Stressing the complexity of Seacom

By Paul Vecchiatto, ITWeb Cape Town correspondent

Cape Town, 14 Nov 2007

Seacom's statement that it has finalised arrangements for $650 million (R4.31 billion) funding to lay an East Coast undersea cable underscores the relationship and technical complexity of the project, an investor says.

According to details released yesterday by Seacom, the investors are the Industrial Promotion Services (25%) - an arm of the Aga Khan Fund for Economic Development, Venfin (25%), Herakles Telecom LLC (25%), Convergence Partners (12.5%), and the Shanduka Group (12.5%).

The cable is planned to run along the entire east African coast. This is considered to be the only major population area in the world not to be linked to the international undersea cable network and is reliant on expensive satellite communications.

Meeting requirements

South African investors make up at least 50% of the consortium. This should meet the perceived landing requirements as outlined by both communications minister Ivy Matsepe-Casaburri and Department of Communications (DOC) director-general Lyndall Shope-Mafole that cables landing in SA should be majority African-owned.

Earlier this month, a press briefing by the economic and investment cluster of ministries stated guidelines for landing undersea cables would be finalised by the Department of Communications at the end of November.

Neotel, the country's second national operator, says it will invest a further R20 million to build a landing station at Mtunzini, where Telkom already lands the SA Far East cable, and the portion of the cable that stretches into South African waters.

Unpacking the investors

A closer look at the South African investors shows Venfin, a formerly JSE-listed company, closely associated with the Rupert group of companies. Venfin made a name for itself in ICT investments, having owned 15% of cellular network operator Vodacom.

The Shanduka Group is the investment arm of businessman Cyril Ramaphosa, who has also had a prominent political career as he led the African National Congress negotiating team that resulted in the current dispensation.

Shanduka also owns 51% of FeverTree Consulting (the remainder owned by US consulting group AT Kearney), which has the contract to assist the Department of Home Affairs with its turnaround strategy. FeverTree has also been instrumental in developing the Seacom strategy and promoting the project with South African government.

Convergence Partners is a private equity firm headed by Dimension Data SA chairman Andile Ngcaba, who was DOC director-general immediately before Shope-Mafole. One of Convergence Partners' employees is Envir Fraser who used to be a DOC senior manager. The company has three former Nedbank Corporate Capital staff: Brendan Doyle, Stephan Ferreira and Idan Segal.

Nedbank Capital has been mandated as the lead arranger for all debt funding requirements of the project and will provide the funding along with Investec Bank.

"A project of this size and with this scope needs a lot of very specialist skills. We have to deal with government, ensure that various regulations are met (some of which are still to arrive) and we have to deal with the technical complexity of the cable and the interconnection regimes. There are few companies in SA that understand all of this and, more importantly, understand the risks involved," says an investor.