Deal Summary
African Infrastructure Investment Managers (AIIM), the private equity infrastructure investment arm of Old Mutual Alternative Investments (OMAI), has sold its 12.67% stake in Bakwena Platinum Corridor Concessionaire (Pty) Ltd (Bakwena) to Gaia Fund Managers (Gaia), a leading specialist secondary infrastructure investor in South Africa. Bakwena is a toll road concessionaire that constructs, manages, maintains, and upgrades the N1 and N4 roads for South African National Road Agency Limited (SANRAL). The sale continues AIIM’s divestment from Bakwena, following a fruitful relationship that began at the fund manager’s inception in 2000, after a consortium of investors purchased a majority stake in Bakwena from the AIIM-managed South Africa Infrastructure Fund (SAIF) in 2016. It is also the sixth successful exit for AIIM’s African Infrastructure Investment Fund 2 (AIIF2), with only two portfolio investments left. AIIF2 is a $562 million fund closed in 2011 with two parallel vehicles holding a stake in Bakwena: AIIF2
Deal Rationale
After 13+ successful years invested in Bakwena through AIIF2 (and longer through other funds), this sale aligns with the AIIF2 exit agenda as AIIM seeks to return profits to investors after years of capital appreciation. Of the eight original AIIF2 investments, Bakwena is AIIM’s sixth exit, following 2018 exits from Azura (Nigeria), Kinangop (Kenya) and Kipeto (Kenya), and its divestment from two South African renewable projects in 2020. AIIF2 now has just two portfolio investments: IHS Holdings, a pan-African telecommunications infrastructure provider and Cenpower, a Ghanaian multi-fuel power plant. Meanwhile, this transaction aligns very strongly with Gaia’s strategy of acquiring assets with predictable, inflation-linked, long-term cash-yielding returns as it seeks to develop a transportation infrastructure platform which invests in existing and new infrastructure projects.
- Initial Investment: Bakwena began in 2000 as a R2.9 billion (~$400 million) project, consisting of R2.3 billion (~$318 million) in 20-year debt and R600 million (~$82 million) in private risk funding. The major initial investors were Public Investment Commissioners (PIC), Old Mutual Life Assurance Company (an affiliate of AIIM), and the South Africa Infrastructure Fund (SAIF). AIIM was established in 2000 and was subsequently appointed to manage the underperforming SAIF, taking on its holdings in Bakwena and other projects. Bakwena was valued at €66 million in 2001 after the Fund for Foreign Investment (FIEX) paid €16.64 million to acquire a 25% stake as construction works were completed. Over the years, AIIM doubled down on Bakwena through a series of primary and secondary transactions. By 2010, it had consolidated its direct and indirect holdings through the South Africa Road Tolling Company (SARTC), a special-purpose investment vehicle which held SAIF’s stake in Bakwena. Following FIEX’s exit in 2010, AIIM consolidated other large shareholders’ stakes through SARTC, which then owned ~82% of Bakwena. The company was worth €420 million in 2010 after FIEX’s exit for €105 million, indicating a six-fold valuation increase in ten years. In 2016, AIIM announced the successful sale of Bakwena and two other South African toll concession companies to a consortium of investors, including PIC, Old Mutual, and Africa Finance Corporation (AFC). After this sale, AIIM retained a 12.67% stake in Bakwena held through AIIF2.
- Value Creation: AIIM has been a critical partner for Bakwena over the last 25 years, utilising its extensive infrastructure investment experience to optimise the company’s capital position and operational approach. Notably, AIIM led Bakwena’s R3.7 billion (~$500 million) debt refinancing in 2009, leaning on its experience managing toll investments to identify a strategic time for debt refinancing as the two main associated project risks (construction risk and demand estimation risk) had been mitigated. The toll road had been functioning for years, so the project no longer had construction risk, while reliable data on usage patterns allowed for more accurate demand and revenue forecasts. AIIM further mitigated Bakwena’s financing risk by linking some of the interest payments to South Africa’s Consumer Price Index, thereby linking debt repayments to cash flows as toll fees are inflation-linked.
AIIM also led Bakwena’s capital restructuring following FIEX’s 2010 exit, consolidating its holdings into SARTC, which then held SAIF and other investors’ stake in Bakwena. This restructuring had two benefits. First, it allowed AIIM to regear at the SARTC holding company level. Second, it allowed AIIM to issue a R400m 12-yr preference share and accelerate distribution to SARTC shareholders, providing enhanced returns on investment.
In terms of technical support, AIIM leveraged its extensive infrastructure experience to pioneer electronic road tolling in SA, boosting revenue potential. For comparison, manual lanes managed on Bakwena’s toll roads can process 200-300 cars an hour, while electronic tolling processes up to 1,000 cars. AIIM also drove road sustainability efforts by helping Bakwena to establish the first traffic control centres on SA highways, mitigating the damage caused by overloaded vehicles by ensuring that vehicles are roadworthy and not overloaded. - Exit Assessment: AIIM’s 12.67% equity sale to Gaia marks its second significant exit from Bakwena after its partial exit through its sale of SAIF assets in 2016. At the time of its first exit, AIIM’s success in restructuring Bakwena’s debt and equity profile, along with technical support to set Bakwena apart as a leading tolling concession company in South Africa had resulted in a 6x jump in valuation from €66 million in 2001 to €420 million in 2010. Whilst the terms of this recent exit have not been disclosed, AIIM exits at a good time, with transport volumes recovering after a COVID-induced lull and renewed optimism for greater public infrastructure spending and accelerated GDP growth in South Africa in the coming years. This has led to an increased appetite for inflation and GDP-linked cash-yielding infrastructure investments among private investors in Africa. Furthermore, AIIM’s success over the years in attracting established investors such as Africa Finance Corporation (AFC) and Liberty Group Limited (part of Standard Bank Grup) bode well for the future of private infrastructure financing in Africa. For Gaia, the predictability of cash income from toll roads and the trend of rising toll prices—Bakwena toll fees have increased by roughly 64% in the last ten years—boosts the liquidity and exit appeal of the investment. Gaia has helped pioneer the use of Real Estate Investment Trusts (REITs) to raise additional liquidity from infrastructure investments, so far launching REITs covering renewables and fibre-optic infrastructure assets.
About the Fund Manager
African Infrastructure Investment Managers (AIIM) is an independent business unit (fund manager) under Old Mutual Alternative Investment (OMAI), the alternative investments arm of Old Mutual Limited, a diversified African financial services group. Established in 2000, AIIM develops and manages private equity infrastructure funds designed to invest long-term institutional unlisted equity in African infrastructure projects. AIIM is one of Africa's most successful private equity infrastructure firms, raising nearly $4 billion (including co-investment) across eight funds. The firm currently has $3 billion in assets under management spread across over 70 portfolio companies in over 20 African countries. AIIM is a market leader in investments in toll roads, renewable energy, power generation, and ports in Africa.
Gaia Fund Managers (Gaia) is a leading South African specialist secondary infrastructure investor focused on sustainable infrastructure investments in the renewable energy, transportation, and environmental sectors. Gaia provides institutional investors access to infrastructure assets that generate stable, inflation-linked returns while supporting social and environmental impact. Gaia has also helped pioneer the use of REITs for sustainable investments in South Africa by launching specialised REITs focused on renewable energy and fibre infrastructure. This innovative approach allowed investors to access inflation-linked returns through infrastructure assets, such as on-site solar power for commercial properties and fibre networks, enhancing ESG impact and expanding the scope of REITs beyond traditional real estate.
