The Kagiso Infrastructure Empowerment Fund (KIEF) was established in September 2006 as a R649 million black economic empowered private equity fund. Its mission is to target empowerment equity investments in infrastructure projects such as roads, airports, power, telecommunications, rail, ports, water and social infrastructure in South Africa.

Established as a joint venture between KTI and African Infrastructure Investment Managers (Pty) Ltd (AIIM), KIEF had, as initial investors, KTI, Remgro, Old Mutual, Metropolitan Life, Capital Alliance and Liberty Life.

AIIM, in turn, is a joint venture between the Old Mutual Investment Group (SA) (Pty) Ltd and Macquarie Capital Funds, which is part of the Macquarie Group of Australia. Through its financial and engineering expertise, Macquarie has become a dominant player in advising on infrastructure transactions. It now manages over 20 specialised funds in over 20 countries that invest in more than 100 infrastructure assets.

KIEF draws from the expertise of AIIM, which already manages the South Africa Infrastructure Fund and the African Infrastructure Investment Fund, with assets exceeding R1,5 billion. The day-to-day business of KIEF is run by Infrastructure Empowerment Fund Managers (Pty) Ltd (IEFM), a company that was set up by AIIM and KTI for this purpose.

KIEF has acquired a 10 percent interest in the Kelvin Power Station in Johannesburg. Kelvin is a 600 megawatt coal-fired power station that supplies electricity to central Johannesburg. It was originally privatised in 2001.

KIEF’s investment and business strategy

With a clear focus on a five-year investment horizon, KIEF has four years left.

Its objective in the next two to three years is to fully invest the fund – to find three or four more infrastructure projects where it can acquire a strategic empowerment equity interest. When the committed capital is invested, KIEF will be closely involved with managing the assets to optimise investor returns over the life of the Fund.

Central to KIEF’s investment philosophy is its becoming active in the businesses it invests in. KIEF prefers to invest in assets in which it can secure board access and meaningful participation in strategic decision-making, which includes deciding on the capital structure and the future direction of the business. It will also seek to ensure that its partners support the advancement of BEE in the infrastructure sector.

The offices of KIEF and IEFM are co-located with the AIIM offices in Cape Town. KTI is involved in all governance and decision-making structures of the business.