African Infrastructure Investment Managers (AIIM) has announced the successful sale of investments in three privately-concessioned toll roads in Southern Africa.

Acting as the manager of the South Africa Infrastructure Fund (SAIF), AIIM successfully concluded the transaction on 4 July 2016. This sale represents the largest private equity realization for toll road infrastructure in Africa to date.

Under AIIM’s management, the Fund evolved into a significant player in Southern African toll roads with material stakes in N3 Toll Concession, Trans African Concessions and the South African Toll Road Company, a holding company through which SAIF invested in the Bakwena Platinum Corridor Concession.

More concretely, the fund has sold: 

• a 62% interest in Bakwena Platinum Corridor Concessionaire, South Africa
• a 50% interest in Trans African Concessions, South Africa & Mozambique; and 
• a 38% interest in N3 Toll Concession, South Africa

The N3 was an existing highway and the 30-year Concession Contract involved the design, construction, finance, operation and maintenance of 415 km of the N3 from the Cedara interchange in KwaZulu Natal to the Heidelberg South interchange in Gauteng, South Africa. The N3 links South Africa’s industrial heartland in Gauteng with Africa’s largest port in Durban and is one of the most utilized freight routes in South Africa with over a decade of operational and industry experience.

TRAC was established as a 30-year Concession Contract to design, construct, finance, operate and maintain the N4 between Witbank in South Africa and Maputo in Mozambique. The concession was extended by 60 km from Solomon Mahlangu Drive interchange east of Pretoria to the Gauteng/Mpumalanga border in 2005, bringing the total road length to 570 km. The concession represents a benchmark public-private partnership with the governments of South African and Mozambique, the private sector and the communities along the route, with each party sharing in the associated risks and rewards of the project. 

Bakwena signed a 30-year Concession Contract with the South African National Roads Agency (SANRAL) in October 2000 to design, finance, build, operate and maintain the N1/N4 highway. The concession covers 385 km of road, comprising a 90 km section of the N1, running from Pretoria northwards to the town of Bela Bela, and a 295 km section of the N4, which runs from Pretoria westwards to the Botswana border. Bakwena refinanced the debt of the project and the funds were used to re-finance existing debt on more attractive terms.The refinancing was done through the collaborative efforts of Bakwena, its shareholders, SANRAL, the company’s lenders and transaction advisors.

Each of the toll roads has in excess of 10 years' operating history and together these roads cover a total of 1,364 kilometres on South Africa's key transport corridors extending from Gauteng province to Maputo (Mozambique), the Botswana border and KwaZulu Natal (South Africa) respectively.

During the period of SAIF’s involvement, capital expenditure in excess of ZAR13 billion was deployed for rehabilitation and expansion to maintain service standards and increase road safety for road users. The toll road concessions also support a comprehensive range of socio-economic and education programs along the concession corridors.

The final sale was to a consortium of largely existing investors which included Public Investment Corporation, Liberty Group Limited, Old Mutual and Africa Finance Corporation.

Macquarie Capital was the financial adviser on the transaction, with various internationally experienced advisors appointed in respect of legal, tax and accounting, technical, environmental and insurance matters.

Other existing shareholders in the assets are: 

• African Infrastructure Investment Fund (AIIF)
• Kagiso Infrastructure Empowerment Fund (KIEF)
• IDEAS Managed Fund
• African Infrastructure Investment Fund 2 (AIIF2)

Jurie Swart, AIIM CEO said:

“This sale transaction demonstrates the increasing development of the African infrastructure sector and addressing the concern investors may have around the ability to dispose of infrastructure assets. The interest from international investors is testament to Africa’s improving status as an investment destination in the current global environment of low yields. Through our investment approach of active involvement in the management of our portfolio companies, AIIM has been able to develop a portfolio of mature toll road concessions with operations and governance on a par with those seen in developed markets. This has been a foundation of AIIM’s value realization strategy across our portfolios."

Andrew Canter, Chairman of the SAIF Governing Board since 2000 said:

“The success of this transaction is a prime example of how private equity investors create value in the companies they own and operate. The SAIF investors were early pioneers in establishing the private infrastructure equity sector in South Africa, and the proof of that model is path-breaking for the wider investment community. The realization process of the toll roads was managed through competitive bids to ensure transparency and protection of all parties and saw strong interest from both local and international investors.”