Big bucks for ICT ideas

By Damaria Senne, ITWeb senior journalist

Johannesburg, 18 Jun 2007

Community Investment Ventures (CIV) aims to take advantage of opportunities presented by the deregulation of the ICT sector, investing up to R500 million in new ICT ideas.

The company plans to pour the funds, which are available now, into telecommunications and technology start-ups as well as established small and medium enterprises.

The R500 million is made up of R300 million in cash, a line of funding worth R100 million and access to R200 million in debt, says CIV director Richard Came.

Chairman Eugene Mokonyane says CIV plans to grow its market capitalisation to R1 billion within 36 months through investment and acquisitions.

"The target will be easy to achieve, as the ICT market is very dynamic, driven by technological and regulatory developments," he says.

In addition to funding, CIV provides technical support for the enterprises it invests in, says Came.

This includes providing technical expertise and assisting the new venture in forming relationships with telecoms players where necessary, he says. "In some instances, we have directly helped the business grow by bringing in new clients."

Group structure

CIV was founded in 1999 by people formerly involved in the ICT sector, says Came, who is a former marketing director for Dimension Data.

The original founders hold a 44.1% stake in the business, with 37.3% shareholding held by New Gx, a company represented by Eugene Mokonyane, a former director-general in the Department of Public Enterprise.

The remaining 18.6% is held by Community Investment Holdings, a diversified investment company with interests in telecoms, transport and healthcare.

Came says CIV has a long history of investing in technology, telecoms and power. Last year, it injected R50 million in new investments. One of its success stories is FerroTech, which supplies technology that ensures continuity and stable power supply.

Technological and regulatory changes in the ICT sector have encouraged management to step up investments and increase its visibility, he explains.

He notes that most entrepreneurs access funding through a wealthy relative, some savings and a bank loan. These are the type of companies CIV typically funds, he says. CIV does not have a minimum or maximum cap for investment, he adds.

Appetite for risk

Arthur Goldstuck, MD of World Wide Worx, and Tebogo Khaas, president of the SMME Forum, say SA has a great need for venture capital (VC) companies willing to invest in good ideas.

Both say local firms that bill themselves as VC are not really venture capital in the traditional sense, as they are usually as averse to risk as traditional funding sources.

Local VCs also tend to invest in companies that are already established and have an annual turnover of at least R10 million, making it difficult for new entrants to access funding, says Goldstuck.

The 2006 SME survey showed 91% of respondents rated access to funding an important element of starting and managing a small business.

Globally, and most notably in the US, VCs are responsible for sustained growth in entrepreneurship, especially in the ICT sector, says Khaas.

"The venture capital market in SA is key to stimulating entrepreneurship and growth in the SME sector by providing much needed support for new entrants," he notes.

Another challenge is that the South African ICT market has insufficient innovation by small players at a level that would encourage cogent attention and competition by VCs, adds Khaas.