West Africa to get tech injection from private equity fund

Published Dec 3, 2013

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Johannesburg - Convergence Partners Investments, a South African private equity company focused on technology, plans to invest part of its $250 million (R2.5 billion) fund for telecommunications infrastructure in Nigeria and across west Africa.

“The rapid deployment of infrastructure is required and the operator community is not going to be able to absorb that growth themselves,” chief executive Brandon Doyle said in an interview last week.

“Our preference is to build infrastructure that will serve operators on a wholesale basis, rather than compete with them,” Doyle said.

The fund expects to reach $250m by the end of next year after raising $145m at its start on November 27, with investments from, among others, the Development Bank of Southern Africa.

It planned to spend at least a third of the fund in west Africa, Doyle said, with the biggest slice of the regional investment going to Nigeria.

Convergence Partners holds a 12.5 percent stake in Seacom’s project to develop an undersea telecommunications cable to link South Africa and east Africa with Europe and India, and has invested in Dimension Data, South Africa’s largest technology services provider.

Bandwidth capacity in the region has grown in the past four years with the addition of three international submarine fibre connections to the one that existed before 2010.

Nigeria’s bandwidth has increased about 26-fold to more than 9 000 gigabytes a second, according to data provided by the Communications Ministry.

A lot of that remains stranded in the cities and the country lacks the infrastructure to distribute it.

“We realise that the bottleneck is” how to connect Nigeria’s major cities in order to distribute the international bandwidth that landed in Lagos, Boyle said.

Nigeria represents Africa’s biggest cellphone market, with 118.5 million subscribers in September, according to the Nigerian Communications Commission. The government wants 20 percent of its population of more than 160 million to have broadband access by 2018 – from the current 4 percent.

Doyle plans to open Convergence Partners offices in Lagos and Nairobi to oversee the new investments, which will typically range between $5m and $40m each.

Investments in the $250m fund have come from the International Finance Corporation, the European Investment Bank, the Dutch Development Bank, the Development Bank of Southern Africa and the UK’s CDC Group. – Bloomberg

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