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Kenya: ICT Firms Secure Capital Boost
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Business Daily (Nairobi)
5 May 2008
Posted to the web 5 May 2008
Kui Kinyanjui
Four Kenyan ICT companies have received major capital inputs under a new plan aimed at improving infrastructure and investment opportunities in the East African region.
The Africa Telecoms Media and Technology Fund (ATMTF) has acquired strategic stakes in three data companies - Wananchi Online, Simbanet, Mitsuminet and a 10 per cent stake in the East African Marine System (TEAMS), as part of a US$50 million outlay on the ICT industry.
"ATMTF is a venture capital fund that has been set up to fund technology, media and communications companies primarily in Kenya and Tanzania. It has already raised US$50 million," said Richard Bell of East Africa Capital Partners, the company that shall act as fund manager for the venture.
ATMTF is one of five major initiatives who will share out US$875 million sponsored by the Overseas Private Investment Corporation (OPIC), launched by US president George Bush early this year.
OPIC is a US government agency that provides medium to long-term funding through loans and guarantees in emerging markets.
Although Mr Bell did not disclose exact details of how much had been invested in the ventures so far, ATMTF, which solely focuses on ICT ventures in East Africa, has already attracted US$50 million from OPIC, and is aiming to get a further US$25 million from private American and African investors.
East Africa Capital said ATMTF had a target capitalisation of US$100 million, some of which has already been spent on acquiring strategic stakes in the four ICT firms within the East African region.
An industry source confirmed the fund had already secured US$25 million from a mix of local and international investors, leaving just US$25 million to be sourced.
Participating investors include American Richard Essex and Kenyan Richard Bell of East Africa Capital Partners, as well as American Mark Schneider, who is a former CEO of Liberty Global, a large pan-European cable company.
Through its strategic relationship with Wananchi Online, the fund also boasts the involvement of Transcentury chairman, James Gachui, who is expected to provide local expertise.
ATMTF now owns several of the region's largest ICT ventures, heralding a potential shift in the power centres in the telecommunications landscape.
The stakes in Wananchi Online, Mitsuminet Cablevision and Trunking Systems as well as Simbanet (which operates in Kenya and Tanzania and is one of the region's largest data providers), have established one of the largest infrastructure providers with a regional presence and cross-industry focus.
Insiders said the venture planned to use its stake in TEAMS to create a cable network that would span most of the continent, connecting countries in the region, and threatening established data providers such as Kenya Data Networks, Telkom Kenya as well as regional ISP, Africa Online ,who had plans along the same lines.
In addition, the fortunes of smaller companies hang in the balance as the fund is said to be hunting for similar investment opportunities regionally, and is especially interested in committing to a media company to develop local content ahead of the shift to digital broadcasting.
To attract more entrepreneurs to the ICT sector, the Fund will also be creating a Special Purpose Vehicle (SPV), which will act as a mini Venture Capital fund, providing funding for SMEs within the technology, media and telecoms sectors.
Under the SPV, the fund will be looking for small-scale projects where it will invest between US$10,000 and US$250,000 in equity.
Each fund is designed to invest in a variety of sectors vital to Africa's economic development, including health care, housing, telecommunications and small and medium-sized enterprises (SMEs).
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"These funds will encourage the growth of sectors critical to Africa's ongoing development, such as housing and telecommunications, as well as other developmental sectors, including health care and small businesses," said OPIC President and CEO Robert Mosbacher, Jr.
"Their overall impact will be to broaden African capital markets and provide critical investment for social development, a model that can be replicated in other geographic areas."
Kenya is also set to directly benefit from the Africa Health Care Fund, which has a target capitalisation of US$100 million, which will invest in small and medium-sized private health care delivery business; as well as AfricInvest II, which has a target capitalisation of US$175 million, and will target SMEs producing consumer products and services.
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