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There can be no doubt that infrastructure -- particularly in the water, telecoms, waste, and energy sectors -- will be crucial to Africa’s ability to economically recover from the fiscal ructions of the past two years. 

Recently, six of the world’s 10 fastest-growing economies were in Africa, and the continent was on track to see six per cent-plus growth up to 2023. Today, predictions from the World Bank suggest growth will remain low at just under four percent in 2022 and 2023.

Even before the COVID-19 pandemic, infrastructure was lacking in many African countries. But building that infrastructure costs money, and many governments simply do not have the necessary funds, having diverted already strained budgets to COVID-19 relief efforts. 

The African Development Bank estimates that the continent will require as much as US$170-billion in infrastructure financing a year by 2025, with an estimated gap of approximately US$100-billion a year. 

That makes the work done by dedicated infrastructure fund managers significant. One such organisation is Infra Impact Investment Managers, which provides growth capital to South African focused mid-market infrastructure businesses. 

According to Infra Impact co-managing partner Morné Edas, “the challenges in the mid-market sub-sector are distinct from large-scale infrastructure in that the sector relies on well-versed infrastructure investors who can structure transactions in this emerging growth sector with customised investment products that capitalise on growth opportunities, but also provide downside protection through innovative investment tools and strategies.”

Infra Impact announced the first close of its Infra Impact Mid-Market Infrastructure Fund 1 in 2021, with Thuso Partners as an investor in the fund. The Infra Impact Mid-Market Infrastructure Fund 1 focuses on the water, waste, green energy, and digital infrastructure sectors.

“The Thuso team has decades of demonstrable track record in incubation, strategy and capacity creation in South Africa,” says Edas. 

Thuso, led by Carlo Dickson and Olwethu Cata, has proven itself to be a hands-on Limited Partner with a quick turnaround time, making it possible to achieve first close expeditiously and efficiently.

“As a result, the team has been able to deploy capital and demonstrate its investment process and strategy to the market while continuing to fundraise towards its final close target,” he adds.

According to Infra Impact managing director Mark van Wyk, Thuso has also been a valuable partner across various functions. 

“From brainstorming solutions with regards to business sustainability and managing the intricacies during the start-up phase to providing valuable insights in fundraising and the investment process,” he says, “Thuso has gone above and beyond to support us.”

This, he believes, will help ensure that the company can take its experience and “assist our portfolio companies in taking full advantage of the market opportunities to grow their businesses efficiently and effectively while delivering superior returns to our clients.”

This approach is fundamental in South Africa where, van Wyk says, it’s critical to make “impactful investments that deliver social returns to our growing economy.”

But investment isn’t just about providing financial backing to promising companies and returns to clients. Now more than ever, it’s also vital for investors to take an active role in the companies they back.

As Infra Impact partner Pamela Papapetrou explains, this includes involvement in “strategic planning, talent management, organic and acquisitive growth opportunities and exit planning.”

“We have been actively involved on our portfolio companies’ boards, capacitated certain business functions – for example, serving as de facto head of business development – within the organisations until we can place the right candidates for the roles,” she adds.

This hands-on approach is essential in a field as critical as infrastructure, where Infra Impact’s investments could make a real difference to ordinary South Africans. 

An example of this is in Infra portfolio company Maru Towers, an independent tower company providing co-location and related services to mobile network operators across South Africa.

“Maru plays a pivotal role in bridging the digital divide and bringing the unserved and underserved telecom coverage not only for telephony but broadband services as well,” says Papapetrou.

Given the extent of South Africa’s digital divide (nearly 8-million low-income South Africans have been paying up to 80 times more than middle- and upper-income citizens for data), companies can address this gap for the benefit of both consumers and company growth. In parts of the rest of Africa, the picture is even starker, with people unable to access connectivity, even if they could afford it.

These inequalities are mirrored (to varying degrees) across Infra Impact’s other vital sectors, including water, waste, and energy. Done effectively, mid-market projects can be just as effective at addressing these inequalities as large-scale ones. 

But this effect is contingent on the execution of well-structured investments by conscientious fund managers who can capitalise on projects and businesses with a focus on financial return and impact, both within South Africa and throughout the continent.