Convergence Partners launches $500m ICT fund
Convergence Partners is launching a $500 million African fund to invest in information and communication technology, with an initial $35 million equity investment by the International Finance Corp (IFC), a unit of the World Bank.
The first close of an initial $120-$130 million of the Convergence Partners Communications Infrastructure Fund is expected within two months, Andile Ngcaba, chairman of the investment group, told Reuters on Tuesday.
Information and communication technology growth has been dynamic when compared to other forms of infrastructure across the fast-growing continent but is still a bottleneck for private sector development, according to the IFC.
“Things are rolling nicely. … We’re almost there,” Ngcaba said, adding Convergence had been in talks with development finance institutions and banks in the last two years for the fund.
The European Investment Bank lists the Fund on its website as a project under appraisal for a $25 million equity injection.
Ngcaba said most of the investment would be in companies working on next-generation infrastructure projects to provide high-volume data services.
He said exit would not be difficult given the high investment interest in Africa.
“The nature of M&A activity we see is quite dynamic. One does not even see a 10-year horizon in some of them, to be honest with you,” Ngcaba said.
Johannesburg-based Convergence has a deal pipeline of $2 billion and has already invested in about 20 telecommunications, media and technology sector firms in Africa through its “Portfolio I” fund.
The IFC is expecting a return of at least 25 percent from its investment, said Saleem Karimjee, a senior manager for the Southern Africa region.
The institution, which invests in developing the private sector in emerging economies, provides loans, equity investments and advisory services to companies.
“There is still huge gain to be made. Through helping private ICT to blossom, we can unlock much greater private sector development than has already occurred. For us, it is a no-brainer,” Karimjee said.
The IFC expects to invest $3.5 billion in sub-Saharan Africa in the fiscal year ending this month, he said.
It made a 170 million rand ($20.18 million) equity investment in South African financial services company Assupol this month.
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