2014 sees total return of £420m while CDC-backed businesses in Africa and Asia create nearly 1.3 million new jobs
CDC Group plc, the UK’s government-owned development finance institution, has today announced its 2014 annual results. The organisation, which invests to support the growth of businesses and create jobs in developing countries in Africa and South Asia, made 19 new investment commitments totalling £296.5m and reported a total return after tax of £420.2m (2013: £117.3m). New analysis also showed that CDC-backed businesses contributed to the creation of nearly 1.3 million new direct and indirect jobs in 2014.
The new findings show that businesses in CDC’s Africa and South Asia portfolio directly employed 533,000 workers and were responsible for a further 10.8 million people when indirect employment effects, such as their supply chains, wages and increased access to power and financial services were taken into account.
2014 saw the value of the businesses in CDC’s portfolio grow, with total assets rising from £2,948m in 2013 to £3,369m in 2014. This growth allows CDC to continue to support and make new investments in new businesses.
CDC’s 19 new investments last year (including fund commitments) covered a variety of job-creating sectors in some of the world’s most challenging places. They included a 335MW electricity plant in Bangladesh, a partnership to help develop transport infrastructure across sub-Saharan Africa, and a pioneering deal (established within weeks alongside Standard Chartered) bringing critically-needed working capital to companies in Sierra Leone during the Ebola crisis.
Since 2012, CDC has evolved from providing capital solely through funds managed by third-party managers to offering a wider range of capital including the direct provision of debt and equity finance. Of the 19 new commitments made in 2014, 13 were direct equity or direct debt. CDC also changed its geographical focus in 2012, now only investing in Africa and South Asia. The 2014 results show that 70% of CDC’s portfolio is in Africa and South Asia and this will grow to 100% over the next few years.
CDC targets a number of priority sectors, selected because of their greater capacity to create jobs. These seven sectors are agribusiness; construction; financial institutions; infrastructure; manufacturing; health and education. 85% of CDC’s new capital for Africa and South Asia in 2014 was invested in businesses in these priority sectors (2012: 53%).
OTHER KEY FIGURES FROM 2014 RESULTS
- The companies in CDC’s Africa and South Asia portfolio paid tax worth US$2.34bn to local governments. Maximising local tax paid is another key objective of CDC’s investment strategy.
- CDC mobilized almost US$250 million of third party private sector capital into funds it backed in 2014 alongside the US$132million it committed from its own resources.
- CDC has 1331 companies in its portfolio across 74 countries. This is made up of investments in 164 funds, managed by 89 different fund managers, and 29 direct investments.
- CDC’s annual investment rate varies with the quality of proposals reviewed during the period and the average size of opportunities. The investment rate in 2014 at £296.5m was relatively low in relation to £608m during 2013; the latter is expected to be closer to the average in future years.
The CDC portfolio generated £450.9m of profit (2013: £140.9m). This represents a portfolio return of 18.0% (2013: 6.3%, 2012: 13.1%). However, the US dollar return (which reflects the denomination of most of the portfolio) was 11.4% (2013: 7.5%). Because CDC is a long term investor with returns often generated over 10 years or more, virtually all of the 2014 return reflects investment decisions taken prior to 2012, before the introduction of CDC’s new strategy. In particular, increases in value in CDC’s historic Chinese portfolio, as well as infrastructure investments in South America and Africa drove the 2014 results, in addition to exceptional currency gains. The financial return on CDC’s investments since the new strategy in 2012 has been 2.7% in US$.
CDC’s new job creation methodology will be reviewed and enhanced over time and will be published shortly to encourage debate and input. Full details of CDC’s development impact can be found on pages 54-59 in the CDC Annual Review, available to download here (PDF, 11MB).
Full financial results can be found in full in the CDC Group plc Annual and Accounts,