In this episode of Creating Markets, IFC speaks with Andile Ngcaba, the chairman of Convergence Partners, a private equity fund that specializes in information and communications technology (ICT). He talks about impact investing and the rewards that have come from decades on the ground building digital infrastructure across the African continent. He also shares the exciting future ahead for a continent that is fast becoming digital.For more information about this episode visit:
Jasmin Bauomy (JB): Hello, and welcome to another episode of Creating Markets. I'm your host, Jasmin Bauomy and on today's episode, we're tackling digital technology and internet connectivity in Africa.
And to do that, I talked to a man whose company is involved in a bunch of projects that are literally laying down the foundations to get the African continent connected.
Andile Ngcaba (AN): My name is Andile Ngcaba. I'm the Chairman of Convergence Partners, which is a private equity fund.
JB: Convergence Partners supports financial investment with a social impact. And the focus of this investment is digital technology in Africa.
AN: When we talk about digital transformation, we actually mean that moving out of the old way of doing things to a new way of doing things, meaning using digital as a model of, changing the way you are doing everything.
JB: But, before Andile tells us more about the world he's changing, this season we're starting every episode with some icebreaker questions, followed by a three part interview where we try and answer these important questions. One, how did we get here? Two, what's going on right now? And three, where's this industry going in the future? So first let's break the ice!
JB: Since we are all currently living through a pandemic and we're doing a lot of home office, what's your home office survival kit? What are some of the essentials that you definitely need other than your computer and your notebook?
AN: I work in the garden. I have a number of greenhouses and, and hydroponics that are built during this COVID [period] where I've both put together hydroponics and IOT. And, and this is what I'm doing in my garden.
JB: What's IOT?
AN: Internet of Things.
AN: The little sensors that are put in the garden. And then irrigation to make sure that, you know, my irrigation can be remotely controlled from my phone and that, you know, the hydroponics, you know, can drip feed the plants and run efficiently. So that's what I do, when I'm not in front of the screens.
JB: Even while tending to plants, Andile is innovating with technology, his passion for digital tech carries into his spare time. Maybe it runs in his blood?
AN: My own father was also in technology through a post office, the post office then, because the post office in the seventies was the one responsible for, for telephones... you connect the telephone in your house, in your office.
AN: So I grew up in that environment and studied semiconductor technology. I've been in the industry now for 40 years.
AN: You know, in the early nineties, I would attend conferences.
AN: People would say there are more telephones in Manhattan than in the rest of the African continent. Think about how small Manhattan is, right. Think about Africa, [which] is 50 million square kilometers.
AN: Manhattan is one, it's a very small island, but in 1990, there were more telephones in Manhattan than in Africa.
AN: So that rang in my head to say, we have to solve this. Today, Africa has close to 1 billion mobile phones. And I've lived through that. This is what the fun part is from walking the streets of Lusaka, Dar Es Salaam, Abidjan, Lagos, Doula, Gaborone. Making sure that we can provide connectivity to people and connectivity to villages.
JB: Internet cables first shared the same lines with, and they evolved from, phone cables. And so the transition to internet connectivity was just natural for Andile.
AN: What I've been doing in the last 10 or 20 years, really, I mean, I'm involved in building networks.
JB: Andile and his partners lay down fiber optic cables that can carry digital information over very long distances. And so the fiber inside larger protective cables are these super thin glass wires that transfer data using light signals. And that's where the word optic comes in. It's almost, but not quite happening at the speed of light.
JB: Imagine that. So if you send an email and your computer is connected to a broadband fiber optic cable, it's taking that information from your computer through the wire at almost the speed of light to get it across to a data center and satellite out and to the world.
AN: Those fiber networks could be in the ocean. They could be on land city to city. They could be one street to the other street in a town, and there could be from one continent to the other, building a fiber in the form of submarine cables, right on the ocean floor bed.
JB: Many of the major cities across Africa are now pretty well connected, but the people who are living in rural areas don't always have great or reliable internet. And so they need to be connected and there's a cost to that.
AN: The whole world is in need of $428 billion between now and 2030 to connect the unconnected. Of that 428 billion, a hundred billion must go to Africa to connect the remaining unconnected. We need 500,000 kilometers of fiber still in the next 10 years to connect every city, every town, every village with optic fiber. So that work is in progress. We are busy with it. All of us who are involved in this industry.
JB: Uh, wait, let me stop you here. Before we jump ahead to what the future holds, let's move on to the second part of this episode, where we explore the here and now. Andile's work looks to solve two problems: one, how to digitally connect people in Africa today; and two, how to finance that investment.
AN: You have communications in your house, there's somewhere where all this communications [goes] right from your house to a particular point, we call that the last mile. Or from your office to a particular point, the last mile, it could be, it could be two or 3, 4, 5, 6, 7, 10 miles to where the node will connect all the houses in the area or the businesses offices.
JB: In the past a phone service provider or a telecommunications company would have been the ones to problem solve and finance and reap the dividends of connecting customers in that metaphorical last mile. But, Andile wants this investment out of the hands of the few and into the hands of more people.
AN: Maybe we need to take this last mile, and create a unique ownership to make sure that you and me and ordinary people can also invest. This is what we are now calling a fractional ownership of the last mile. And we want to use blockchain basically as a platform and use cryptocurrency basically as a way of a number of different people owning the last mile.
JB: These digital mediums of financial exchange, like cryptocurrencies that rely on blockchain technology, are not yet prolific on the African continent. They are perhaps the future. However, there has already been a lot of innovation in Africa, milestones and successes in the world of information, communications, and technology.
AN: A company called Inq, which is a Convergence Partners company, is in Cote d'Ivoire, right, is in Nigeria, is in Cameroon, right, is in Zambia, is in Malawi, and Mozambique, is in Botswana, right; soon to go to South Africa and Kenya. This company has built internet in almost all these countries; able to provide, not just people but businesses to be able to use the internet.
AN: We have a company called Seacom that has built a submarine cable on the Indian Ocean. You know, 10 years ago. From South Africa to Mozambique, to Tanzania, to Kenya, I mean to South Sudan to Djibouti to Egypt, right up to France in Marseilles.
AN: On the other side, it goes to India as it branches in that Horn of Africa, it lands in Mumbai.
AN: So, here now, you know, Asia is connected. Europe is connected. Africa is connected by one company by one cable. That same company has got a network that lands in Mombasa, in Kenya. It goes to Nairobi. It goes to Uganda, it goes to Kampala. It ultimately goes to Rwanda, and then it crosses over to DRC.
AN: Right? So land cables, cables in the ocean, cables in the cities, right? We also have a company called Comsol. Comsol in South Africa has a wireless network to connect small towns using 28 gigahertz spectrum. This is the fastest. Wireless infrastructure you can find [that] is, is as fast as fiber, basically. All small towns in South Africa, small, small towns are connected via this wireless network.
AN: So there's wireless, there's fiber, basically there's internet. These are just [a] few.
JB: This brings us to part three of our interview. So what is the future of this industry? Companies like Google and Facebook are already on the continent, investing in internet, cable, and wireless infrastructure. But, Andile wants other investors not to shy away from the opportunity.
AN: Investors need to know you get a good return on investment in Africa, right?
AN: That's one, two, your investment has an impact. So you become an impact investor because the impact is visible. And there are indirect benefits. i.e., of growing the economy, of advancing education, of doing all these things.
AN: Remember we have in Africa, what is called demographic dividends, meaning we have the youngest population in the world and this population is becoming digital. And this is a market for the future, for those who have digital products. And the biggest labor force of the world in 2035 is going to be in Africa because we have the biggest population of people below the age of 30 in the world.
AN: Other markets in the world are saturated already. So, if you say to me, Andile, what message do you give to an investor, that is my message. If you have a long term vision about investments, about being part of the digital world, Africa is the right place to be. By 2035, 2040, Africa will be the most digital continent in the world.
JB: I've got a different question as a consumer. So I've been to South Africa. I've been to other places in Africa, um, South Sudan, et cetera. And one of the things in terms of internet connectivity that jumped out at me was that it is very expensive. You know, buying a package of gigabytes for your phone. It's very expensive. How can that be remedied?
AN: Competition will drive. So we need more competition in order to drive down price. We need more deregulation of networks in order to drive down price. So regulators need to deregulate the last mile or what is called “the edge” in order for as many people [as possible to] do this, right? The more people are able to provide “the edge” connectivity, last mile connectivity, using all these fractional ownership models--cryptocurrency, blockchain--and be able to make sure that there's crowd sourcing of funding you know, the price will come down. But there's a lot of work that still is ahead of us. I mean, it's not going to happen tomorrow. Mobile phones didn't happen overnight. It took us over 30 years to get to close to a billion. But this, I believe that it's going to take us less than five years to get into pricing that is affordable for people.
AN: Remember you know, certain people will live, I mean, below a dollar a day. You need to make the internet cheap. We need to make phones cheap. We need to make phones affordable. We need to make the internet affordable [because] without that we are not going to reach as many rural people as possible. So that is our next biggest task, to lower the price.
JB: For Andile, this is quite literally in the hands of future generations.
AN: There's a project called Giga, which started around 2018, 2019, and, uh, UNICEF ITU. The Broadband Commission have been driving this project with a number of other stakeholders. That report has been published [on] how to connect all the schools in the world, how to map them and see how far the connectivity grid is in the world.
AN: There are a number of countries already participating in this.
AN: I mean, I know that the World Bank, the IFC are part of it. You know, the Giga project is really about connecting all schools in the world, in particular schools of, uh, developing countries of small countries of emerging markets. Right? So one has been fortunate to be part of this. And, and the critical aspect is how you finance it.
AN: There are now a number of case studies that are being developed and a, you know, proof of concept to say, how do you finance this connectivity to all schools? Remember when we talk about the next generation, remember the world population will have 10 billion people and very soon, 12 billion people by 2040 [and] beyond.
AN: Right now one critical infrastructure of the 21st century, of the fourth industrial revolution, is the internet. It is the foundation of the 21st century digital economy, right? Therefore it starts with education. The more you connect schools, the more the content of learning is provided through the internet, whether I'm at home or at school.
AN: This COVID-19 [pandemic] is exactly the proof of this need of connecting schools and kids, [showing] that they are the most important group that requires connectivity. The work is continuing: to make sure that we can map all the schools in the world, to make sure that we can provide connectivity using multiple ways to come up with creative financing models. If we want a digital planet, we have to start at the foundation and that foundation is education.
AN: When you do not have access to the internet at preschool, I mean, it's almost like you don't have access to books.
AN: It's a very important issue. So Giga. Watch Giga.
AN: It's a great initiative.
JB: A few other areas that you think should take priority. Am I right?
AN: Oh yes. I mean, of course. I mean, clinics and hospitals, right? I mean, and also the biggest issue in the world is going to be food security and environment. Right? We need to make sure that, you know, agritech, you know, the tractors, you know, to improve yield using technology.
AN: This is not a luxury. It is about, you know, technology in agri... It is about improving yield of production, for instance. So we need to begin to bring technology and agriculture. Connectivity in agriculture. This will even advance basic food production. The other very important issue for this planet.
AN: I mean this piece of real estate, right? That we have, we need to preserve it for future generations--100, 200 years. We need to make sure that carbon emission greenhouse gases are reduced. Technology is going to assist in doing that. So how do we apply? How do we use them? You know, ICT's in the introduction of green technologies, right?
AN: Everything we do must be responsible. So our industry can play a very important role in energy management in the way in which you manage solar, the way you miss you manage wind, the way in which you manage almost every aspect of green tech. That's supposed to power this future of digital technology and digital society.
JB: And that's it for this episode of Creating Markets. If you enjoyed our interview with Andile, please like or subscribe to this podcast, tell your friends about us, and go back and listen to our other episodes. We really appreciate your support. Many thanks to Andile Ngcaba for taking the time to chat.
JB: And in our next episode, we're talking to Santiago Sosa in Argentina. With him, I talked about e-commerce in Latin America and the potential that holds.
Santiago Sosa: For a country or for a region to progress, infrastructure is needed to be built in a very broad sense--like railway, roads, or highways, or electrical network servers, whatever you can think [of] in terms of infrastructure. I think that we're building a second level of infrastructure that has to do with the digital infrastructure.
JB: I'm your host, Jasmin Bauomy. This podcast is produced by Maeve Frances, Aida Holly-Nambi, and me, for the IFC communications team. I'll talk to you again soon.