| 02 June 2011

Teraco Secures 158m Rand to Expand IT Data Centers in Africa

In a third round of fundraising, vendor-neutral data centre operator Teraco has raised a further R158-million to expand its operations in South Africa, this time tapping into development finance.

The Development Bank of Southern Africa (DBSA) extended a loan of R80-million, while the International Finance Corporation (IFC) provided a loan of R35-million. The remainder of the financing was put forward by investors including Treacle Private Equity, Pentangle Group and Marlow Capital, which acted as financial adviser.

This, together with the initial fundraising meant that Teraco had secured R258-million, which would be spent largely on infrastructure for its new and extended data centres in South Africa.

Teraco CEO Tim Parsonson said that the funding would be used to triple the size of the company’s existing Johannesburg facility, as well as to build a second facility in Cape Town, and a new facility in Durban, which was set to open in August. Teraco is the first vendor-neutral data centre operator in Africa, which meant that the company was not aligned to any one specific service provider, and could connect any network service provider. It can outsource services to any IT services business or systems integrator.

Already, Teraco’s data centres in Cape Town and Johannesburg provide services for 14 network providers including Altech, Broadband Infraco, Cell C, Neotel, MTN, Seacom, Telkom and Vodacom, as well 18 Internet service providers, six major information technology operations, and other customers including banks.

IFC Southern Africa region senior manager Saleem Karimjee said that the IFC supported information communications technology (ICT) projects owing to the “huge development impacts” that ICT could have in a region and the numerous downstream opportunities it could open up.
Parsonson said that Teraco has ambitions to extend operations further into Africa, with a keen eye on East Africa, which was more competitive in the ICT arena than Southern Africa, as well as considering working in Nigeria, which was also experiencing significant growth.

Karimjee noted that Teraco’s plans to expand into Africa also fitted in with the IFC’s mandate, and the organisation viewed a vendor-neutral data centre as enabling infrastructure.

The involvement of development finance institutions was said to be key, as the commercial banking sector did not understand the benefits very well.

DBSA Investment Banking divisional executive Lucy Chege said that the bank supported and funded infrastructure where market failure was experienced and where there was lack of appetite from the private sector commercial institutions for the funding required for a development project or programme.
She added that Teraco’s business model provided support to the ICT sector and indirectly contributed towards introducing efficiencies within ICT companies.

Chege noted that large specialised data centre operators like Teraco invested in greater energy efficiencies, hence reducing demands on the power grid.

Power was one of the major requirements for a data centre to ensure that equipment remained cool and dust-free, thus back-up power generation made up for a large portion of the costs.

Chege added that the project was expected to result in temporary and permanent job opportunities through the installation of services and construction of the proposed expansion.

“Creation of additional capacity will benefit the local economic activity and the ICT sector as a whole,” she concluded.