Local private equity firm Convergence Partners is bullish about blockchain — the technology that powers or underpins cryptocurrencies such as bitcoin. This comes as the firm announced that it invested more than R180m in 42Markets — a company that specialises in building financial technology (fintech) platforms.
Founded by businessperson Andile Ngcaba, who serves as chair, Convergence Partners specialises in digital infrastructure investments, having raised $296m (R5.124bn) for its third fund, in January. This has been earmarked for opportunities across Sub-Saharan Africa.
Those funds are being put to work, with the firm announcing on Tuesday that it had invested $10m (R183.82m) into 42Markets Group, an incubator, investor and builder of fintech companies. The funds will enable 42Markets “to accelerate growth through the buildout of its product set and further geographic expansion”.
The new capital is set to grow 42Markets’ portfolio companies, made up of Andile, FXFlow and Mesh.trade, which will receive the bulk of the funds.
Mesh is a financial markets platform for cross-asset issuance, trade, investment and management of digital and financial assets. The platform make use of blockchain — the technology underpinning asset classes such cryptocurrencies — to deliver services to clients, among others.
Brandon Doyle, CEO of Convergence Partners, told Business Day that the company sees opportunity in blockchain, not necessarily cryptocurrencies.
Mesh “is a start-up, it is post-revenue, so it's not a complete start-up and really what they're looking to do is take these learnings of how these markets operate and drive digital transformation of market structures to the next level using these new emerging technologies, including blockchain.”
“This is not a crypto business, it’s a blockchain business, so we love the underlying technology,” he said.
Mesh was cofounded in 2019 by MD Connie Bloem and Andries Brink, who serves as group CEO of 42Markets.
Bloem says “this injection of capital will support Mesh in its next phase of growth, which includes expanding the reach of our SA operations, investing in regulatory compliance and launching our next operating company in the EU”.
The capital raised by Convergence Partners earlier in 2023 represents the firm’s largest fund to date, bringing total funds under management to more than $600m. Funding was backed by existing and new investors comprising global and regional development finance institutions, pension funds, and financial institutions based in Europe and Africa.
The firm says the fund is focused on investing in digital infrastructure opportunities across Sub-Saharan Africa. This includes fibre networks, data centres, wireless, towers, cloud, Internet of Things (IoT), artificial intelligence (AI), and other infrastructure “that is vital for the growth of the digital economy in the region”.
“When it comes to some of the big challenges across the continent, whether that’s in fintech, whether it’s in digital identity or proof of ownership of property, there’s real big challenges out there,” said Doyle.
“We’ve coined the term ‘applied blockchain’, which is taking blockchain out of the crypto environment and really applying it as a base technology underpin for these sorts of solutions and we starting to see a lot of these solutions come to market.”
Doyle said: “Most of them are still too early stage for us, but it's an area that we track.”
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