Convergence Partners, a South African investment firm, has launched a fund that will scout for information and communications (ICT) deal opportunities in Sub-Saharan Africa.
Described by the firm as the only infrastructure fund solely focused on these sectors, the vehicle has a target of $250 million.
“Based on World Bank data, we estimate that there is an ICT infrastructure deficit of $20 billion a year in Africa. The evolution of the ICT landscape, with its increasing focus on shared, open access models, provides significant investment opportunity for a specialised infrastructure fund,” commented Andile Ngcaba, chairman of Convergence Partners, in a statement.
Having reached a first close on $145 million, the vehicle already counts among the largest Africa-based infrastructure funds. Its cornerstone investors include the International Finance Corporation (IFC), the European Investment Bank (EIB), the Dutch Development Bank (FMO), the Development Bank of Southern Africa (DBSA) and CDC Group.
The firm hopes the capital it deploys will help plug the ICT infrastructure gap in Africa, which is growing on the back of increased use of internet and mobile services. Consultancy McKinsey estimates that the need for related products and services could add around $300 billion a year to the continent’s gross domestic product (GDP) by 2025.
Founded in 2006, Convergence is not new to the sector. Its flagship deals include SEACOM, the first undersea fibre system serving East Africa; New Dawn, Africa’s first private sector communications satellite; and FibreCo Telecommunications, the first independent national fibre network in South Africa.
Africa has witnessed a peak in investor interest over the last couple of years, the result of fast-paced economic growth across much of the continent, a weakening deal flow in core infrastructure markets, renewed DFI commitment to boost private investment and the emergence of local fund managers.
Last week, South Africa-based Harith General Partners paid $1.2 billion for debt provider Frontier Markets Fund Managers from a cluster of public and private institutions. This followed news that the Africa 50 Fund, an infrastructure-focused vehicle backed by the Africa Development Bank (AfDB) and Made in Africa Foundation (MIAF), a British NGO, is already halfway to its $500 million target.
Telecoms have themselves grabbed the interest of a growing number of investors, with Emerging Capital Partners successfully completing a $1 billion financing round for its Nigerian telecom towers IHS Holdings in July. This included a $242 million capital injection by Paris-listed Wendel, a first-time investor on the African continent.