$250 million TMT and real estate fund raising capital in East Africa

Kenyan venture capital company East Africa Capital Partners Ltd (www.eacp.co.ke) is to begin raising its second fund next year, with a target size of USD250 million, after its success in fully investing $100 million of the first African Technology, Media and Telecommunications (ATMT) fund. The new fund is to focus on information technology, media and real estate.
In an email to African Capital Markets News, EACP chief executive officer Richard Bell says: “We’ve bet on our view that growth in mass market “home entertainment” in the next 10 years in Africa will be what mobile phones were to the last”.
On technology, the plan is to build massive data centres, generate clean energy to power them, and stimulate the creation of an outsourcing cluster in East Africa. We believe that East Africa is set to become Africa’s ICT Hub.
On real estate, Bell says “Africa is the fastest-urbanizing society in the world.
Africa’s emerging consumer class needs massive amounts of housing”. He says Kenya, for example, needs 250,000 homes a year and is only building 30,000. “Amongst other things our real estate strategy aims to make a dent in that supply-side bottleneck.”
Much of EACP’s Fund 1 investments were channelled through Wananchi Group Ltd. (www.wananchi.com), an Internet and cable television company. EACP has a 51% stake through its ATMT I Fund.
Last month (August 2010) Wananchi and Cisco announced a multi-year contract to roll out “triple play” (broadband, multichannel cable television and voice telephony) to 9 countries in East Africa: Kenya, Uganda, Tanzania, Rwanda, Burundi, Malawi, Ethiopia, Sudan and Zambia. According to the press release: “The contract will enable Wananchi to deploy Cisco’s integrated end-to-end network technology solutions, encompassing Cisco’s Borderless Networks, collaboration and data centre virtualization solutions, as their customer base expands and technology advances.”
According to a report on Bloomberg, Bell says: “We have invested in 10 new TV channels,” he said. The sports channel has started operating while the others will go live over the next month. “In Africa, what you have is satellite TV for the elite. What we are introducing is pay TV for the mass market.” The venture Zuku TV (www.zuku.co.ke) was introduced in October 2008.
The penetration of pay TV in developed economies is estimated at 70-80% compared with 20% in emerging markets, he said and expects this to grow fast over the next 5 to 10 years, if the market gets “the right product at the right price,” he said.
Private Investors, Export Development Canada and the US Government’s Overseas Private Investment Corp. (www.opic.gov) have invested a total of $90 million in Wananchi to date, while Emerging Capital Partners LLC (www.ecpinvestments.com), a Washington-based company that owns 49% of Wananchi, has invested $25 million, according to the report.
Bell told African Capital Markets news that ATMT Fund 1 was basically a TMT infrastructure fund. “Even though we have used Wananchi as the conduit for all of our investments from this fund the investments themselves are quite broad and include:
(1) SimbaNet – corporate voice and data business services
(2) Wananchi Telekom – through which we have invested in the undersea fibre-optic cable TEAMS, and a number of terrestrial cables dark fibre leases to create a international and long distance carrier of carriers business.
(3) iSat – a specialist VSAT and satellite business
(4) Zuku Cable – a mass market retail cable TV business that is deploying triple play across all the major towns in East Africa.
(5) Zuku Satellite – a Direct-To-Home (DTH) Satellite TV business
(6) Wananchi Programming – a media and content business that is building initially 10 new TV channels including a sports channel, a general entertainment channel focusing on African content, a documentary channel and 6 new movie channels.

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