US$20m commitment to Convergence Partners Communications Infrastructure Fund
CDC, the UK’s development finance institution, has announced a commitment of US$20m to the new Convergence Partners Communications Infrastructure Fund (CPCIF), the only infrastructure fund that is dedicated solely to the information and communications technology (ICT) sector in Africa.
The fund is managed by Convergence Partners, an investment management firm focused on the telecommunications, media and technology sector in Africa. CPCIF will use CDC’s capital to invest in communications infrastructure and related services and technologies across sub-Saharan Africa.
The African ICT sector has grown significantly over the past decade, coupled with higher rates of economic growth and the creation of direct and indirect jobs. According to a recent McKinsey report, increased use of the internet in Africa could add US$300 billion to the continent’s gross domestic product (GDP) by 2025. A 2010 study by Arthur D. Little and Ericsson in OECD countries suggested that every 10% increase in broadband penetration was associated with GDP growth of 1%, and more recent research has confirmed the benefits to household income of increasing broadband speeds in emerging economies.
Broadband access can also have wider socio-economic impact, enabling the delivery of new products and services that would, in many cases, not otherwise be available in Africa, such as financial services, healthcare, and education. The Broadband Commission for Digital Development identifies broadband as a “tool of unprecedented power” in meeting the Millennium Development Goals by 2015.
However the infrastructure to deliver ICT services remains under-developed in Africa. The International Telecommunications Union (ITU) estimates that fixed broadband penetration is less than 1% in sub-Saharan Africa, compared to 27.2% in developed nations.
“By increasing the availability of ICT services in sub-Saharan Africa, Convergence Partners is playing an important role in economic development and job creation. This investment will tackle the current infrastructure deficit, accelerating the development of the African digital economy, which in turn stimulates business activity in the private sector.
“CDC’s commitment at first close signals our confidence in this team, which has a track record of successful investments in this sector in Africa.”
CDC’s commitment of US$20m contributes to the first close total of US$145m, which is derived from a range of private sector and development finance investors. The fund is targeting a total size of US$250m.