Ngcaba looks north with new R4,2bn fund

Convergence Partners has secured $35m from the International Finance Corporation, with more funding agreements expected to be signed in the coming weeks. By Duncan McLeod.

Convergence Partners, a telecommunications investment vehicle controlled by Dimension Data Africa chairman Andile Ngcaba, has secured US$35m in equity investment from the International Finance Corporation (IFC) for a new communications infrastructure fund.

It will use the fund, which it expects will grow to $500m (R4,2bn at the prevailing exchange rate) within 18 months, to invest in telecommunications infrastructure projects and businesses across sub-Saharan Africa. The company plans to open regional offices in Kenya in East Africa and in either Nigeria or Ghana in West Africa.

Ngcaba tells TechCentral that the investment focus will be on wholesale open-access networks, using wireless, fibre and satellite technologies. There are plans to establish teleports, data centres and similar facilities.

Convergence Partners expects the “first closing” of the fund to happen in the next six to eight weeks, once it has raised at least $120m. It will continue raising investment money for the next 12-18 months until it reaches its target of $500m. Convergence Partners itself is investing $30m into the new fund using cash it has available on its balance sheet rather than raising new debt.

Ngcaba says there is no shortage of potential investments for the fund and the company has a “pipeline” of $2bn in opportunities that Convergence Partners has identified. About 80% of the money raised in the new fund will be spent in Africa outside SA.

Convergence Partners already has a range of investments, including in FibreCo, which is building a national fibre backbone network with Cell C and Didata’s Internet Solutions, and Seacom, the undersea cable along Africa’s east coast. Other investments include the New Dawn Satellite Co and software development house Britehouse.

The IFC, which is a member of the World Bank Group, says its $35m investment into the fund will be used to build infrastructure across Africa, especially broadband networks.

“The fund aims to develop and invest in new wholesale, open-access networks and related services,” the IFC says.

“It is expected to play an important developmental role in Africa, where information and communications technology infrastructure bottlenecks impede the growth of business and companies lack access to finance, especially risk capital and related expertise from investors that can help businesses succeed,” it says.

The fund will include other investors, including local and international development finance institutions and banks.

Convergence Partners CEO Brandon Doyle says the company already has further verbal commitments from other investors, with these agreements expected to be signed in the coming weeks.

He says the fund is a 12-year vehicle, longer than most private equity funds, but this is necessary given the long lead times associated with the big telecoms infrastructure projects that the fund will invest in.  — (c) 2012 NewsCentral Media