Strengthening digital infrastructure for AfCFTA

The goal of the African Continental Free Trade Area (AfCFTA) is the elimination or reduction of tariff and non-tariff barriers among its 54-member countries by providing a single market for goods and services, facilitated by movement of persons to deepen the economic integration and prosperity. LUCAS AJANAKU reports that investment in digital infrastructure too will facilitate electronic trade among members.

 

 

In Nigeria and across the continent, there exists a massive investment opportunity to address digital inclusion.

According to World Bank’s estimate, more than $100 billion of capital is required to bring sub-Saharan Africa to acceptable levels of digital access by 2030.

In line with global trends in civilised societies where the digital platform is the first option in everything, Federal Government, had in 2019, unveiled the National Digital Economy Policy and Strategy (NDEPS) while the Central Bank of Nigeria (CBN) and other stakeholders unveiled a National Financial Inclusion Strategy that targeted the reduction of the percentage of adult Nigerians excluded from financial services from 46.3 per cent in 2010 to 20 per cent last year.

The number of Nigerians included in the formal sector was also targeted to increase from 36.3 per cent in 2010 to 70 per cent last year.

Executive Vice Chairman/CEO, Nigerian Communications Commission (NCC), Prof Garba Danbatta, said the commission has deepened broadband access beyond its current 38 per cent towards achieving the 70 per cent broadband penetration set for 2025 by the Federal Government.

However, some infrastructure funds are going to help drive Africa’s digital agenda. One of such funds to expand the local digital infrastructure is coming from MTN Nigeria. The telco said it plans to invest N640 billion (about $1.5 billion) over the next three years to expand broadband access across country, in line with the Federal Government’s 2020-2025 National Broadband Plan (NBP) and in support of MTN Group’s strategy, Ambition 2025: Leading Digital Solutions for Africa’s Progress.

MTN Group President/Chief Executive Officer Ralph Mupita, said Nigeria is one of the Group’s most important markets. “We have a proud history of partnering with Nigeria and Nigerians to drive faster and more inclusive growth through digital transformation,” he had said during a visit to the country.

Mupita reiterated the telco’s support for Nigeria’s plans to secure 90 per cent broadband population coverage by 2025. This aligns with “MTN Group’s belief that everyone deserves the benefits of a modern connected life and our work to extend digital and financial inclusion across Africa”.

Another is coming from a private equity investor focused on the technology sector across sub-Saharan Africa, Convergence Partners. It also announced the successful first close of its third fund, the Convergence Partners Digital Infrastructure Fund (CPDIF) at $120 million. The fund is targeting a final size of $250 million. Now with more than $400million of capital under management, Convergence Partners remains the largest private equity investor dedicated to digital infrastructure in Africa.

Investors in CPDIF are leading institutions that continue to support African growth such as the CDC Group (the UK’s development finance institution), the United States International Development Finance Corporation (DFC), the European Investment Bank (EIB), the International Finance Corporation (IFC) and Proparco (the private sector arm of the Agence Française de Développement – AFD Group).

CPDIF investments will be driven by the infrastructure needs of the emerging growth themes in the digital infrastructure ecosystem, specifically fibre, wireless, data centres, towers etc., as well as 5G, Cloud, Internet of Things (IoT), Artificial Intelligence (AI), fintech and network virtualisation. Its first investment is in Ctrack, a transaction that was announced earlier in the year. As a data analytics business servicing the fleet management and insurance industries, the business sits at the intersection of AI and IoT with all its solutions being cloud delivered.

The fund also has a strong and measurable impact objective and, via its participation in the build out of Africa’s digital infrastructure, will boost entrepreneurship, innovation, skills development and job creation though massively boosting access to the internet and all the critical digital tools it offers.

Africa remains by far the most underserved region in terms of broadband and digital technology access. Despite the advances in the rollout of digital infrastructure on the continent, fixed broadband penetration in sub-Saharan Africa still lags far behind at about seven per cent of the population.

CEO of Convergence Partners, Brandon Doyle, said: “We are delighted to have achieved this milestone, particularly given the headwinds in African PE fundraising generally, and the impact of the COVID-19 pandemic on business activity, over the past 12 months. We are very pleased with the level of support from both repeat and new investors and believe this reflects our solid track record and the opportunity CPDIF presents at this crucial time in both a tech and African context.”

CPDIF is a continuation of the strategy that has been successfully implemented by Convergence Partners since inception in 2006 across its funds under management. In the past 15 years, Convergence Partners has invested in submarine cable systems, geostationary satellites, terrestrial long-haul, metro and access fibre, wireless networks, data centres, as well as service provision delivered by these networks such as enterprise connectivity, SD-WAN, fintech & healthtech solutions, data switching and more.

Chairman of Convergence Partners, Andile Ngcaba, said in the past 20 years, there has been an exponential growth of internet penetration on the African continent.

“Internet penetration in sub-Saharan Africa alone has grown tenfold compared to the threefold increase the rest of the world has seen. As Convergence Partners, we pride ourselves on contributing to this growth through our numerous communications infrastructure investments across the continent. However, the COVID-19 pandemic has shown us that there is still much work to drive digital inclusion.

”Today, Africa is experiencing the highest growth in international internet bandwidth compared to any other region in the world. As we embark on this journey as CPDIF, the next 12 years will be spent continuing to build on our original vision of ubiquitous pan-African communications.  As AfCFTA commences in the same year, we embark on the next step of our journey as Convergence Partners. We believe that AfCFTA will benefit immensely from the availability of digital infrastructure. Our greatest strength is our knowledge of technology, investments, and deep understanding of the African market and cultures.”

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