Moneta Finally Cracks Open International Ecommerce Payments System In Ethiopia

Ethiopian companies do not have the capability to accept digital payments through their digital platforms, such as websites and mobile apps, but Moneta Technologies, the fully-owned subsidiary of Fettan Holdings, Limited of Kenya, that is based in Addis Ababa, Ethiopia, has just rewritten this history. This comes after the official launch of Amole eCommerce Gateway, which accepts Visa, Mastercard, and American Express cards using Visa CyberSource infrastructure. The Amole eCommerce gateway is Ethiopia’s first to accept all three big foreign credit cards. Dashen will soon extend its acquiring partnership to include more digital payment types. Since March of this year, select merchants have had access to the Amole eCommerce Gateway.

Yemriu Chanyalew, CEO of Moneta Technologies
Yemriu Chanyalew, CEO of Moneta Technologies

“We are delighted to partner with Dashen and Visa CyberSource to launch this product that supports Dashen’s customers and over 8000 Amole merchants to accept digital payments from anywhere in the world. This partnership and technology play a pivotal role in delivering more value to merchants by linking them to more global eCommerce marketplace opportunities. In the near future, we will be offering the Amole eCommerce Gateway to other Ethiopian Banks that currently have international card acquiring licenses from international card associations,” Yemriu Chanyalew, CEO of Moneta Technologies (“Moneta”) said. 

Read also: South Africa Throws Regulation In The Way Of In-Home Service Startups

Why This Is Very Significant For The Startup Ecosystem In Ethiopia

This launch means many things, but most importantly, it means that the Ethiopian economy and tech startup ecosystem is fast opening up to the outside world. Hotels, tour and travel companies, and retailers in Ethiopia are unable to market their products and services to international customers through the internet. Customers travelling to Ethiopia couldn’t get a verified reservation and peace of mind because local hotel chains couldn’t accept international cards online to guarantee a reservation, putting them at a disadvantage. Now, local hotels in Ethiopia can now accept online payments and secure reservations thanks to Amole.

“With the Visa CyberSource payments infrastructure, businesses will accept online payments seamlessly. Consumers, tourists and visitors coming to Ethiopia will have access to a secured payment service. Moreover, the diaspora community can shop for their families and friends living in Ethiopia. All this will be carried out on a secured and risk-free online environment, said Abebe Girmay, Visa’s Country Manager for Ethiopia.

Read also:Mastercard Expands Cashless Payment Functionality for Uber MEA

“We are very excited to work with Moneta and Visa CyberSource to bring this product to the Ethiopian market, leveraging our combined assets to broaden our offering to a larger number of Dashen merchants. We believe this product will help the National Bank of Ethiopia’s goal to increase the formal forex inflows and reduce the forex cash being brought into the country which potentially ends up in the informal market.” said Asfaw Alemu, CEO of Dashen.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer

Ecommerce Ethiopia payments Ecommerce Ethiopia payments

Uber to License its Ride-Hailing Software to Three More Public Transit Agencies

Uber

Uber is expanding its software as a service (SaaS) business with three additional public transit partnerships in a pilot project starting off in the United States, and may be replicated in other parts of the world. The ride-hailing company announced that it would be selling the software that powers its ride-hailing business to transit agencies in Denver, Colorado; Cecil County, Maryland; and Porterville, California. The news comes amid Uber’s broader push into public transit.

Uber
Uber

Denver’s Regional Transportation District will start using Uber’s management software this week to manage its fleet of wheelchair-accessible vehicles, while Cecil Transit and Porterville Transit will follow in the weeks to come. For a subscription fee, these transit agencies will be able to use Uber’s “matching and marketplace technology to facilitate on-demand community rides using their own transit fleet,” the company says.

Read also:Bolt Launches Food Delivery Service to Rival UberEats in Kenya

Uber announced its first transit deal with Marin County in the San Francisco Bay Area in July 2020. As part of that deal, the Transportation Authority of Marin pays Uber a subscription fee to use its software to facilitate requesting, matching, and tracking its vehicle fleet. Cape May County in New Jersey is also a customer of Uber’s SaaS program.

Starting in late April, Ceil Transit will use Uber’s software to transport “riders in recovery seeking access to employment, essential services, appointments, and recovery programs,” Uber says. The service area is a closed loop.

Porterville Transit, based between Fresno and Bakersfield, will roll out transit vehicles with Uber’s software to members of its community in early May. Porterville previously had used a software company called Transloc, which is owned by Ford, but switched to Uber for “enhanced reliability.”

Read also:South African Government Encourages Businesses to Market to Africa’s Population

Over the years, Uber has been accused of directly competing with and poaching riders from subways, trains, and buses. Declining bus and subway ridership has been pegged to the rise of app-based ride-hailing in dozens of cities across the US. Recently, Uber has added transit directions and ticketing to its app in some cities in the hopes that by giving transit equal footing in its app, it can blunt that criticism. It also acquired an Atlanta-based company called Routematch, which sells software to public transit agencies for data management, dispatching, trip booking, and ticketing.

Read also:Appzone to Expand Banking Technology Across Africa With New Funding

Last year, Uber announced it would begin selling train and bus tickets through its app for customers in Denver. Since then, the company has integrated public transportation schedules and directions into its app for over a dozen other cities. Less than a year later, Uber says that “over 2 million riders” have tried Uber Transit.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry

Nigeria accounts for 23% of Africa’s upcoming oil and gas projects

Nigeria is expected to have 100 oil and gas projects commencing operations across the value chain between 2021 and 2025, accounting for 23% of the total project starts in Africa. New build projects dominate the upcoming projects and account for around 90% of the total projects commencing operations across the value chain, according to GlobalData, a leading data and analytics company.

Oil & Gas
Oil & Gas

GlobalData’s report, ‘Africa Oil and Gas Projects Outlook to 2025 – Development Stage, Capacity, Capex and Contractor Details of All New Build and Expansion Projects’, reveals that of the 100 projects expected to commence operations during the outlook period, petrochemicals will have the highest count with 28 projects, followed by upstream (25), refinery (24) and midstream (23).

Read also:America’s Kariya Energy to Acquire Oil and Gas Assets in Africa

Teja Pappoppula, Oil & Gas Analyst at GlobalData, comments: “Nigeria is betting on several refinery and petrochemicals projects to meet its growing domestic demand and reduce its reliance on imports. The projects also have potential to transform Nigeria as an exporter of refined products to neighboring countries.”

In refineries, the 650 thousand barrel per day Lagos I is a key project expected to start operations in 2022. Once the project begins operation, it could become the largest oil refinery in Africa. Among the upcoming petrochemical projects in Nigeria by 2025, Brass Fertilizer & Petrochemical Company Brass Methanol Plant is a key project with a capacity of 1.70 million tonnes per annum (mtpa). The new build plant has already received approval and is expected to start operations by 2025.

Read also:Mauritius Issues Africa’s First P2P Lending Licence To Fintech Startup Fundkiss

In the upstream (fields) segment, GlobalData expects 25 projects to start operations in Nigeria during 2021 to 2025. Some of the notable projects include Bonga North and Okpokunou Cluster Development. Bonga North is a deepwater conventional oil field presently in FEED stage and is expected to commence operations by 2025, while Cluster Development is an onshore conventional gas field presently in feasibility stage and is expected to start operations by 2024.

Read also:South African Government Encourages Businesses to Market to Africa’s Population

Midstream projects account for around 23% of all oil and gas projects in Nigeria by 2025. Gas processing projects account for around 39% of all upcoming midstream projects. ANOH-Seplat is one of the key projects with a capacity of 300 million cubic feet per day (mmcfd). The project is currently in the construction stage and is expected to start operations in 2022.In LNG, Nigeria Expansion is a key liquefaction project with a capacity of 7.60 mtpa and a project cost of US$7bn. The liquefaction project has been approved and is expected to start operations in 2025.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry

South Africa Throws Regulation In The Way Of In-Home Service Startups

WemTech

South Africa is not joking with domestic workers, especially following the eye-opening turbulence occasioned by the coronavirus pandemic. The country has moved in support of domestic workers, finally gazette-ing new rules under the Compensation for Occupational Injuries and Diseases Act (Coida) that will see domestic workers compensated for occupational injuries and diseases suffered by them in the course of their employment. 

WemTech
Startup

The new rules also grant domestic workers the same benefits that are payable to all other injured employees. 

Read also:Nutanix Appoints New Senior Director of Multicloud Business Development

Perhaps the most interesting part of the new rules is that from now on, all domestic workers in South Africa must now be registered with the South AfricanDepartment of Employment and Labour, the body in charge of industrial labour in the Southern African country. 

“This is to inform the domestic employees that based on the Constitutional Court Order dated 19 November 2020, domestic employees are now covered under the Compensation for Occupational Injuries and Diseases Act (COIDA). This means that Domestic employees will now be entitled for compensation in the event they are injured or contract diseases while on duty. As per the COID Act, the employee is a person who has entered into or works under a contract of service or of apprenticeship or learnership, with an employer, whether the contract is express or implied, oral or in writing, and whether the remuneration is calculated by time or by work done, or is in cash or in kind,” a part of the new law reads. 

Read also: COVID-19: What SweepSouth Is Teaching Other African Startups About Workers’ Welfare

To Be Affected By The New Rules Are In-Home Service Startups Such As SweepSouth

The new regulations require all employers of domestic workers, whether part-time or full-time, to register themselves and their employees with the Compensation Commissioner.

The new rules also state that domestic employees must be licensed within seven days of signing an employment contract with an employer. 

Under the rules, a domestic worker must also be registered by an employer as soon as possible if an employment contract already exists.

Although there is no fixed date for employers to register, they are strongly encouraged to do so as soon as possible. 

The penalties for non-registration are likely to begin after the end of March 2022.

Those would be affected most are in-home service startups in the country, such as SweepSouth. 

Last year, at the heart of the coronavirus pandemic, SweepSouth launched a R12m fund in support of workers under its care. 

Read also:Appzone to Expand Banking Technology Across Africa With New Funding

The launch of the fund was aided by a R6m contribution from the Michael & Susan Dell Foundation, which invested in SweepSouth in 2019. The aim of the investment into SweepSouth was to promote better family economic stability in South Africa by backing an organisation providing broad access to work opportunities. This initial injection of funds would enable SweepStars to receive weekly financial support in the form of top-ups of between R150 and R450 during the national lockdown period.

However, the new compensation and registration regimes in favour of domestic workers introduced by government may mean many things for the home-cleaning startup, and its cohort. 

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer

Angels Continue To Rain Funds In Egypt As Kemitt Lands Six-figure Investment

This year, startups across all sectors in Egypt are making big waves, and they increasingly being backed by a growing ecosystem of angel investors. The latest to join the league is the Giza, Egypt-based ecommerce startup, Kemitt. The startup was backed by a group of angel investors from Saudi Arabia. The funds will be used to grow the company’s team and operations, develop its technology, and expand into new markets in the region, beginning with Saudi Arabia.

Mahmoud Fouad, co-founder and CEO of Kemitt
Mahmoud Fouad, co-founder and CEO of Kemitt

“We are very excited about the opportunity this investment gives us. It will enable us to scale up our operations and expand to new markets,” said Mahmoud Fouad, co-founder and CEO of Kemitt, adding that their goal is to put Kemitt as a first choice when the customer considers furniture shopping.

“We invest in technology to drive growth, as we have prioritised solving logistical pain-points to ensure a smooth journey from the factory to customers’ houses. We believe that digitising the furniture industry in the region is crucial for the local economy,” Fouad added.

Read also: Ghana-based VC Again Leads A $200k Seed Round In Fintech Startup BezoMoney

A Look At What The Startup Does

Kemitt’s online marketplace, which launched in 2017, gives consumers access to over 15,000 SKUs, as well as on-demand manufacturing and 7–12 day delivery services to their doorstep, saving them time by completely digitising the shopping experience and using the best technology available, while also providing all payment and financing options.

Read also:Ghana-based VC Again Leads A $200k Seed Round In Fintech Startup BezoMoney

By collaborating with a network of suppliers, Kemitt will be able to extend its range and scope across Egypt while maintaining the highest quality and lowest price.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer

Toyota Tsusho Comes For Healthcare And Retail Startups, Invests In Africa-focused VC Samurai Incubate

Toyota Tsusho

Toyota Tsusho, the leading investor in the African mobility space, has moved to expand its investment focus in Africa beyond mobility. To that effect, the Japanese VC has announced today that it had invested in Samurai Africa Fund 2 (a fund run by Samurai Incubate Inc.) in March 2021. 

Mobility 54 Investment SAS (“Mobility 54”) was founded in October 2019 by Toyota Tsusho and its subsidiary CFAO SAS (“CFAO”), a company dedicated to the investment and financing of mobility-related startups in Africa. Mobility 54 has invested approximately 12 million USD (approximately 1.3 billion JPY) in four startups since its inception, with the aim of accelerating the MaaS market in Africa and addressing issues in the mobility sector.

Toyota Tsusho
Toyota Tsusho

Samurai’s latest investment is aimed at scouting startups in fields other than mobility, such as healthcare and retail, as well as collaborating with Mobility 54 in the field of MaaS. Toyota Tsusho will contribute to the resolution of social problems in Africa through its “WITH AFRICA FOR AFRICA” ideology, which aims to evolve alongside Africa’s citizens and communities.

Read also: A New $18 Million Fund From Japanese VC Launched For African Startups 

The Target Of The Fund Under The Partnership

  • The fund targets startups raising Pre-Series A rounds in Nigeria, Kenya, South Africa, Egypt, among other countries. 
  • The ticket size for investments, for this fund, will range between 100k to $735k for startups developing solutions in the Finance & insurance, logistics, medical & healthcare, retail & e-commerce, energy, agriculture, transportation & mobility, and entertainment sectors. 
  • The total fund under the partnership is now $19m. 
  • The previous fund of Samurai Incubate Africa made 18 seed-stage investments under the name of Leapfrog Ventures in Africa during 2018 -2019. The USD 4.5 Mn fund actively rolled out equity money in startups based out of Kenya, Uganda, Rwanda, South Africa, Ghana and Nigeria.
  • Particularly, the fund invested invested $50 000 in Kenyan startup Biasharabot in 2018.

How To Apply To The Fund

Click here.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer

Coinbase Heads for $91 billion Valuation as Indicative Share Price Surges

Coinbase Global Inc

Cryptocurrency exchange Coinbase Global Inc. was set to be valued at more than $91 billion in a stock market debut that marked another big milestone in the development of bitcoin and other digital assets. At 10:21 am Eastern Time, the company’s stock was indicated to open at $350, up 40% from a reference share price of $250, making its implied valuation more than three times that of Nasdaq.

Coinbase Global Inc
Coinbase Global Inc

Coinbase’s listing, launched directly to investors instead of through a traditional IPO process run by banks, marks a victory for digital currency advocates in a year that has seen a clutch of mainstream, top-tier firms dive into the space.

The San Francisco-based firm’s value has surged in line with bitcoin’s own huge gains: the world’s best known digital currency hit a record of $62,741 on Tuesday.

Read also:Boomplay Fights Spotify’s Africa Entry, Expands In 47 More Countries

In a direct listing, no shares are sold ahead of the debut and the company lists directly on the exchange. US gaming platform Roblox Corp. also went public through a direct listing last month.

Coinbase had confidentially filed paperwork to go public in December.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry

African Hubs Network AfriLabs Expands With 28 New Members

Anna Ekeledo, executive director of AfriLabs

Pan-African innovation hub network AfriLabs has added an additional 28 new members to expand its total membership to 268 across 49 countries. Founded in 2011, AfriLabs is a network of technology innovation hubs on the continent, with a mission to support the growth of these hubs and their communities to raise high potential entrepreneurs that will stimulate economic growth and social development in Africa.

Anna Ekeledo, executive director of AfriLabs
Anna Ekeledo, executive director of AfriLabs

The new additions to its network mean AfriLabs has extended its reach to seven new cities and one new country – Comoros. Joining the network from Western Africa are Ilorin Innovation Hub, Unimak Workflow Innovation Hub, Duapa Werkspace, 8thGear Hub, Cirkle Labs, Equilibrium Zone, Fobespace Hub, The Hub, GoGlobal Hub, Dare to Innovate, Vision Incubation Hub, Noni Hub, Impact Cove and The Hague Institute for Innovation of Law Innovation Hubs.

From East Africa, new members are Institute of Innovation, Technology, and Entrepreneurship (SIMAD University), Muni University Business Incubation Centre (Muni University), SNDBX International, WITU Hub, DICOS Incubator LLP, Com’Work, Nakuru Box Innovation Centre and The Hague Institute for Innovation of Law Innovation Hubs.

Read also:South African Government Encourages Businesses to Market to Africa’s Population

From Central Africa, WETECH, Youth Business Cameroon (YBC), Startup Factory Djibouti, Kum’lab, and Akewa Accelerateur became a part of the AfriLabs family, while Innovation Co-Lab Durban, and The Hague Institute for Innovation of Law Innovation Hubs join from Southern Africa. Also added are 249 Startups and The Hague Institute for Innovation of Law Innovation Hubs from Northern Africa. 

“We are always excited when we admit new members into our network. A journey that started 10 years ago, we still remain true to our core values of building and supporting a community that powers innovation in Africa,” said Anna Ekeledo, executive director of AfriLabs.

Read also:Ghana-based VC Again Leads A $200k Seed Round In Fintech Startup BezoMoney

“The future is full of opportunities for the African tech ecosystem because of communities like ours, and our arms are always open to innovation hubs that want to be a part of us.”

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry

IMF Supports Digital Money for Cheaper Cross-Border Payments and Remittances

Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva

The Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, has called on governments and individuals to adopt digital money for “faster, easier and cheaper” remittance and cross-border payments. Georgieva said this at a virtual workshop on how digital money can facilitate remittances. At the meeting, she spoke extensively on the potential of decentralised money to increase remittance flows to developing countries and “reshape cross-border payments”.

The IMF boss’ call came on the heels of the historic disruption of the traditional payment by digital currencies. The disruption is considered a major threat to traditional payment channels.

Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva
Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva

Georgieva said the adoption of digital currencies as an option for sending and receiving money is a “revolution” that leaves many countries with little or no choice. “Last October, The Bahamas launched the Sand Dollar, the world’s first central bank digital currency. Many other economies are exploring their pilot programmes. Other forms of digital money, such as privately issued stable coins, are increasingly being used for cross-border payments. We are witnessing a revolution in digital money that could make remittances easier, faster and cheaper,” she said. 

Read also:Covid-19 More Devastating Than Global Financial Crisis Says IMF/World Bank Report

According to her, a cheaper remittance transfer would help poor households across the world to cope with the impacts of COVID-19 and the danger “we face from growing divergence across countries”. 

Divergences in access to vaccines, in recoveries from the pandemic and access to a digital future, she noted, are key challenges the world must find a smart way to address, stressing that remittances have always played a key role in improving the lives of people in developing economies and supporting economic activity. 

“As we look for ways to address the challenges of economic divergences across countries, we need to use every tool we can to support those most affected by the pandemic. And with the risk of a growing digital divide between rich and poor countries, we must also ensure that all countries benefit from the latest innovations in digital money and payments, particularly remittances,” she said. 

Read also:South African Government Encourages Businesses to Market to Africa’s Population

The IMF chief executive said that “new forms of digital money could provide a parallel boost to the vital lifelines that remittances provide to the poor and to developing economies”. 

She said the right frameworks are required for peer-to-peer transfers of central bank digital currencies or privately-issued stable coins, which “could lead to shorter payment chains, faster transactions and more competition among remittance providers”. 

She said the biggest beneficiaries would be vulnerable people sending small value remittances: those most at risk from being left behind by the pandemic. 

Georgieva added: “With such digital disruption, however, also comes risk. We can address the risks posed by digital money by focusing our efforts on three areas. First, new forms of money must remain trustworthy. They must protect consumers, be safe and anchored in sound legal frameworks, and support financial integrity. 

“Second, domestic economic and financial stability must be protected by carefully designed public-private partnerships that underpin the provision of digital money, including fair competition. Third, frameworks should be geared toward ensuring the international monetary system remains stable and efficient.” 

Read also:WemTech Spring 2021 Program for African Women in Technology and Engineering Calls for Applications

She said the world must do everything to build a payment system that works for all countries and avoid a “digital divide”. She suggested that reserve currency configurations and backstops would necessarily evolve smoothly. 

The IMF, she noted, would offer itself as a transmission line of best practices, capacity building and policy development as the world transitions into a decentralised money era. “With our mandate to safeguard monetary and financial stability, the IMF has an important role to play in supporting our members to deliver on these priorities, and we are ramping up our capacity. In doing so, we will continue our close collaboration with key stakeholders – including the Financial Stability Board, the Bank for International Settlements, the World Bank and industry players and each must leverage its comparative advantages,” she said.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry

A Budget to Turn South Africa into an Investment Dust Bowl

President Cyril Ramaphosa

By Chris Hart

When President Cyril Ramaphosa’s launched his drive to secure new investment in South Africa of R1.2-trillion it appeared that investment was rightly regarded as the best way to tackle the country’s most pressing economic and social challenge — the world’s worst unemployment problem.

So far the investment conferences have seen pledges of about half this amount, but will it make enough difference? Big companies starting big projects do bring big benefits, but the government itself needs to come to the party, creating the optimal conditions for companies big, small and embryonic to start new ventures.

President Cyril Ramaphosa
President Cyril Ramaphosa

Despite the president’s investment red carpet, the wider economy remains an investment dust bowl.  And last month’s budget presented by finance minister Tito Mboweni lacked a basic understanding of how to dig the economy out of this dusty hole.

Read also:South African Government Encourages Businesses to Market to Africa’s Population

To invest, you have to have capital. To bring new economic activity into existence, you have to have investment. However, capital flows naturally to where it’s easiest to invest. Just as water flows downhill, investment capital flows to the best prospects.

And investment capital is created via savings. When we tax the key pillars of investment — capital formation and savings — it is the equivalent of eating the seeds you need to plant for growth. Hence my fear of an economic dust bowls.

Wealth taxes, capital gains tax, transfer duties on property and death duties are all diverting capital from where it is needed into a fiscus where it does not lead to greater production — eating those seeds at an alarming rate.

Meanwhile, some taxes raise the investment hurdle rate.  Dividend taxes and company taxes. To his credit, Mboweni has promised a lowering of corporate tax, just not for a while. At the same time as he giveth, he will of course taketh away. Targeted investment incentives have their critics, and I have been one of them. However, when thoughtfully implemented they have been shown to boost investment, create jobs and support skills training, the greening of the economy and BEE.

Read also:Sparkle Business Launches Mobile App to Support SMEs in Nigeria

Do they need a thorough review? Oh, yes. But what Mboweni has announced is not a pruning exercise; he is wielding a chainsaw. When a batch of incentives schemes is due to expire, the undertakers will be summoned and they will be laid to rest. No further review, no appeals process. 

There has been an outcry about one investment incentive in particular that supports venture capital, which is called Section 12J. It is due to close down on June 30 when a so-called sunset clause is triggered. The reason given for the termination is that some of the projects that have enjoyed S12J support do not resonate with what the National Treasury had expected. Some, but not all. There are hundreds of others now on death row that tick every box in terms of transformation, job creation, rural development and skills development.

The mega projects that are rewarded by a handshake from the president (or were in pre-Covid days, before handshaking became a mortal sin) cannot and must not be dismissed. However, it is the start-up firms, the small businesses, that are our future in terms of significant potential job creation, growth, rural development and so on.

Investment incentives

Being slapped with a big corporate tax bill is just a dream for a start-up company. Before it starts to pay tax it needs to start producing, to start selling, to start growing, taking on new employees. These are the businesses that need investment incentive support today, so that tomorrow they can produce the next generation of Elon Musks and Mark Shuttleworths — hopefully a generation that will remain in SA and use its talents to help drive our economy forward.

Not only is it damaging to remove a raft of business-friendly support measures, but it creates uncertainty.  Here today; gone tomorrow. What happens the next day? Dust! Such policy uncertainty is the biggest reason some people — local and foreign — don’t want to invest in SA.

Read also:After A Major Pivot, Ugandan Fintech Startup Numida Raises $2.3m Seed Round

The government sets up a whole new scheme. The private sector invests in the channel that is created — but then the bureaucrats shut it down on a whim, without proper consultation. They crush it like a bug. Arbitrary decisions on whether a business can operate are bound to damage investor confidence, and the reasons given for the Treasury’s S12J U-turn don’t ring true.

In a normal world, the Treasury would be right. Some S12J projects involving the establishment of hotels, game lodges and similar property investments might not have looked entirely appropriate as community development schemes. But we are not in a normal world. This is a world where the wrong policy mix drives people to invest offshore.

S12J has been shown to stop this money going offshore; the cash has been invested onshore because of this incentive. A few S12J investments may have a tinge of elitism, but even they do create jobs and uplift a micro-economy.

It is worth recalling that when S12J was launched the architects never explicitly said what was wanted. No guidance on preferred investments was offered, other than a specific list of what was prohibited, such as alcohol or tobacco schemes. 

Read also:WemTech Spring 2021 Program for African Women in Technology and Engineering Calls for Applications

A list of unapproved and approved investments may have lurked in the dark subconscious of government thinking, but the investment community didn’t have many clues on what was favoured or not favoured.

Important as it is, the president’s investment drive looks at the big picture but ignores the smaller picture, where the real prospects for job creation lie. The PR campaign that SA is open for business rings less and less true when you see the latest budget.

Is it really wise for the Treasury to insist there is a choice between lowering corporate tax and continuing incentives, such as S12J for venture capital investment? When we look at the scale of unemployment in SA, it’s hard not to conclude that we need both.

Unless our vision reaches no further than a dust bowl.

• Hart is executive chair of Impact Investment Management

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry