Absa banks on Dark Fibre Africa

Absa Capital has taken a 10% stake in Dark Fibre Africa (DFA).

It says this is the beginning of an infrastructure play into the rest of Africa, whose broadband needs are greater than this country's.

The value of the investment was not disclosed, but it is understood that the deal was financed in the form of a cash payment, as well as debt facilities totalling R950 million.

This takes the form of a R700 million senior debt facility, plus a further R250 million in mezzanine debt - a form of financing that carries a higher interest rate because it is less secured than the senior debt. This is being facilitated by another Absa subsidiary, Absa Corporate and Business Bank.

DFA's financing arrangements make it one of the more aggressive infrastructure players in the country. Its financing arrangements overshadow the R600 million government has allocated as direct funding to get Broadband Infraco operational through the rolling out of its national fibre-optic network.

Government has also said it will raise another R700 million through debt financing to help Broadband Infraco achieve its objective of participating in an undersea cable project.

Sollie Nortj'e, Absa Capital's head of infrastructure equity investments, says the liberalisation of the telecommunications market in SA means more companies will need fibre-optic connectivity to deliver their services.

"We like Dark Fibre Africa because of its model to provide infrastructure that anyone can use. Neotel, for instance, is laying fibre only for its own use," he says.

Nortj'e expects a plethora of infrastructure investments by various companies into a number of different connectivity technologies, such as WiFi and WiMax, but notes that fibre-optic cables will be essential for the backhaul.

"We have had an understanding of the broadband needs of the market for a long time. While it has been constrained in SA, the need for connectivity in most of African, and particularly sub-Saharan African countries, is really great."

Nortj'e says since the Independent Communications Authority of SA indicated it would not oppose the High Court ruling that value-added network services be allowed to build their own networks, Dark Fibre Africa has the right business model and the advantage of being a first mover.

"Dark Fibre Africa already has eight cable-laying machines in operation and is planning to double that number. It has laid more than 200km of cable in the Johannesburg area, and is starting to lay more in Pretoria, Durban and Cape Town," he says.

This is not Absa's first foray outside of the financial sector. Absa Capital's infrastructure equity investments team has made recent investments in the Gautrain; Zambian Energy Corporation; Southern African Development Community headquarters, in Gaborone, Botswana; and the Pan African Infrastructure Development Fund, which is championed by the Public Investment Corporation.