Harith fund to double down on infrastructure assets

One of the country’s largest investors in infrastructure has launched a fund that aims to raise as much as $200m (R2.9bn) to deploy into existing assets, to supply both additional capital or increase the fund’s shareholding in them.

“If we get to $200m we might invest in greenfield investments too. It’s a shorter tenor fund than our previous funds and that leads us into existing investments where we might realise assets in the near term,” Harith’s MD for fundraising and liabilities, Emile du Toit, said.

This comes as the government moots larger investment in infrastructure in partnership with the private sector as a remedy for the ailing economy and structural unemployment.

The Treasury also recently gazetted proposed changes to regulation 28, which governs the investments of pension and provident funds, to make it easier for funds to invest in infrastructure specifically.

Harith established and manages the Pan African Infrastructure Development Funds (PAIDF 1 & 2), which invest in a range of infrastructure assets in SA and across the continent.

Arena Holdings, the owner of Business Day, is chaired by Tshepo Mahloele, who also serves as a director of Harith Fund Managers.

The mandate of the new fund will be similar to PAIDF 1 & 2, which invests in “core infrastructure” across three main areas.

This includes telecom and digital capacity involving assets such as fibre, mobile towers and data centres. Energy and power generation involving the construction and operation of renewable energy and thermal projects is also a major focus. Lastly, transport assets involving road, rail and air transport make up the last leg of the mandate.

“We are proposing a five- to six-year fund life. This might be attractive to new investors that haven’t invested in closed-end long-life funds. So this will provide a unique opportunity to invest in infrastructure assets that have already been built,” Du Toit said.

It is anticipated the new fund will be more or less evenly split between assets located within SA, and investments in the rest of Africa. In particular, Harith is likely to increase its shareholding in one of the largest renewable energy (wind) projects located in Kenya, as well as increasing its stake in Anergi which is a holding company for a portfolio of power assets.

The fund will target an internal rate of return in US dollars of 15% per year.

“We typically absorb construction risk and then look to buy out development finance institutions (DFIs) in projects once this risk has passed,” Du Toit said.

Harith recently received permission to upgrade the Zimbabwean side of the notoriously busy Beitbridge border post, that serves as the main gateway for commuters and freight between SA and the subcontinent.

Du Toit says construction to expand capacity on the Zimbabwean side has already begun.