STELLENBOSCH-based investment giant Remgro might have its roots in the old economy, but its acumen for making smart technology investments should not be underestimated.
The group’s tilt at building a compelling fibre optic hub has reached an intriguing juncture, and now represents 10% of the sprawling investment portfolio.
Older readers will remember that Remgro was an early anchor investor in Vodacom back in the mid-nineties. Remgro’s stake was eventually sold to Vodaphone at a sizeable profit…but not before the group realised the power of modern communication.
Before committing to fibre optic ventures, Remgro became an anchor investor in undersea cable specialist SEACOM. The SEACOM investment – now valued at around R900 million – has been a solid rather than spectacular investment. Recent profits came in at R35 million.
Remgro, on the other hand, will be far more excited about its investments in Community Investment Venture Holdings (CIVH). CIVH houses controlling stakes in fibre optic businesses – Dark Fibre Africa (DFA) and Vumatel.
Remgro values its CIVH investment at a whopping R10 billion, which makes it the third biggest investment in the portfolio and larger than stalwart investments like liquor group Distell and food group RCL Foods.
In the last financial year Remgro committed another R1.63 billion to CIVH in a rights issue, increasing its stake slightly to 55.2%.
The new funds were used by CIVH to reduce debt and, in Remgro’s words, “to unlock capital expenditure for future growth”.
In past reporting period, DFA generated flat revenue of R1.2 but hiked underlying operating profits by 47% to R232 million. Vumatel – which took on some of DFA’s infrastructure – boosted revenue 43% to R1.1 billion and underlying profits were a sound R297 million.
Growth was driven by Covid-19 accelerated requirements for data. This trend is likely to continue for the foreseeable future, and will probably more than justify Remgro’s recent funding effort.
The local fibre optic market has been slated as one of the highest growth industries with fibre-to-the-home of fibre-to-the-building subscriptions more than tripling between 2015 and 2019.
The continued growth in the digital economy – spurred significantly by the prolonged Covid-19 pandemic – should also mean steady annuity income streams for DFA and Vumatel.
To date DFA has laid over 13 000 km of fibre optic cable in most of the major cities around the country. Vumatel, which is primarily a fibre-to-home provider, has a cable network that winds past 600 000 households.
There seems little doubt that, like cell phones did with telephony, the fibre optic market will also connect most South Africans to reliable and fast broadband internet.
CBN reckons Remgro has latched onto another winner…