South Africa - Afrikan Heroes

How South African Startups Can Make Profit Giving To Charity

July 4, 2019

For South African startups that are still operating below R79,000 ($5700) between now and 31st of March, 2020 they can still benefit from zero tax on any income they make from their businesses. However, for those operating well above that monetary range — of R79,000 — they would need to pay taxes to avoid being fined. For the latter group of startups, one of the strategies to get around taxation and increase profitability is by donating to charity.

Here is how:

Which Organisations are Considered Charity In South Africa?

For South African businesses, charity organizations are registerable as Non-Profit Organisations (NPOs). NPOs in South Africa are governed by the Non-Profit Organisations Act (NPO Act).

The Act defines an NPO as either a trust, company or other association of people established to serve a public purpose — essentially, those in need.

However, the South African Revenue Service (SARS) usually urges NPOs to register as Public Benefit Organisations (PBOs) in terms of Section 30 of the Income Tax Act (ITA). Doing so will enable them to apply for the relevant tax exemptions afforded in terms of Section 18A of the Income Tax Act of South Africa, where required.

The Implication of Donating To Registered PBOs

For startups donating to registered PBOs in South Africa, they can claim tax deductions up to certain limits as long as the donations meet the expectations of Section 18A of the Income Tax Act, which may include evidence of a Section 18A certificate given to the donor.
A donation is valid if it is made in good faith, and is a voluntary, gratuitous gift given out of generosity, without reciprocal obligations or personal benefit for the donor. The donor may also not impose conditions that could enable them to derive some direct or indirect benefit from the donation.
The deductible portion of the donation is capped at 10% of the taxable income of the donor. That is, for each tax season, only 10% allowance on donation can be claimed as deductible tax.
Excess donation may be rolled over as a deductible donation in the subsequent year of tax assessment, with donor companies,
Consequently, donations and bequests made to registered PBOs are also not subject to donations tax and/or estate duty.
Similarly, assets donated or bequeathed to registered PBOs aren’t subject to capital gains tax.
Registered PBOs, themselves are exempt from income tax — certain receipts and accruals from trading or activities carried out by a PBO may, however, be taxable.

Running A PBO Itself Attracts Tax Incentives

Non-Profit Companies

For non-profit companies — governed by the Companies Act — in South Africa (PBO, etc), they may have all the benefits of juristic personality, which may include the protection of directors from personal liability.

However, since there is a total prohibition on the declaration of dividends in a not-for-profit company, shareholders will not receive any form of dividends.

A disadvantage of setting up this form of PBO, however, is that it’s administratively intensive, hence may attract higher costs

Image result for This is who is paying South Africaâs tax as at 2017 — This is who is paying tax in South Africa. In terms of revenue sources, personal income tax accounts for 38% of revenue, with value-added tax making up 25%. Companies tax accounts for 18%,

Non-Profit Trusts

Non-profit trusts — governed by the Trust Property Control Act — in South Africa can only apply for tax benefits if it complies with the relevant requirements of the ITA.

Trusts in South Africa are governed under the Trust Properties Control Act and common law. A trust can be established for private benefit or for a charitable purpose. To determine whether a trust qualifies as a charitable trust under South African law, a grantmaker must look to the trust deed.

A trust is created when a property is transferred by a trust deed. The trust then manages the property for the benefit of others or for the achievement of a particular goal.

The most significant advantage of a non-profit trust is its flexible structure — it can be used for a variety of purposes.

Another benefit of a non-profit trust is that its formation requirements and ongoing obligations are less onerous than those of a non-profit company, and it may be less costly to run.

A disadvantage is that a non-profit trust doesn’t have a separate legal personality. Trustees may, therefore, be protected from personal liability only to a limited extent.

What It Takes To Approve Tax Benefits for Public Benefit Organisations

To qualify for approval to benefit from tax deductions, the PBO has to undertake and support particular public benefit activities, including stipulated welfare and humanitarian; healthcare; land and housing; education and development; religion, belief, and philosophy; cultural; conservation, environment, and animal welfare; research; and sports activities.

These tax benefits are available to any individual or company making a bona fide donation to a registered PBO.

Bottom Line

For smart startups with the right tax strategies, this is one way of becoming some percent more profitable if properly utilized.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.

Facebook: https://web.facebook.com/Afrikanheroes/

South African Digital Lender Lulalend Raises $6.5 Million In New Funding

June 26, 2019

South African startup Lulalend has just raised a $6.5 million in its Series A round of funding to, among other things, grow its loan book.

“The biggest thing is strengthening our balance sheet so we can access traditional debt funding to grow our loan book,” CEO Trevor Gosling said.

The Funding At A Glance

The funding was led by IFC and Quona Capital.
As part of the $6.5 million Series A, investor Quona Capital (which is sponsored by fintech organization Accion) will join LulaLend’s board.
LulaLend co-founder Trevor Gosling said the startup could consider expansion in the future but will remain focused on South Africa for now.
Lulalend will use the round to build its tech and data team and improve its ability to reach more SMEs in South Africa, according to CEO Trevor Gosling — who co-founded the startup in 2014 with Neil Welman.

“What we’re trying to achieve is building a $100 million loan book as quickly as possible and that’s what this raise is assisting us with,” Gosling said.

“We believe if you build a quality business opportunities will present themselves, whether it’s through a strategic partnership or an IPO or whatever makes sense at that time.”

The Idea of Lulalend

Lulalend uses an online based application process and internal credit metrics to provide short-term loans to small and medium-sized businesses that are often unable to obtain working capital.

Lulalend’s loan sizes range from around $1500 (≈ 20,000 South African Rand) up to $70,000, for 6 to 12-month tenors, requiring monthly payments of one-sixth or one-twelfth the total loan with monthly costs of 2 to 6 percent.

The most common loan is around $10,000 (≈ 148,000 Rand) over a 6-month term for a cost over the principal of roughly $1700, according to Gosling.

SMEs can apply online and need a bank account to receive a loan disbursement. A high percentage of Lulalend’s approvals are processed automatically — without requiring manual due diligence — using the company’s proprietary credit scoring tech.

Loans by sector for the startup run pretty evenly across online commerce companies, manufacturing and distribution type businesses, and professional and business services firms.

“When we set up the company the biggest piece within the automation that we’ve had to solve for is the underwriting component and ability to score companies,” Gosling said.

The startup has an internal database, developer team, and operates on Microsoft’s Azure cloud services. Co-Founder Neil Welman is the company’s CTO and brings previous experience in financial credit risk analysis.

That internal ability to assess loan risk and process loan applications (largely) straight through is how Lulalend is able to serve an under-served SME market. For many big South African banks, that require traditional due diligence and collateral, booking small loans doesn’t make economic sense, according to Gosling.

“With a very manual credit process and little automation, it doesn’t make…it….profitable to do $5000 loans,” he said.

Why Invest In Lulalend?

On why the fund invested in the startup Quona Capital Partner Johan Bosini said:

“We believe Lulalend’s tech-enabled scoring, combined with their ability to provide funding in a quick and transparent way, has the potential to…catalyze SME growth in South Africa.”

Lulalend does not release info on revenue or loan portfolio size, but Gosling said the company has a loss-rate below 4 percent and has reached profitability — something confirmed in the round due diligence process.

On the market for Lulalend’s business, Gosling highlighted IFC numbers indicating a $23 billion financing gap for South Africa’s SME’s — which are estimated to contribute 34 percent of the GDP for the country of 56 million.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.

Facebook: https://web.facebook.com/Afrikanheroes/

Travelers To South Africa Would Need e-Visa By October This Year

By October 2019 you would need an e-visa if you are interested in traveling to South Africa. This is because South Africa has concluded all plans to reform its current visa regime.

“We’re now at the stage where we’re doing functional testing, once that’s done we’ll do a proper pilot with a few countries,” said South Africa’s Home Affairs acting director-general Thulani Mavuso.“Once that’s completed we’ll go into production.”

With this, South Africa said it is targeting people with highly sought after skills who will boost investment in the country.

“They [e-Visas] provide predictability, people will be able to stay longer in South Africa; people will be able to study etc. The realisation of the visa regime will literally allow us to double our tourism numbers internationally,” said South Africa’s Department of Tourism spokesperson Blessing Manale.

The Implication of This

Currently, all visitors to South Africa have to spend several hours or days at several South African missions overseas in order to get visas or at the port of entry into South Africa. This is even made worse because the port of entry visas are not issued on arrival at South African ports of entry to foreigners who are subject to South African visa control — such foreigners arriving without visas shall be refused entry into the Republic of South Africa and placed on return flights.

South Africa Grows Tourist Arrivals for 2018

But all that is about to change. With an e-Visa which can, of course, be obtained easily anywhere with an internet connection and which saves time that you would otherwise spend on visa applications at South African foreign missions or at the ports of entry into South Africa (if you are eligible), access to South or denial from visiting South Africa can be stamped right from the comfort of your home.

Manale was merely saying what was obvious. South Africa’s visa regime had previously been one of the constraints for tourism, and the roll-out of the e-visas will be beneficial for both tourists and for the local economy. The system will also save people a lot of time as they spend much less time at airports and waiting for administration approval.

It Doesn’t Stop At e-VISA, New e-Gates Are Coming

With e-Visa follows e-gates. South Africa’s Home Affairs is also planning to pilot new e-gates at a number of South African airports in 2019.
The gates will first be piloted at Cape Town International Airport and will form part of the implementation of the Biometric Movement Control System (BMCS).
A further rollout will be done in a phased approach, with OR Tambo, and King Shaka International airports to follow.

Eight of the top ten countries who visit South Africa come from states that don’t need visas to enter the country. More than two-thirds of all the country’s visitors come from these ten countries. Source: Statistics South Africa

“The broad objective of the project is the facilitation of movement of low-risk travellers through a self-service solution, hence freeing capacity for the assessment of high-risk categories by an immigration officer,” the spokesperson said.

“In line with the risk-based approach to managing migration, the first phase will focus on South African passport holders (excluding minors).”

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.

Facebook: https://web.facebook.com/Afrikanheroes/

Only About 28% of Small Businesses In South Africa Have Websites

June 23, 2019

Hard as it may seem, the era of internet disruption is already here and South African small businesses who are not prepared to take these trends seriously may soon be in for a surprise. From the recent survey conducted by GoDaddy, only half of the South African small businesses reported either having their own website (28%) or are planning to build one soon (22%), while around 42% said they rely solely on social media platforms.

The GoDaddy Global Small Business Research Survey was conducted in April and May 2019 in Australia, Canada, Germany, Hong Kong, India, Mexico, South Africa, Turkey, United States, and the United Kingdom.

The GoDaddy Global Small Business Research Survey Is Interesting In Many Ways

GoDaddy also looked at the attitudes of small business owners. Here are some of the key findings:

Small business owners in South Africa value the flexibility of running their own business, with nearly half (48%) saying it’s the best aspect of being an entrepreneur. For 13% of respondents, the money they can make is the biggest plus of running their own small business, while 12% cited helping the world to solve a problem;

On the flip-side, 32% said that the risk of failure and uncertainty about the future is the worst thing about being a small business owner;

Encouragingly, 91% of South African respondents said they would start their own business if they had to make the choice again knowing what they know now, and 84% reported they are happier since becoming an entrepreneur;

The skills shortage is a major challenge for small South African businesses, with 76% saying it is somewhat hard, hard, or very hard to find talented workers;

57% of small South African businesses serve mostly local customers (within 80 kilometers of their location) and only 10% serve mostly international customers;

41% of small business owners worked for a corporate employer before setting up their own venture; 26% were working for a small business; 16% were unemployed and 16% were students.

Right Now, Small Businesses In South Africa Say The Major Problems of Running A Small Business In South Africa Include:

Insufficient Investment

Around one third (34%) identified insufficient investment as a significant obstacle to growth, followed by failure to keep up with technology (20%) and cyber-security risks (13%).

Instability

Almost half (46%) of South African small businesses cited political instability and social turbulence as may be caused by change, including economic, technological or cultural factors as a major challenge to their growth prospects.

Cyber Attack

While few small businesses (7%) in the South African sample reported being victims of a cyber-attack, for those who did, the consequences were severe.

Those who were attacked reported that it shut down their business for some time; customers couldn’t reach them. They had to spend money to repair systems, and they lost access to accounts needed to service their customers, the survey found.

Technology and Disruptions

One of the biggest issues facing workers globally is the rise of automation, artificial intelligence and robot disruption that raises concerns about the future of jobs.

However, the vast majority of small business owners in South Africa believe they are insulated from those risks — 70% felt protected against job loss from these technology developments.

Studies show that between 70–80% of people research a company online BEFORE visiting the small business or making a purchase with them

While technology disruption is likely to pose challenges, it also can reduce the barrier to entry to create a small business.

Local small businesses were least likely to have a website among the countries in the survey, and the most likely to rely on social channels, the survey noted

Optimism In The Face of Challenges

Even with these challenges South African small business owners remain optimistic, with 76% reporting they expect to grow at least 25% in the next three years, according to the GoDaddy Global Small Business survey.

Research firm Savanta conducted the field research of the 4,505 small businesses in the countries. The South African respondents comprised companies with less than 25 employees.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.

Facebook: https://web.facebook.com/Afrikanheroes/

South Africa ’s ‘Uber of Cleaning Services’ Gets $2 Million Investment From Naspers

June 21, 2019

Startups across Africa are having a field day raising funds for their businesses. The latest to join is sweepSouth, South Africa ’s ‘Uber of cleaning services.’

The Deal At A Glance:

The investment is from internet giant Naspers’s Foundry investment fund for South African startups. This is the first investment Naspers Foundry would be making. With a $2 million (R30 million) investment in the gig economy startup SweepSouth, Naspers’ Foundry is making a big bet.

“The investment kicks off Naspers’ commitment to supporting talented and ambitious entrepreneurs in South Africa who are using technology to improve people’s daily lives,” said Naspers chief executive Bob van Dijk.

“We are inspired by entrepreneurs like Aisha and Alen who use innovative technology to improve people’s lives. We know what it takes to scale tech businesses, and the team is looking forward to working together with SweepSouth to help them do that.”

Naspers Foundry is a $98 million (R1.4 billion) fund that was announced last year as part of the South Africa Investment Conference last October, held by South African President Cyril Ramaphosa to spur investment into the country

The Business Is To Simply ‘Clean’

Founded in 2013, the Cape Town-based startup is an online cleaning service for domestic cleaners in South Africa’s major urban centers, founded by couple Aisha Pandor and Alen Ribic, who invested their savings for their children’s university studies in the startup after they struggled to find a cleaner.

The startup is often referred to as the “Uber of cleaning.”

SweepSouth has reached $7 million (R100 million) in revenues in the past year.

“We went from the two of us working around our dining-room table — both of us sitting all day and working on this business plan — to going from a few domestic workers we were interviewing ourselves,” Pandor has said, and “even went from cleaning houses ourselves to having 11,000 domestic workers on the platform”.

Pandor said SweepSouth was “ecstatic” about the investment and aims to use it to expand into other home services and growing beyond the South African market.

“We are proud to have provided employment opportunities for thousands of people, many of whom are single mothers. To be able to bring these opportunities to a new region in South Africa is both rewarding and exciting,” said Pandor, who is the daughter of South African cabinet minister Naledi Pandor, who is minister of international relations and cooperation.

“We see ourselves as an emerging market-focused platform that aims to serve the many professionals who don’t have the time to source the services we provide, whilst also creating meaningful employment opportunities.”

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.

Facebook: https://web.facebook.com/Afrikanheroes/

New Funding Round Opens For Small Businesses In South Africa

June 18, 2019

Small businesses in South Africa now have a new source of funding to support their growth. The CDI Growth Fund, which is supported by National Treasury’s Jobs Fund of South Africa is offering small businesses a chance to benefit from its R12.8 million grant.

Who May Benefit From The Fund?

To qualify to benefit from the CDI Growth Fund, the business must specifically:

Be South African-owned business, with the controlling interest of the enterprise (51% of the issued ordinary share capital). The business must be held by South African citizens with valid a South African ID or a South African Registered legal entity itself controlled by South African citizens with valid South African ID.
Operate within South Africa, including but not limited to projects, programs or enterprises of the business.
Be an existing business, at least 1 year old (preference will be given to businesses that have been trading for 2 years or more) with turnover or assets above R1m.
Match 20% of the contribution of the Fund through a cash contribution
Must create one job for every R21,000 grant investment.
Be tax compliant

The table below gives you an idea, of how many jobs are required for a given amount of grant funding.

Additionally, you must:

Not be insolvent or currently under debt administration
Be willing to provide financial statements and all supporting documents required
Commit to training new employees

Once your application is successful, you will sign a contract and report on progress and impact to the Fund administrators on a quarterly basis during and for a two-year period after the project completion.

Application Requirements

Applications can only be made online on the CDI Capital website on or before 12 July 2019 at 17:00.

CDI Growth Fund At A Glance

The CDI Growth Fund is managed by CDI Capital, which was incorporated as a subsidiary of the Craft and Design Institute (CDI) in 2016 to catalyze funding for SMEs.

The funding has been enabled through contributions by the National Treasury’s Jobs Fund, the Technology Innovation Agency (TIA), and the Western Cape Department of Economic Development and Tourism (DEDAT).

Since its launch in 2017, it has already contracted with 38 SMEs, who have collectively created over 160 jobs.

The Fund is in the second year of a five-year disbursement period.

CDI Capital CEO Lesley Grimbeek said that the grant funding they received has had a tremendous impact on their growing business.

“We have seen really rapid growth in the past four years, and in the next two years we are determined to have a facility four times the size of what we currently have, creating between 250 and 300 jobs and bringing our amazing product right across South Africa.

“It’s been a pleasure working with the CDI’s Growth Fund, and it has been very exciting to see the impact it has made in such a short time. We have been able to purchase equipment that we could not have afforded otherwise, and through this we have been able to create more jobs.

“To date, we have created ten new jobs in the factory, and we have the intention of at least another 12 to 13 new positions by the end of the year,” said Grimbeek.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.

Facebook: https://web.facebook.com/Afrikanheroes/

Foreign Investment In Africa Increased By 13% With South Africa, Congo, Ethiopia, Ghana Leading The Largest Investment

June 14, 2019

More foreigners are starting to commit more funds to Africa by way of investment. African countries put together saw a 13% inflow of foreign investment in 2018 alone according to the United Nations Conference on Trade and Development. Aggregate investment volumes climbed to $32 billion, challenging a global downward trend and reversing two years of decline.

Which Countries Foreigners Are Choosing To Invest In

At the head of all these are some African countries which performed better than others. A breakdown of the performance of African regions and countries is as follows:

The Southern Africa region performed the best, taking in FDI of nearly $4.2 billion, up from -$925 million in 2017.
Foreign investment in South Africa more than doubled to $5.3 billion. Though much of the South African jump came from intracompany loans, new investments included a $750 million Beijing Automotive Group plant and a $186 million wind farm being built by the Irish company Mainstream Renewable Energy. President Cyril Ramaphosa, who took office last year pledging to revive the economy, is seeking to attract $100 billion in FDI to Africa’s most developed economy by 2023.
Investments in northern Africa jumped seven percent or $14bn from the previous year. This increase in FDI helped to offset less investment in Egypt, which was down eight percent. However, despite the decline in FDI for Egypt, UNCTAD data shows that the country was still the largest recipient of FDI continent-wide.
Ethiopia remained East Africa’s top recipient of FDI at $3.3 billion, despite an 18% drop compared with the year before. Kenya, another East African country, received $1.6bn worth of FDI. These investments were mainly in manufacturing, hospitality, chemicals, and the oil and gas sector.
Generally, Kenya, Uganda, and Tanzania all saw increases in FDI inflows. Foreign investment in Uganda jumped 67% to a record $1.3 billion, boosted by the oil and gas development of a consortium that includes France’s Total, CNOOC of China and London-listed Tullow Oil.
Ghana, which is in the midst of an oil and gas boom and saw inflows of $3 billion, making it West Africa’s leading destination for foreign investment. Italy’s Eni Group was behind Ghana’s largest greenfield investment project.
By contrast, inward FDI to Nigeria, a major oil producer, plunged 43% to $2 billion. Investors were put off by a dispute between the government and South African telecom giant MTN over repatriated profits. Banks HSBC and UBS both closed representative offices there in 2018.

**Op investor economies in Africa, 2013 and 2017**
(Billions of dollars) Source: UNCTAD

AfCFTA Is Going To Be A Game Changer

Much like the European Union, the newly ratified African Continental Free Trade Area Agreement could be a huge game changer on FDI, especially in the manufacturing and services sectors.

“The ratification of the African Continental Free Trade Area Agreement could also have a positive effect on FDI, especially in the manufacturing and services sectors,” the report said.

The AfCFTA aims to eliminate tariffs between member states, creating a market of 1.2 billion people with a combined GDP of more than $2.2 trillion.

Also the development of new mining and oil projects, a new U.S. development-finance institution could further boost foreign direct investment (FDI) in 2019, the report said.

**Africa: economies with the most SEZs, 2019**
(Number of zones) Source: UNCTAD

Again, the creation of the U.S. International Development Finance Corp could help support FDI inflows this year. A replacement for the Overseas Private Investment Corp, it will have a budget of $60 million and a mandate to make equity investments.

Right now, Africa stands in sharp contrast to developed economies, which saw FDI inflows plunge 27% to their lowest level since 2004, the United Nations Conference on Trade and Development wrote in its “World Investment Report”.

**African FDI Inflows: Top 5 Recipients**
(Billions of dollars). Source: UNCTAD

Comments

This report shows Africa is continuously becoming a new market for international investors. Indeed, this new report shows Africa is defying the current slowdown in global foreign direct investment. In fact, for the third year in a row, foreign direct investment (FDI) is down all over the world, but not in Africa. In 2017, France was the top foreign investor in Africa, followed by the Netherlands, the United Kingdom, and the United States. Critically, UNCTAD’s data shows that from 2013 to 2017, Chinese FDI in Africa grew 65 percent, only topped by the Netherlands, for which FDI was up more than 200 percent. Most African countries are also resorting to creating zones. In fact, in 2018, Burkina Faso, Côte d’Ivoire, and Mali launched an SEZ spanning border regions of the three countries. Similarly, Ethiopia and Kenya recently announced their intention to convert the Moyle region into a cross-border free trade zone.

UNCTAD notes that stronger regional cooperation also creates scope for more ambitious regional and cross-border zones.

This is exactly what AfCFTA is proposing. So expect more inflows of FDI before this year ends, but mostly in countries that have agreed to be part of AfCFTA.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.

Facebook: https://web.facebook.com/Afrikanheroes/

Three Months After Launch, South Africa’s First Digital Bank Hits 500,000 Customers.

June 13, 2019

The stage is set for South Africa ’s new fully digital bank, TymeBank. The bank is on track to hit one million customers by the end of the year. Its current customer base is just a few numbers close to 500,000 customers.

A Look At TymeBank

If you are looking to find any physical branch of the bank in South Africa, you may have to look harder. This is because there is none. The branches exist only in the clouds, that is, the bank is only digitally focused. In February, it launched its EveryDay transactional account bundled with a savings tool called GoalSave, its MoneyTransfer solution, and its TymeCoach App, which gives consumers free access to their credit report, supported by tips on how to make better decisions about the money.

“We are planning to introduce credit products later this year, as well as an SME (small medium sized enterprise) proposition, but for now our focus is on getting simple and cost-effective banking solutions into people’s hands,” said TymeBank chief executive officer, Sandile Shabalala. “Our mission is to drive meaningful financial inclusion, by making banking more accessible to all South Africans. We see it as our responsibility to take the complexity out of banking for consumers and to give them insights into how the financial system works.

“We believe that uncomplicated banking coupled with relevant knowledge will empower people to make more informed and responsible decisions about their own financial futures. Why shouldn’t banks be more transparent with customers about what they are paying for?”

TymeBank is owned by African Rainbow Capital (ARC) Financial Services, a company within billionaire Patrice Motsepe’s Ubuntu-Botho Investments stable. It is South Africa’s first majority black-owned bank focused on retail and business banking.

ARC bought the bank from the Commonwealth Bank of Australia in November 2018.

“TymeBank brought synergies that are complementary to ARC’s existing insurance and asset management businesses. Given ARC’s focus to, mostly, invest in businesses with established client pools, we’ll be looking for synergistic opportunities to the benefit of both the client and TymeBank,” said Tauriq Keraan, deputy CEO of TymeBank.

The latest figure came from the digital bank ’s latest investor prospectus, which detailed its customer acquisition since launching in February.

Chief executive officer, Sandile Shabalala said the group is averaging 100,000 new customers each month.

After bringing on board around 40,000 clients during its ‘soft launch’ phase between November 2018 and February 2019, the bank moved to a high growth phase where it was adding 4,000 new clients a day.

The bank said that it has a total addressable market of around 21 million customers in the middle market, as well as 2 million small-to-medium enterprises, which opens up the potential for products and services it wants to introduce.

TymeBank is looking to disrupt traditional banking in South Africa whose operations are usually expensive to maintain.

“We are leveraging our cloud-based technology which doesn’t come with a legacy burden and it’s one of the many reasons we’re able to pass cost savings onto the consumer. We have built an open banking platform, which allows us to move with speed with the partners we engage with,” said Shabalala.

The Bank Is Relying On Partnership As Its Strength Both For Money Deposit Or Withdrawal

TymeBank has created a network of partners including Pick n Pay and Boxer, with the former’s Smart Shopper program now fully embedded into TymeBank’s technology stack.

“We’ve partnered with companies whose business ethos aligns with what we want to do in the market, which is to do good. The customer will always be at the centre of our banking practices and going forward we will be doing some really exciting things with our partners, it will go way beyond just occupying floor space,” said Shabalala.

The implication of joining forces with Pick n Pay and Boxer stores is that TymeBank now has access to a relatively significant distribution edge.

“By the time we complete our bank kiosk roll-out we will have 730 points of presence where customers can open accounts inside a Pick n Pay or Boxer store — we have over 500 bank-enabled kiosks in the market today.”

Even in stores without a bank-enabled kiosk, customers can still do their everyday banking transactions, TymeBank said.

As part of its acquisition strategy, TymeBank said it will further leverage its partnership with Pick n Pay and Boxer stores, which gives it access to 730 physical stores across the country, where customers can withdraw money free of charge and deposit money for just R4, said Shabalala.

“We have a strong proposition, which competitors will find hard to match right now and the tens of thousands of customers that have opened and are using their accounts are testament to that,” said Shabalala.

TymeBank is part of a trio of banks launching into the South African market in 2019, with the other two banks including Bank Zero, the brainchild of former CEO of FNB, and Discovery Bank.

Again, Rain has recently entered into a partnership deal with Tymebank to test the distribution of its SIM cards at Tyme kiosks, making it easier for its clients to sign up for a new service.

TymeBank’s Strategy Is To Make It Simple and Cheap For Customers

Indeed, signing up to the digital bank could cost little or nothing. No documents are required and no charges demanded.

To open an account, you need a South African ID number and a South African cellphone number, which the bank verifies through several questions and a One-Time PIN (OTP).

If the process is done at a kiosk, biometric data will be captured and compared to the data with Home Affairs, which is connected to the Tyme systems, and a free Visa debit card is issued immediately.

If done online, you will have access to your account, but it will be limited in how much you can transact until you go to a kiosk and “upgrade” your account (for free) to a full account through capturing biometric data and registering your residential address.

Getting a debit card is free and immediately.

Service Fee for new registration is free. There is no monthly account or withdrawal at Pick n Pay and Boxer stores, only R2 at other major retailers.

By July 2019 Customers Can Borrow From TymeBank Without Collateral

TymeBank’s CEO, Sandile Shabalala, has also told analysts and investors that the digital bank would start piloting unsecured term lending in July and a credit card in partnership with consumer lending company RCS later in 2019.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.

Facebook: https://web.facebook.com/Afrikanheroes/

South Africa: e-health Startup SmartBlade Raises $635k

June 10, 2019

E-health startup, SmartBlade has raised a ZAR9.5 million (US$635,000) funding round from the Savant Venture Fund to take its solution to market.

What SmartBlade is All About

SmartBlade is a video laryngoscope that uses a smartphone as a camera and communications device.

Once SmartBlade app is loaded onto the smartphone, it will allow the user to access the camera in the laryngoscope, which in turn allows for video viewing, storage, and transmission. In other words, the app will help users to see videos of their larynxes.

A laryngoscope is an instrument for examining the larynx, or for inserting a tube through it.

The company has been incubated at the Cape Town-based hardware incubator Savant over the past few years and has now become the first recipient of investment from the Savant Venture Fund, launched after the incubator itself raised funds, from the South African SME Fund.

SmartBlade will use the investment, which comes in the form of a convertible note, to take its innovation to market and deliver on the global interest and demand it says it has seen for the device.

“Following the successful launch of the video laryngoscope, the company will look to utilise its smartphone endoscopy expertise to bring associated medical devices to market,” Savant venture fund manager Nick Allen said.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.

Facebook: https://web.facebook.com/Afrikanheroes/

South African New Tax Law: What Businesses in South Africa Need to Know

June 8, 2019

Businesses in South Africa would now have to pay new taxes, thanks to the Carbon Tax and the Customs and Excise Amendment laws which will both come into effect from 1 June 2019.

Key Points About The New Laws

Both laws will work together in dealing with administrative issues surrounding the implementation of the new carbon tax.

‘Carbon tax’’ according to the new law is a tax on the carbon dioxide (CO2) equivalent of greenhouse gas emissions.

A person is a taxpayer under the Act and is therefore liable to pay an amount of carbon tax calculated in respect of a tax period if that person conducts an activity in South Africa resulting in greenhouse gas emissions above the limit allowed under the Act.

**Cyril Ramaphosa, South African President**

Under the new law, taxpayers are expected to pay R120 ($8.3) per ton of carbon dioxide according to the amount of greenhouse gas emitted by the taxpayer. This rate would be increased from R120 to any amount depending on the prevailing market inflation in South Africa, plus an additional 2% for the tax period between now and December 31 2022. After 31st December 2022, the carbon tax rate would depend on the prevailing market inflation alone.

Those given some allowance from taxation under the new law include industrial taxpayers; taxpayers engaged in activities that cannot reasonably prevent the emission of carbon dioxide; taxpayers who are exposed to carbon dioxide emission by reason of their exports or imports activities; taxpayers that have implemented measures to reduce their greenhouse gas emissions in respect of a tax period (5% tax allowance); taxpayers that operated within a city limit for carbon dioxide emission even though they emitted the gas (5% allowance).

All taxes are to pay in accordance with South Africa’s yearly environmental levy prescribed under the Customs and Excise Act, 1964 (now 2019 as amended), for every tax period. Hence, the essence of the Customs and Excise Amendment Act is that a new levy known as the environmental levy (which is the carbon tax) is now to be charged by the South African customs on goods, whether imported into or manufactured in South Africa.

Who Is Going To Feel The Impact of the New Carbon Tax?

South African Motorists

With the introduction of the Carbon Tax Act South African motorists and car owners, as well as potential car buyers, will feel the greatest impact. Already, there is a planned fuel increase of 9 cents per litre on petrol and 10 cents per litre on diesel which will start from the 5 June 2019.

The new tax will also affect any substantial drop in petrol price, with South Africa’s Central Energy Fund’s data for mid-May, 2019 showing a 5 to 7 cents per litre increase (including the tax) in the price for the month of June for these both petroleum and diesel products.

The contributions of economic sectors to global greenhouse gas emissions. Credit- From the FAO report‘Greenhouse Gas Emissions from Agriculture, Forestry and other Land Use’ 2016.

Longer Impact

South Africans should also expect ‘trickle-down taxing’ on emissions that escape by accident in the petrol and diesel value chains from oil production, transport and venting systems which will likely be passed down to consumers. The heavily hit would be industries that rely heavily on carbon dioxide.

Global carbon dioxide emissions by sector from data from FAO 2017. Credit: Our World in Data

Enforcement?

Expect the South African Tax Commissioner to go all out to implement the new Carbon Tax law. This is because, under the new law, he must annually submit to South Africa’s Energy Minister a report showing the total amount of greenhouse gas emissions reported in respect of which taxpayers are liable for the carbon tax and the amount collected as a carbon tax.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organisations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution and data analytics both in Nigeria and across the world.