[TOP STORY] Convergence Partners closes its latest digital infrastructure fund at $296 million
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SIMON BROWN: I’m chatting now with Andile Ngcaba, chairman and founding partner at Convergence Partners. They just closed their latest digital infrastructure fund, $296 million – that’s just over R5.1 billion. Andile, I appreciate the early morning time. It’s a giant fund. What sort of areas are you investing in? [What] obviously springs to mind is things such as fibre networks, data centres. But I imagine there’s a lot more to it.
ANDILE NGCABA: Yes, definitely. Thank you very much for the invitation. We closed the fund, and this is a Pan-African fund with LPs [limited partners] from North America, Europe and Africa, both DFIs [development finance institutions] and commercial. Our focus area is technology, TMT – technology, media and communication so to say. We have been in it for the last 20 years, investing in tech. As African investors, this is the region we understand, and this is the sector we understand.
We really are an impact investor and for us, West Africa is very important, East Africa is very important and Southern Africa is very important. [What is] critical is the 1.3 billion people today in Africa, and soon in the next 10 to 15 years it will be two billion. These are young people in the main, 60% of them below the age of 30. They need connectivity. They need broadband at schools. They need to be able to be part of the global digital community. They need to get into Web3, into the Metaverse.
So for us, building digital infrastructure is really the foundation, you know, for the continent. This is, as you have said, subsea fibre, land-based fibre, basically data centres, Edge data centres, Tier 3, Tier 4 data centres, and coming up [with] the software as a service layer, and all the layers of technology, to make sure that businesses can function well – small, medium and big. And also education, fintech and generally the life of people can be improved through technology.
One of the critical factors for us is to make sure that the infrastructure we build contributes to the target towards net zero.
This is one of the fundamental principles for impact investors – that environmental issues and social issues are addressed in the continent, in particular as we are working to close the digital divide.
So that’s really the thrust of what we are all about. There are a number of interesting assets in the continent. Entrepreneurs are working very hard, as you have seen the need for broadband. As we were going through Covid-19, courts needed broadband, schools needed broadband, individuals working from home needed broadband. So this is something that is a right, that people need to have.
SIMON BROWN: I take your point on that, absolutely. Broadband is a right. It’s maybe food, shelter, power ahead of it, but then broadband comes in. And looking at some of your partners – you’ve got Seacom there, you’ve got Cartrack, Vuma, brands that we know down here in South Africa.
Are you partnering more with the sort of mature businesses, perhaps looking to grow and expand? Or are you also doing some sort of smaller – I’m thinking maybe sort of seed, almost startup investments as well?
ANDILE NGCABA: No…. We are at private equity growth funds, more mature companies. Yes, we have an eye looking at companies as they develop. We look at them and we really monitor, for instance, companies that are being funded by our communities, which are VC-based [venture-capital based] companies. But we take them as they exit series B or C funding, depending on how you measure it.
SIMON BROWN: I get you. That makes perfect sense. You’re coming in as private equity. Are you coming in sort of as passive investments or are you bringing skillsets to a lot of private equity teams?
ANDILE NGCABA: The reason [is] we are sector-focused basically, we are not a generic investor. We focus on technology, because we bring to our partners that deep skill in technology, in investment, to support the invested companies that we have identified. So that is why we chose a sector [in which] we have capability and deep skills and knowledge, rather than investing in real estate or basically mining and technology and health. We opted for a model that basically focuses more in a single sector, and is able to have deeper skill in supporting companies that we have identified and that we invest in.
SIMON BROWN: I get you. And becoming the sort of expert private equity in that particular niche.
ANDILE NGCABA: Exactly.
SIMON BROWN: We will leave that there. Andile Ngcaba is the chairman and founding partner at Convergence Partners.
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Listen: Andile Ngcaba discuses raising R5.1bn for digital infrastructure in Africa, with Fifi Peters