provided at least 46,000-gigawatt hours of electricity, which in turn supported approximately 1.3milllion jobs. 
These businesses support the local economy by increasing disposable income. They also pay taxes to support the functions of the government. With the increased tax collection, the government can then meet the socio-economic needs of the citizens. Businesses that got financing from CDC Group in 2017 paid about 3.5billion in taxes, both in South Asia and Africa. 
At the end of every year, businesses are also expected to make a return for the investment. Since 2012, of the investments made in Africa and South Asia, the CDC Group sees a return of about 7% annually. These funds are then reinvested. The asset value of the CDC clearly shows the profitability of the investments. In 2012, the asset value was about 2billion pounds. In 2017, the total assets had grown to 5.1billion pounds. 
 
Kigali International Financial Centre 

Rwanda has seen large scale investments recently, making it one of the most competitive markets in Africa. With a projected growth of about 8% in 2020, the pace is much faster than other countries in the region. In fact, for the past decade, Rwanda has had an annual average growth of 8.6%.

Additionally, in 2019, Rwanda was rated first in governance transparency in Africa by Transparency International. Therefore, it is not surprising that the CDC signed an agreement with Rwanda in June 2020 to financially support the development of this international financial Capital in Kigali. 

When complete, this enterprise is expected to be a world-class financial hub that will facilitate and encourage inward investment. It will also rapidly increase demand for skilled personnel and make finance an attractive course for students who are looking to advance their education with an increased likelihood of getting employed when they qualify for available job opportunities. This will e beneficial to Rwanda, East Africa, and indeed the rest of Africa. 

Having such a financial hub in Africa will help African nations avoid dependency on other international financial bodies. In addition to providing financial support, CDC will provide expertise to ensure a solid foundation is set for the legal and regulatory framework to ensure the project is a success.

With the right foundation, this financial hub will attract other investors, especially if it meets international norms and standards. Easy access to financial capital will help African countries quickly eradicate poverty and improve citizens’ quality of life. 

African countries have a high unemployment rate, yet the youth make up a significant portion of the population. This means Africa’s labor market fails to meet its potential because the youth are not productive at a period when they should be most productive.

Rwanda has been attracting a lot of investment because of its strict compliance framework that has set it apart from many African countries. Additionally, Rwanda contributed significantly to the creation of the African Continental Free Trade Agreement (AfCFTA), whose aim is to establish stronger African markets where countries in the continent trade with one another to encourage economic diversity. 

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MARIO GARCIA/ hello@mmnieto.com