South Africa’s Convergence Targets West Africa Fiber Deals

Convergence Partners Investments Ltd., a South African private-equity company focused on technology, plans to invest part of its $250 million fund for telecommunications infrastructure in Nigeria and 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 Officer Brandon Doyle said in a Nov. 28 phone interview from Johannesburg. “Our preference is to build infrastructure that will serve operators on a wholesale basis, rather than compete with them.”

The fund expects to reach $250 million by the end of next year after raising $145 million at its start on Nov. 27, with investments from the International Finance Corporate, the European Investment Bank, the Dutch Development Bank, the Development Bank of Southern Africa and U.K.-owned CDC Group.

It plans to spend at least a third of the fund in West Africa, Doyle said, with the bigger slice of the regional investment going to Nigeria.

Convergence Partners holds a 12.5 percent stake in Seacom Ltd.’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.

Fiber Connections

Bandwidth capacity in the region has grown in the last four years with the addition of three international submarine fiber connections to the only one that existed before 2010. Nigeria, Africa’s biggest oil producer, saw its bandwidth increase about 26-fold to more than 9,000 gigabytes per second, according to data provided by the Communications Ministry. A lot of that remains stranded in the cities where the nodes landed due to a lack of infrastructure to distribute it.

Nigeria is Africa’s biggest mobile-phone market with 118.5 million subscribers as of September 2013, according to the Nigerian Communications Commission, for a population of more than 160 million. MTN Group Ltd.’s unit is the market leader with more than 47 million subscribers.

“We realize that the bottleneck is” on how to connect Nigeria’s major cities to the distribute the international bandwidth that currently lands in the commercial capital, Lagos, Doyle said.

Nigeria wants 20 percent of its population of more than 160 million to have broadband access by 2018 from the current 4 percent, according to its National Broadband Plan 2013-2018. South Africa and Kenya have similar broadband policies that aim to attract investment to make the Internet faster, more accessible and more reliable, spurring economic growth and social development.

“One of the major risks to the timely implementation of the various broadband plans is lack of funding,” Kenechi Okeleke, senior analyst for ICT Research at Business Monitor for the Middle East and Africa, said in an e-mailed statement from London today. There’s also a concern over policy continuity, he said, with “most broadband plans set to outlive the governments that created them.”

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

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