Patrice Motsepe’s latest mega-venture is no doubt being monitored very closely by banking incumbents in South Africa, given the disruptive potential of some of the firm’s plans to aggressively back innovative financial services businesses.
Motsepe’s African Rainbow Capital is ARCI's majority shareholder and will lead the seeding of the company’s initial investment portfolio, which reportedly comprises sixteen investments in the financial services sector and seventeen investments in other sectors. I’m most excited about the group’s decidedly forward-thinking approach to taking on legacy players in the financial services scene.
Their ambitious rhetoric is refreshing, in an industry that appears committed to squeezing every last drop of profitability from dated banking practices. The new kid on the block does, however, boast significant institutional shareholders such as Sanlam Private Wealth, the Public Investment Corporation and the Singapore sovereign wealth fund.
ARCI is helmed by two experienced industry executives - former Sanlam chief executive Johan van Zyl, and former Sanlam Investments chief executive Johan van der Merwe - who are probably wide awake to the marketplace white space that exists in terms of new profit growth opportunities. ARCI's more notable tech interests include a 20percent stake in the fixed and mobile data network operator, Rain.
According to Rain chief executive, Duncan Simpson-Craib, ARCI's capital injection will help his company to act on a growth plan that will see them go from the 1000 sites and 1500 base stations they have currently to 5000 within three years.
And thanks to a handy agreement Rain has struck with Internet Solutions and its partners, the firm says it’s poised to offer clients next generation 5G wireless broadband services.
ARCI has also previously announced that they will be buying a 10percent stake in the Johannesburg-based fintech lender, Tyme, from the Commonwealth Bank of Australia (CBA). The deal is expected to help ARCI access a banking licence which will position them to take the game to banking industry players who are way overdue for fresh competition.
Meanwhile, CBA’s enlisting of a Black Economic Empowerment compliant shareholder will certainly do a lot to improve its commercial prospects in South Africa. I have referenced Tyme’s mission in this column a couple of times before. The start-up was founded to provide affordable yet commercially viable financial solutions for the unbanked, low-income market.
In February 2015, Tyme was acquired by the CBA for a rumoured $40million (R523.16million) in a deal that came together after local venture capital and institutional investment interests either passed up on the opportunity or simply didn’t act fast enough to close out CBA.
Since CBA’s acquisition of Tyme, the Australian bank has spent a great deal of time and effort cementing key strategic relationships in South Africa, China, Vietnam, Indonesia and India, as well as overhauling Tyme’s tech infrastructure. Tyme’s value proposition is viewed by many as the most significant emergent threat to the dominance of South Africa’s "big four" lenders since Capitec Bank launched 15 odd years ago.
Doubled customer base
That’s big talk considering that Capitec Bank has reportedly doubled its customer base over the last five years while growing its market value fourfold - this despite the South African economy battling recession and household income coming under severe pressure.
Capitec’s no-frills product offering has clearly resonated with consumers who have come to appreciate that the cost of accessing financial services needn’t break the bank.
Despite being exposed to the risks of the unsecured lending market, Capitec has so far managed to stave off the negative impact of the macroeconomic downturn by staying away from tightly constrained business areas like mortgage lending and vehicle finance, which are essentially the mainstay of the country’s four biggest banks: Standard Bank, FirstRand, Barclays Africa and Nedbank. It also appears that the financial services giant, Sanlam, definitely wants in on the race to close the awkward gap between access and inclusion, in terms of the delivery of financial services.
Sanlam Investment Holdings’ recent acquisition of a 30% stake in Purple Group’s EasyEquities business for $7.5million will now enable even more previously excluded individuals to participate in the stock market. Launched in 2014, the fintech platform has seen impressive growth, largely thanks to its attractive low-cost model and the fact that it enables clients to purchase fractions of shares with no minimum threshold for investment.
It’s worth noting that prior to the sale, Purple Group disclosed that EasyEquities was yet to turn profitable, and that its operations needed to be subsidised by revenues of other business units. However, the fractional investment platform’s rapid remarkable growth could not be discounted, and that led to the decision to rope in capital from Sanlam to support EasyEquities’ growth while the business pursued profitability.
Meanwhile, the Kenyan bitcoin payments start-up BitPesa’s recent success in landing a follow-up round of investment is helping to move the needle for financial inclusion on the continent. BitPesa was launched in Kenya in 2013 and now has a footprint that spans Nigeria, Tanzania, Uganda, the DRC, the UK and Senegal.
Earlier in the year, the company raised $2.5m in their Series A, and this latest tranche of follow-on funding led by Greycroft Partners brings the total raised to $10m.
According to reports, BitPesa founder and chief executive, Elizabeth Rossiello, has said that the new funds are needed to keep up with growth that has surpassed even their most bullish projections - this, even as they have expanded across Africa and into Europe. BitPesa has reportedly enjoyed 25percent month-on-month growth over the last two years.
I imagine that the current Bitcoin surge has unwittingly aided BitPesa’s fund raising activities in some way, given how the company’s name references the wildly popular cryptocurrency.
I just wonder how they and other remittance platforms might have to innovate their business models for the sake of survival in the unlikely event that Bitcoin, or indeed, some other cryptocurrency, truly goes mainstream all around the world.
But I wouldn’t lose any sleep over that prospect just yet. Most governments and the global banking fraternity aren’t about to let that happen without putting up fierce resistance.
Andile Masuku is a broadcaster and entrepreneur based in Johannesburg. He is the executive producer at AfricanTechRoundup.com. Follow him on Twitter @MasukuAndile and The African Tech Round-up @africanroundup.