Uhurunet investors sought

Johannesburg, 01 Apr 2008

Companies interested in investing in the New Partnership for Africa's Development (Nepad's) 45 000km Uhurunet undersea cable have received clarity on how they can participate.

However, communications director-general Lyndall Shope-Mafole has warned that investors will not be able to access preferential pricing, or access.

Instead, the Nepad e-Africa Commission's policy and regulatory advisor Edmund Katiti revealed the $2 million upfront investment would deliver as yet uncalculated "regulated" returns.

With purpose

Investors identified by each of the signatory countries were invited to attend presentations on Nepad's special purpose vehicle (SPV) for Uhurunet owner, operator and manager, Baharicom. This presentation followed last week's inaugural meeting of the initiative's inter-governmental assembly (IGA).

The Nepad SPV will have a 30% shareholding in Baharicom; African telcos and other investors will have 45% and international investors have been allocated 25%.

Investors can choose to invest through any of these routes; however, participation in the Nepad SPV is limited to $2 million (around R16 million).

"The objective of the Nepad SPV is to create open and affordable access to regional and international communications for citizens of the region and continent. Accordingly, we have decided that all participating entities will have equal ownership. It is also important that everyone is clear that SPV participation is separated from capacity allocation and sales on that cable," explained Katiti.

As the SPV requires $210 million to acquire the 30% shareholding in Baharicom, Nepad is seeking 105 investors. These investors can be participating governments and a maximum number of telecoms operators from each region, "quasi-equity" investors such as pension funds and investment houses, and debt providers.

Inherent value

Although investors in the SPV will not be able to access preferential prices or access, Katiti is confident there is sufficient value in the proposal to attract local and international shareholders.

"The question of regulated return was one of the first things discussed by the IGA in the run-up to the inaugural meeting. We agreed that this must be sufficiently interesting to attract investors, while at the same time not hampering our aim to bring down access costs."

He adds: "We did a study on these returns last year, but since then the terms of reference have changed. In the coming months, the return will be determined and communicated to interested parties."

Of course, there would come a time when returns from that investment would no longer require regulation, said Katiti. At that point, investors would be able to do a lot more with their shareholdings, particularly if a decision was taken to list Baharicom, he rationalised.

However, Shope-Mafole appealed to potential investors to look beyond financial returns.

"The advantages of investing in the SPV are not so much financial. Yes, those companies who invest are going to get a return; more importantly though to my mind is that those investors will be part of the decision-making process and able to influence the priorities of Baharicom," she explained.

No holding back

Despite requiring 102 investors, Shope-Mafole said there is no need to wait for "everyone to get on board" before construction on Uhurunet can begin.

"We are already in the process of securing debt financing and investment warehousing to ensure Uhurunet can get going as soon as possible," she explained.

The Nepad e-Africa Commission is negotiating with the Pan African Infrastructure Development Fund (PAIDF), the Development Bank of SA and the Industrial Development Corporation.

PAIDF investment professional Sipho Makhubela told attendees it was limited as to how much of its $1.5 billion fund would go to any particular industry sector, but it was able to pull in its investors to act concurrently with the organisation.

"We believe in this initiative. We have been approached by a number of cable initiatives, but we've said no because we wanted to align ourselves with the right projects. We are quite happy with this cable; we have been involved for sometime."

However, he warned the commission that PAIDF's involvement in a warehousing scheme would be "purely on a commercial basis".