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
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.
21 of the whole 54 African countries are officially French-speaking countries. Africa makes up more than 70% of the world’s total French-speaking population. But how buoyant the startup ecosystem there remains a question. Only about three French-speaking African countries — Rwanda, Senegal, Cote d’Ivoire— have been at the forefront of all investment into the African startup ecosystem in the past two years.
The question is now: why are French-speaking African countries still backward in terms of startup funding?
African startup investment by country
Here are some of the reasons:
Startups In French-Speaking Countries Are Under-Funded Because of Language Barrier
While startup owners are not to blame for the language they speak, it appears however that language is actually a major barrier for most startups in the French-speaking countries. A look at the investment preference of investors and their countries of origin show a majority of investors coming from English-speaking countries, or having the major funds coming from English-speaking countries.
The table below represents the top investment in African startups for the years 2017 and 2018. Consequently, potential francophone entrepreneurs are turned off by lack of funding than their anglophone cousins, as the major financiers in tech are English-speaking investors.
This lack of funding has therefore led to the dearth of developers and designers in francophone Africa. Most resources for startups in Africa(e.g. regional incubators and accelerators, labs, conferences) are mostly in the English-speaking countries.
The Ease of Doing Business In Most French-Speaking African Countries Is Still Poor
The economies of English-speaking African countries are growing faster and tend to have better World Bank Doing Business indicators than their francophone equivalents. Top ten African countries in the latest ease of doing business report include Mauritius, Rwanda, Morocco, Kenya, Tunisia, South Africa, Botswana, Zambia, Seychelles, Djibouti. Data show that from the whole ranking in 2019, French-speaking countries were not doing well in terms of ease of doing business.
However, some governments in the speaking countries appear to have already considered this. For instance, the Ivorian government has developed a Schéma Directeur National to support the TIC, the telecoms regulatory, to simplify the creation of tech companies (Horizon 2020). In Senegal, a startup fund of $50 million, the DER, aims to catalyze entrepreneurship all around the country.
To boost internet connection to enable startups to thrive, the government of Niger Republic awarded the country’s first 4G license to Airtel Niger in May 2018.
Also, Côte d’Ivoire’s tech scene is hot on the heels of Senegal’s. The country’s first tech hub, Akendewa, was launched in 2009 and stayed active throughout the 2010–2011 crisis. The country also has generated promising startups that respond to specific problems faced by Ivoirians, such as Qelasy (an educational tablet for children) and TaxiTracker (a geolocation app to address security concerns with taxis).
“It is the hubs’ job to make sure that the different members of the ecosystem can interact, in order to provide more experience, feedback and networks to the startups. But they are not supported or strong enough at the moment to carry out their mission fully and efficiently. Hubs do need more support,” said Impact Dakar co-founder Aziz Sy.
Some francophone nations are now leading the way when it comes to startup-friendly policies, with Tunisia, Senegal, and Mali among those to have passed or been on the verge of passing dedicated “Startup Acts”. The Senegalese government is now also making direct investments in local tech startups.
Relatively Small Market
Another point investors may be taking into consideration may be the size of the market in the French-speaking countries.
“Investors tend to view most Francophone African markets as too small. In 2016, even after a deep recession, the Nigerian economy was worth US$405 billion. That same year, the ECOWAS markets excluding Ghana and Nigeria, and therefore primarily Francophone countries, only amounted to US$120 billion dollars, less than 30 per cent of the size of the Nigerian economy,” Fayelle Ouane is co-founder and managing director of Mali-based startup support organisation Suguba, which is running the Francophone-focused L’Afrique Excelle programme on behalf of the World Bank, noted.
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.
West African businesses can now benefit from seamless trading across West African borders. This is because the Heads of State and Government of countries in the region have finally adopted ECO as the name of the single currency to be issued in January 2020.
Here Are Things To Know About The New Currency
The currency would fully be in use from January 2020.
The currency would be used for trade across West African countries.
The ECO will work this way: shops, hotels, and restaurants, particularly in the larger cities in Ghana, for instance, may now display prices in both the Ghanaian Cedi and ECO currency and many are likely to accept payment in ECO. However, as the official currency is Ghanaian Cedi, no establishment is under no obligation to accept payment in any other currency apart from Cedi.
Consequently, the introduction of ECO may serve as an alternative to the legal tenders in the countries of West Africa who have met all the requirement to start using ECO.
In simple terms, for people living in Nigeria, this means that you can now carry, in addition to Naira, ECO, and ECO can be used to buy or sell anywhere in Nigeria as long as the other party is willing to accept so.
The West African Monetary Agency, the body of ECOWAS in charge of money and finance across the region has said the currency would be based on a flexible exchange rate regime, coupled with a monetary policy framework focused on checking inflation.
In Which Countries Can You Use The Currency?
The currency can be used across the whole of West African countries from January 2020. However, ECO would be used only in the countries that have met the requirement for its use. That is, for any country in the West African sub-region to start using ECO, it must first meet the following requirements:
It must have a single-digit inflation rate at the end of each year
It must have a fiscal deficit (liabilities) of no more than 4% of the GDP
Its central bank must have deficit-financing of no more than 10% of the previous year’s tax revenues
The country’s gross external reserves must give import cover for a minimum of three months.
Additionally, each country must:
Prohibit new domestic default payments and liquidate existing ones. (That is, all domestic debts must be paid off first)
Have a tax revenue base which should be equal to or greater than 20 percent of the GDP.
Have its wage bill to tax revenue equal to or less than 35 percent.
Have its public investment to tax revenue equal to or greater than 20 percent.
Have a stable real exchange rate.
Have a positive real interest rate.
Right now, it appears Ghana is the only country in West Africa that has met all of the above requirements.
“The single currency for 2020 vision is: let’s find two, three or four countries that are ready. Once they meet up, we follow through with the others cascading in,”said Ken Ofori-Atta, Ghana’s finance minister, at a meeting of West African ministers in Accra recently.
The seriousness of the ECOWAS leaders on ECO is buried in this communique issued after the 55th Ordinary Session in Abuja:
‘‘The single currency would be issued in Jan. 2020.’’ the communique reads. “We have not changed that but we will continue with assessment between now and then. We are of the view that countries that are ready will launch the single currency and countries that are not yet ready will join the programme as they comply with all six convergence criteria.”
The leaders also instructed the commission to work with West African Monetary Institute and the central banks to accelerate the implementation of the revised roadmap with regard to the symbol of the single currency.
“It [the communique]further directs the commission to ensure implementation of the recommendations of the meeting of the ministerial committee held in Abidjan on June 17 and June 18 as well as preparation and implementation of the Communication Strategy for the single currency programme. The Authority takes note of the 2018 macroeconomic convergence report. It noted the worsening of the macroeconomic convergence and urges member states to do more to improve on their performance in view of the imminent deadline.”
Most of the eight currencies used in the 15 countries of the West Africa region are not convertible. Convertibility is defined as the possibility to freely exchange a country’s currency for foreign currencies. Where they are convertible, their rates are highly volatile ($2 in the morning, $5 dollars in the afternoon) Hence, ECO will help to address the issue of multiple currencies and exchange rate fluctuations that affect intra-regional trade.
West African countries have the least developed financial sectors in the world. The ratio of bank credit to GDP there is very low. There is no much money in their financial markets, through which money can easily flow across the region. Unlike the Eurozone where payment can be made and settled by banks using Euros and cheques. Payment and settlement systems in several West African economies are still marked by the predominance of cheques in noncash payments. In 2013, for instance, the whole money available in the West African regional market only represented 13% of GDP of the whole of the West African countries put together — this is like 8.5% of GDP for Ghana and 21% for Nigeria, against an average of about 65% for Sub-Saharan Africa. Hence, ECO will open up the market a bit.
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.
Consider the case of human travel agents who were once consulted before trips bookings to foreign countries were made before digital disruption set in. The information below would serve as a guide for further analyses.
Data from Statista showed declining sales growth among travel agents in the United States since 2011.
The above is a classic case of how far digital disruption can go. An ABTA Holiday Habits Report 2018, which tracked British holidaymakers’ booking behaviour in the last 12 months and their attitudes to planning and booking holidays in the 12 months ahead, found that 81% of people booked their holiday online, compared to 22% of younger ( mostly 8–24-year-olds) and older families who booked their holiday in store.
This suggests a shift towards booking online and the gradual elimination of the use of human agents to schedule overseas travels. Simply put, the migration of the business of travel agency online and the increasing power of customers indicates that people are:
Now more knowledgeable about travel;
Now more technology savvy and have better access to devices;
Now get attracted by offers too lucrative to refuse;
Are offered more choice than ever.
Price is more transparent than ever.
Indeed, the above digital disruption in the business of travel agency could be extended to those of:
Tax accounting where software such as TurboTax has eliminated tens of thousands of jobs previously available for tax accountants.
Newspaper publication which has seen their circulation numbers decline steadily, replaced by online media and blogs.
Traditional taxi drivers and livery companies have completely been decimated by digital players such as Uber, Lyft, Bolt and other car and bike sharing apps.
Airbnb and HomeAway are doing the same for the hotel and motel industry.
Jobs previously done by bus and truck drivers, taxi drivers and chauffeurs are gradually being taken over by driverless cars, such as those being developed by Google (GOOG).
3D printing is continuously proving a threat to the manufacturing industry where the technology is becoming better and faster and in a few years, maybe deplored to manufacture a wide variety of goods on demand and at home. This will diminish the importance of logistics and inventory management.
Radio DJs are largely a thing of the past. Software now chooses most of the music played, inserts ads, and even reads the news.
Farmers and ranchers previously made up over 50% of the U.S. workforce. Today less than 2.5% are employed in this sector. Yet, more food than ever is being produced in America due to the automation in agriculture and food production.
Rapid and disruptive change is coming to your business, regardless of the industry in which you operate
75% of today’s leading brands will be gone inside a decade.
The table above shows the top 10 US companies ten years ago versus today, ranked by market value (market capitalization) in US dollars.
Getting ready for disruption would be the best thing that can happen to small businesses. Here are a few ways to stay alert:
Agility Will Allow Small Businesses To Survive
The best way to stay ahead of digital disruption is to stay agile. For a business to be agile means that it can move quickly, decisively, and effectively in anticipating, initiating, and taking advantage of change.
A Global Study of Current Trends and Future Possibilities 2006–2016 found that the best way of adapting to change is to develop organizations that are both agile and resilient. The report found that higher performing businesses tended to take a more proactive and opportunistic approach toward change.
‘‘…The average tenure of companies on the Standard & Poor’s 500 in 1958 was 61 years. That decreased to 25 years in 1980 and is just 18 years now, a number forecasted to dwindle to 14 years in 2026.What does this decreased lifespan portend for business?,’’ says Sasha Viasasha, content strategist based in Chicago. ‘‘Such a shortened lifespan points to the changing nature of business itself. The business cycle has shortened, and the accelerating pace of innovation — and competition — is disrupting the old linear model of business and replacing it with new, dynamic model. Today, agility rather than longevity is winning. In fact, characteristics that once contributed to corporate longevity and denoted a healthy culture, such as the ability to ‘stay the course,’ now could utterly sink a company.’’
Consider the five stages of a business lifespan, says Sasha:
Seed and development — ideation, feasibility and fundraising
Startup — product development, market testing, and iteration
Growth and Establishment — improved cash flow, established customer base and brand identity
Expansion — expanded offerings and new markets
Maturity and exit — every idea or product reaches a crisis stage, a point where improvement plateaus, expansion is no longer possible, and profits reach a ceiling.
Now there needs to be added a sixth stage:
Rebirth or return — in this stage, a company starts over again, reinvesting its resources in new innovation, she says.
Rahul Varshneya, co-founder of Arkenea, custom software development services for founder-led companies says the trick is to lean into technology rather than become consumed with fear, like forward-minded entrepreneurs in specific industries who love, not loathe, technological advance.
‘‘It’s time for you to get down and dirty and really investigate the demographics of your target audiences,’’ he says. ‘‘Find out what they want, what they need, where they’re getting assistance and how you can help them. By creating a psychographic chart for each of your prospective consumers, you can get a truer view of their personalities, attitudes, lifestyles, interests and so much more. Then, you can use this outline to make wiser predictions about their buying behaviors.’’
Innovate And Adapt To Technological Changes
The best way small businesses can also survive in the face of digital disruption is to innovate. Dr. John Kotter, a world-renowned change and leadership expert prefers small businesses to create a dual-operating structure that combines the best of both worlds.
‘‘Ultimately, great companies execute and disrupt at the same time. Often they disrupt themselves…Truly great companies like Apple, Google, Amazon, and Starbucks constantly find new ways to become relevant to us and remain an essential part of our lives. When analyzed closely, you can see that they are simultaneously executing and innovating. If there is not enough innovation, changes do not occur quickly enough, your people can lose their passion, your products can become outdated — and worse, your business can become irrelevant. Great leaders maintain the balance between achieving results today and innovating to seize new opportunities in the future. So if you want to avoid disruption — or even lead disruption — then you need to greatly accelerate the way you operate internally to keep pace with a rapidly changing world,’’ says Randy Ottinger an Executive Vice President at Kotter International and Professor of Leadership, Emeritus, at Harvard Business School.
The best way to adapt to this disruption, according to Robert Glazer, founder, and CEO of a global performance marketing agency, Acceleration Partners, is to put technology and data to work.
‘‘No matter what industry you try to disrupt or in what way you to try to do it, data and technology can be a huge help,’’ he says. ‘‘Technology doesn’t just revolutionize businesses, it changes how consumers behave in every aspect of their lives. If you track the market and note where interest in new technology is heaviest, you can likely foresee what areas are most ripe for disruption.’’
The most basic advice on adapting for small businesses would be to:
Small businesses can also hop on the frenzy of social media advertising. According to Ewan Duncan and Eric Hazan in their article, Digital Disruption: Six Consumer Trends, “Social networking represents almost a quarter of all Internet time (up 10 percentage points since 2008) and reaches over 75 percent of all Internet users.”
‘‘With more than 70% of Australians now using smartphones, and more than 40% of them making purchases directly from it, according to Our Mobile Planet, you’re missing out on a huge slice of the pie if you’re in e-commerce and operating without a mobile friendly site,’’ says Kwasi
Collaborative Partnership For Innovation
Small businesses can also survive technological disruption if they can partner with industries within their sectors, and where possible with the disruptors.
‘‘Companies that are better prepared for industry disruption are much more engaged in growing and broadening their ecosystem partnerships,’’ notes the Accenture Institute for High Performance. “They actively use this strategy to support innovation and research and development, as compared to only half of those who admit they are less prepared. Companies that are disruption-ready are a third more likely to partner with advertising agencies, innovation companies (26 percent more likely), design service providers (24 percent more likely) and even customers (26 percent more likely). They are also 36 percent more likely to collaborate with companies beyond their traditional industry boundaries, and 32 percent more likely to align with companies they consider direct competitors.’’
“In order to successfully navigate industry convergence and strengthen their network of alliances to build truly collaborative operating models, they must shift their mindset to compete as a ‘cluster’, not as a single company, creating shared value for their alliance partners and customers.”
Accenture Institute also goes to recommend tips for surviving disruption as follows:
Do not face digital disruption alone. Deepen and broaden partnerships with customers, providers, and a diverse array of companies in and beyond your core industry
Make yourself indispensable. Use your business’s focus and expertise to become a critical part of the integrated solutions that customers demand
Embrace operational flexibility. Consider what business changes you will need to be more collaborative and open — both in terms of your processes and your employee mind-sets
Develop New Customer Segments.
Small businesses can also confront digital disruption by developing new customer segments, instead of just defending existing business lines through cost cutting, automation, or service improvements for existing customers.
Medialaan NV As An Instance
Medialaan NV, a leading free-to-air video broadcaster in Belgium, found out that there had been a shift in video consumption by youngsters to platforms such as Netflix or YouTube. In a bold response, Medialaan bought Mobile Vikings, a mobile virtual operator with attractive data plans.
The strategy: Transform itself into the leading online social video platform for Flemish teenagers. Medialaan not only has diversified its revenue base to include data plans but also has been able to reengage with a lost segment — the teens — and now advertises its television programs to them more effectively. It is one of the few traditional broadcast companies to grow its TV audience in the youth segment.
Start Off New Business Models.
‘‘Innovative companies are experimenting with business models intended to disrupt their own legacy strategies,’’ Jacques Bughin and Nicolas van Zeebroeck in MIT Sloan Management Review said. They gave an instance of how earlier this century, Schibsted Media Group of Oslo, Norway, observed something that most media companies saw in their newspaper businesses: Print classified advertising was beginning to dry up. Rather than sit idly and witness the erosion of one of its most important revenue streams, Schibsted pulled the rug right out from under its own feet by moving its entire classified business to a free online marketplace. Today, more than 80% of the group’s earnings come from commissions on sales from its consumer e-commerce platform.
Commonwealth Bank of Australia (CBA) as an example.
Jacques Bughin and Nicolas van Zeebroek noted that when digital disruption started threatening CBA’s payment services business, Commonwealth Bank of Australia (CBA) confronted the disrupters once and for all. The bank moved from focusing exclusively on payment services to developing its Pi, an open payments platform that hosts an ecosystem of applications and devices for merchants.
The platform is open to third-party developers, and the bank developed for itself an Android-based point-of-sales terminal called Albert, which is fully integrated with the Pi payments platform. Equipped with a card reader and an integrated printer, Albert can be extended with dedicated apps, enabling it to do much more than process payments. Among the first adopters was Earthling Investments Pty. Ltd. of North Adelaide, South Australia, owner of wholesale fuel distributor Mogas Regional Pty. Ltd., also based in North Adelaide.
The company is using Albert at its fuel stations to process customer transactions, manage their payments, and receive sales data faster.11 Although the platform and its ecosystem contribute to the disruption of the traditional banking value chain, it also positions CBA to compete with digital entrants.
Similarly, while the mortgage side of the banking business is being disrupted by online search and home-financing platforms, CBA updated its digital value chain through an augmented-reality app that gives customers the ability to read a property’s sales history and community information by pointing their iPhone camera at the residence.
When they have found a property that they wish to buy, users can then file a loan application directly in the app, thus positioning CBA strongly against digital and incumbent competitors alike.
The Bottom Line
Imagine the hard work that comes with running a business, the burnt energy and the spent time, all guzzled up by fast-paced disruptive technologies? Although the general advice has always been that when businesses are faced with disruptive innovation the best and the most common-sensical things to do are to try and hold on to an existing market by doing the same thing better, or try to capture new markets by embracing new business models and technologies, a lot of businesses have gone into extinction due to a sudden ambush by mind-boggling, disruptive technologies. Only small businesses who understand these disruptions and can disrupt them could stand a chance to win.
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.
Health tech startups in Africa have got another pool of funds to tap from. Founders Factory Africa and South African healthcare company Netcare are looking to select 35 African health-tech startups for an acceleration and incubation program.
Here Are Details Of The Fund
Founders Factory Africa is looking to commit a minimum of a £30,000 cash investment in accelerated startups as well as £220,000 in support services each. Incubator health-tech ventures will receive £60K cash and £100K toward support.
Founders Factory Africa and Netcare will then both retain a 5 to 10 percent equity stake in each startup accepted into the program.
The program will accelerate 5 startups a year and incubate 2, FFA CEO Roo Rogers.
Criteria for the accelerator startups include that they have a healthcare focus, be post-revenue, and have a Pan-African scope.
Startups aiming to pursue those objectives through Founders Factory Africa’s new accelerator program have until September 6 to apply
This is the first big foray into tech funding for Netcare, which operates South Africa’s largest private hospital network, according to CEO, Dr. Richard Friedland.
The partnership includes an investment (of an undisclosed amount) by Netcare in Founder’s Factory Africa, or FFA. The Johannesburg-located organization was formed in 2018 as an extension of Founders Factory in London — an accelerator that has graduated 122 startups.
How Startups Can Access The Funds
Interested startups who render health-tech services in Africa can forward all their applications to Founders Factory’s Online Portal for the FFA’s new Africa health-tech program.
There Are Huge Opportunities And Gaps In The African Health Sector
“There are so many issues in terms of healthcare delivery in Africa that can benefit from technological solutions,” Netcare CEO Richard Friedland said.
“I think the old bricks and mortar model of delivering healthcare in South Africa, in a private insurance or public setting, is archaic, it’s limited, it’s capital intensive and I think health-tech solutions can break that down,” he added.
Overall, Founders Factory’s move into Africa and healthcare (through FFA) raises several compelling things to watch.
One is the rise in African health-tech as a sector and the need for more capital. Formation of healthcare-focused African startups has picked up but investment into these ventures is relatively low compared to annual VC: only $19 million of roughly $1 billion (using Briter Bridges and Partech numbers).
This is also particularly meager given the potential impact of health-focused startups on a continent that still posts dismal stats comparatively. World Bank life expectancy rates, which on average place Africa last, are just one indicator. So the FFA initiative could serve as a needed boost for African health-tech
“The way we deliver healthcare in South Africa, Africa, and perhaps internationally…is in many cases broken,” he said, adding there’s a crisis of affordability and access to healthcare in Africa.
“I believe healthcare is ripe for disruption and innovation and that couldn’t be more true than it is here in South Africa and the rest of the continent,” Friedland said.
He named the FFA partnership as a way to increase the quality of healthcare in Africa. “We think the…continent and even our own business in South Africa can benefit,” he said.
Netcare’s interest in partnering with Founders Factory Africa to support startups comes down to multiplying healthcare solutions across the continent and shaking up the healthcare industry, according to Friedland.
Though a value wasn’t named for the Netcare round, it’s Founders Factory Africa’s second investment raise and collaboration.
Founders Factory entered Africa in 2018 through a partnership with Standard Bank (the continent’s largest bank), which a release said included a “multi-million-pound investment.” Founders Factory Africa selected the first five startups for its fintech accelerator track in April 2019.
Founders Factory Africa and Netcare’s investment in health-tech could produce innovation models with use-cases beyond Africa. Zipline and the rest have already given African health startups the green light.
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.
For startups venturing out into the unknown territories of a tech startup business, here a few tips shared by Wiza Jalakasi, head of international expansion at Africa’s Talking on how to build a successful tech company at the just-concluded third Google Launchpad Accelerator Africa program held in Lagos Nigeria. Wiza runs Africa’s Talking which raised $8.6m from the IFC, Orange Digital Ventures and other partners. Africa’s Talking is on its international expansion efforts as it scales APIs for infrastructure (SMS, USSD, voice, airtime, banking, and mobile money) across Africa
Patience And Passion
Building a business takes time, for most, it takes four to five years. There is a process that is involved and it’s not always colorful. It’s day-to-day grinds, doing seemingly mundane things and you need to get it in your head that that’s the only way for you to get where you’re going. Fall in love with the process.
Focus
You need to focus on your business. It’s very easy for you to get distracted by ecosystem events. Don’t be your start-ups. Spend your time and energy on things that are directly related to the outcomes of your business. Mind your own business, drink water. Remain teachable. Check your psychology as grow, especially when people start talking about you. Don’t let that get into your head, tomorrow is another day and you still need to pay your bills.
Customer Care
Spend time with your customers. If as an entrepreneur you’re not willing to get your hands dirty, it’s not going to work out for you. Do not fall in love with this notion that you can sit on your high table with a laptop on your lap and think this is how you’ll build your business. Sometimes you need to sit down and talk to someone to get things done. That’s how you build a technology company.
Be Stable In Competition
When you see similar business pop up, that’s a good thing. It validates that there’s value in the space that you’re creating and it’s important for you to be aware of what’s happening in the industry. Don’t be scared when you see the competition and don’t double down on trying to beat the competition directly. Focus on your customers.
Be Accountable
If you’re trying to run a business and you’re trying to avoid accounting, it’s not going to work. You need to get comfortable with basic administration. You need to be running a profit and loss from day one.
Loss Will Come Anyway
Don’t have a goal of making a profit immediately. You’ll make a loss for many years. What’s important is keeping those records so when the time comes for fundraising, you have your ducks in order.
You may think investors don’t want to see losses on your books but what investors are looking for is a consistent attitude towards record-keeping and responsibility, you must build that from day one.
Get Some Culture For Your Startup
The company culture is what you as the founder do on a day-to-day basis. You can’t build culture through writing nice bullet points. It’s what you do on a day-to-day basis and you can only lead by example. Be deliberate about the culture from day one.
Fundraising Is About Story-telling
Fundraising is about telling a good story. The market doesn’t always reward great ideas, if you fail to tell a good story you might not have access to capital. Be good at storytelling. If as a founder you are not good at storytelling, find someone who can do it for you.
If you’re not good at storytelling, start building relationships early. Some investors will back you simply because you’re consistent with the information and they’ve seen you grow.
Think Twice Before Expanding
Expansion is extremely difficult. You’ll spend twice your budget. I don’t recommend that tech startup jumps into expansion from day one. Stop and validate your idea in your home market and respect that base.
See Yourself As A Different Person From Your Startup And Respect Partners And Staff
Kindness is an important tool that you can leverage to build your tech startup. Be kind to yourself as a founder. Separate yourself as a founder from your tech startup. The success or failure of your start-ups will never be tied to the success or failure of you as a person.
Your business partner will more likely become one of the most important people in your life. Have empathy for who they are — their strengths and weaknesses. Take time to cultivate an authentic relationship in which you as co-founders can have extremely difficult conversations on a day to day basis without breaking the company.
Take care of yourself. You can be a start-up founder and live a normal life. This idea that you need to be breaking your back to make your start-up work is not true. Let it go.
Be kind to your staff. The people working for you are going to make a pass on opportunities that they could take advantage of elsewhere. If you treat your staff members as your first customers and your job as the CEO is to make sure your customer is happy, they will actually build the business for you.
Reputation Opens Doors
Be guarded about your reputation and integrity, people will use it to decide on whether to work with you.
You don’t get what you don’t ask for. Speak to people and share your progress and struggles.
Launchpad Accelerator Africa Class 3 comprised of 12 startups from six African countries — Egypt, Kenya, Nigeria, Senegal, South Africa, and Uganda. 58% of co-founders were female.
Teams who graduated were trained in machine-learning technologies and implemented AI in their product as a result. The startups in this class raised about R129 million in funding, created more than 120 jobs and accumulated over 270,000 users on their services.
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.
Navigating through the complex terrains of finance for startups could one of the toughest stages in developing a business idea. While commercial institutions, family and friends donations as well as personal savings may one of the toughest nuts you have to crack, raising capital to start a business is generally a tall order. How much then is enough to start up your business?
To properly determine what type of funding you should commit into your startups, it is important you first ask the following questions, according to Bob Adams:
How much cash will I have at risk?
How much time will it consume?
How much energy will it take?
Do I currently have other obligations that will prevent me from giving the business 100 percent?
Would there be a much better time for me to start a business other than now?
What are my alternatives if I don’t start a business now?
What are the chances of success?
Am I looking at starting a business from a position of relative strength — feeling good about myself and feel I am relatively well off — or am I looking at starting a business from a position of relative weakness — recently laid off from a job and being behind on my bills?
Can I test-run the business part-time before quitting my job?
Should I choose between a higher-risk or lower-risk business?
Suppose my business provides less income than I expected. How long should I stick with it?
If the business doesn’t work out, how easily will I be able to pick myself up and move along to the next endeavor?
These questions are important because nobody would want to stop halfway into the journey when funding has been made and time spent. That said, deciding on how much is enough to get your new business started would be considered under the following questions.
What Type of Business Do You Plan Going Into?
The U.S.’s Small Business Administration, says microbusinesses cost around $3,000, while most home-based franchises cost $2,000 to $5,000 to start. This may vary according to countries, depending on the value of their currencies and the per capita income of the citizens.
The 10 most profitable small business industries by net profit margin (NPM) are:
Accounting, Tax Preparation, Bookkeeping, and Payroll Services: 18.4 percent NPM
Lessors of Real Estate: 17.9 percent NPM
Legal Services: 17.4 percent NPM
Management of Companies and Enterprises: 16 percent NPM
Activities Related to Real Estate: 14.9 percent NPM
Offices of Dentists: 14.8 percent NPM
Offices of Real Estate Agents and Brokers: 14.3 percent NPM
Nonmetallic Mineral Mining and Quarrying: 13.2% NPM
Offices of Other Health Practitioners: 13 percent NPM
Medical and Diagnostic Laboratories: 12.1 percent NPM
The 10 least profitable industries in the US by net profit margin (NPM) are:
Oil and Gas Extraction: -6.9 percent NPM
Software Publishers: -5.1 percent NPM
Beverage Manufacturing: -3.7 percent NPM
Semiconductor and Other Electronic Component Manufacturing: -0.3 percent NPM
Forging and Stamping: 0.4 percent NPM
Farm Product Raw Material Merchant Wholesalers: 0.9 percent NPM
‘‘If it is a manufacturing unit you can choose a location that can let you save money on electricity, water, taxes, and transportation. Look for a place where manpower is easily available and raw materials can be sourced easily. You can even look for a location that can get you rebates and subsidies from the government.
If yours is a niche product or a service, you may have to look for a single location where all your competitors are. For instance, if it is a software company you want to start, you may have to look for a software belt where all other software companies have set their shops. Similarly, the ideal location for a gold vendor / jeweler would be a gold mart that has housed many such shops.
Offices can be set up in any place that is accessible and offers good facilities such as parking spaces, refreshments, transportation, and so on.
Make sure the location fits well within your budget and offers scope for expansion. An ideal location would be one that complements your business in the best possible way.
Considering the above is so important that entrepreneur Drew Gerber, who started a technology company, a publicity firm and a financial planning company noted that:
“One of the main reasons most small businesses fail is that they simply run out of cash. Writing a business plan without basing your forecasts on reality often leads to an unfortunate, and often unnecessary, business failure. Without the benefit of experience or actual historical financials, it’s easy to overestimate a new company’s revenue and underestimate costs.”’
He estimated that an entrepreneur will need six months’ worth of fixed costs on hand at startup.
“Have a plan to cover your expenses in the first month,” he said. “Identify your customers before you open the door so you can have a way to start covering those expenses.”
‘‘When planning your costs, don’t underestimate the expenses, and remember that they can rise as the business grows,’’ Gerber said. ‘‘It’s easy to overlook costs when you’re thinking about the big picture, but you should be more precise when planning for your fixed expenses.’’
What Costs Are Necessary To Get The Business Running?
After considering what type of business you plan going into, it is best to consider what costs are necessary to get the business running.
The American Small Business Administration says that there are various types of expenses to consider when starting your business.
‘‘It’s important to differentiate these types of costs to properly manage your business’s cash flow for the short and long term,” said Eyal Shinar, CEO of Fundbox, a cash flow management company.
Business owners usually face these types of costs when they plan to start their businesses:
One-time vs. ongoing costs: One-time expenses will be necessary in most cases in the startup process, such as the expenses for incorporating a company.
If there’s a month when you must make a one-time equipment purchase, your money going out will likely be greater than the money coming in, Shinar said. This means your cash flow will be disrupted that month, and you will need to make up for it the following month.
Ongoing costs, on its own, are incurred on a regular basis. Examples include expenses such as utilities. These generally do not fluctuate as much from month to month.
2. Essential vs. optional costs: Essential costs are expenses that are absolutely necessary for the company’s growth and development. Optional purchases should be made only if the budget allows.
“If you have an optional and nonurgent cost, it may be best to wait until you have enough cash reserves for that purchase,” Shinar said.
3. Fixed vs. variable costs: Fixed expenses, such as rent, are consistent from month to month, whereas variable expenses depend on the direct sale of products or services.
‘‘Fixed costs may eat up a high percentage of revenue in the early days, but as you scale up, their relative burden becomes negligible,’’ Shinar said
Below are some of the estimates of both fixed and variable costs, although these depend on the nature of the business you are running
Office space: (On-going; essential) $100-$1,000 per employee per month
Inventory: (On-going; essential)17–25% of the total budget
Marketing: (On-going; essential) 0–10% of the total budget
Website: (On-going; depends) About $25 per month
Office furniture and supplies: (On-going; essential) 10% of the total budget
Utilities: (On-going; essential) About $2 per square foot of office space
Payroll: (On-going; depends) 25–50% of the total budget
Professional consultants: (On-going;optional) $1,000 to $5,000 per year
Insurance: (On-going; essential) An average of $1,200 per year
Taxes: (On-going; depends) Variable
Travel: (On-going; depends)Variable
Shipping: (On-going; depends) Variable
Are There Ways You Can Track Your Spending To Ensure That You Stick To Your Budget?
Important here is the need to keep track of your expenses by calculating these costs from time to time. This will give you a clearer picture of the amount needed to keep your business viable.
Bill Brigham, director of the New York State Small Business Development Center in Albany, New York, advised new business owners to project their cash flows for at least the first three months of the business’s life. He advised startup owners to add up not only fixed costs but also the estimated costs of goods and best- and worst-case revenues.
‘‘If you borrow money, make sure you know not only how much you borrowed but also the interest you owe. Calculating these costs puts a floor on the revenues needed to keep the business viable and provides a good picture of the cash necessary to start it up,’’ Brigham said.
Shinar advised that once you get your business going, you can use QuickBooks or FreshBooks. These tools can connect directly to your bank account. They will also help you to track expenses throughout each month and during tax season.
For Brigham, while starting, it is wise not to resort to borrowing as an option.
‘‘Borrowing puts a lot of pressure on any business and its owners, as it leaves less room for error,’’ he said.
Click here to download a cash flow template to be able to track your monthly cash flow.
Follow this link to find out how you can attract investors to your startup.
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.
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.
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
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.
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.”
About SweepSouth
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.
Expect more cars, or more ride-hailing options soon across major African cities. Russian startup inDriver is next on the line. Already launched in Arusha, Tanzania last year, inDriver has expanded to Nairobi, Johannesburg and Cape Town. Its next bus stop is most likely Nigeria, and that would be sooner than you think. The startup’s aim is to enter major cities in Nigeria, Kenya, Ghana, Zimbabwe, Uganda, and Namibia within the shortest feasible time. It has recently been subtly pushing for drivers to register with it in Nigeria.
Here Is Why inDriver May Put Up A Fight With Uber Or Bolt For Market Shares
At A Glance:
Founded in Yakutsk in 2012, inDriver now has more than 24 million users in more than 200 cities in over 20 countries.
The startup is one of the top 10 ridesharing and taxi apps worldwide by downloads.
Currently, the company operates in the United States, Russia, Kazakhstan, Kyrgyzstan, Uzbekistan, Armenia, Brazil, Mexico, Guatemala, Colombia, Peru, El Salvador, Chile, Ecuador, Costa Rica, Panama, Honduras, Dominican Republic, Bolivia, Tanzania, South Africa and Kenya.
In fact, in just six months after launch, more than 60 thousand people joined the startup either as drivers or riders.
Johannesburg:
In Johannesburg, South Africa, inDriver already has an estimated 3,000 registered drivers.
Creativity In Competition:
inDriver’s strategy is to give its customers the power to fix the fare they would want to pay, much like traditional car-hailing taxis, except, of course, that the customers, instead of the drivers, peg the initial offer.
“Passengers enter the amount they are willing to pay for a trip and drivers then bid on the offer. The bargaining function on the app makes the ride-hailing service well suited to longer commutes, from neighbouring suburbs into hubs like Sandton and the CBD.
“A unique feature to inDriver is that drivers are not automatically assigned to riders. Passengers receive multiple offers from drivers in the area and are given the opportunity to select one based on fare amounts, driver ratings, estimated time of arrival and vehicle model. The trip is confirmed once both parties agree to the fare,” the startup said.
This innovation is probably a game changer in the face of growing stiff competition with the other car-hailing startups such as Uber and Taxify, and the depreciating purchasing power of car-hailing users in Africa.
However, unlike others that allow you to pay using your credit cards, inDriver says it works on a cash-only basis.
Safety:
inDriver has security features such as “A safety button’’ for both driver and rider, linked to emergency numbers, and is integrated into the app. In addition, both parties can share their GPS location and other details of rides in real time with trusted contacts.
Drivers Are Increasingly Having A Say In The Multi-Billion Dollar Industry.
The first problem inDriver is planning to solve to stick out of the competition is to endear itself to its drivers. Thus, even if the hailers have cut their prices, the drivers always have the final say, by way of the commission they earn. There are already signs that the startup has its drivers at heart.
What it did in Tanzania was a big shot. Drivers were given an initial six-month period without charging commissions after which the startup charged the drivers just 5% to 8% in commissions. At this rate, it is the lowest by commission among the three major car-hailing companies. Uber is charging 25% and Bolt is hovering around 15%. In addition to the attractive commissions, drivers will also be able to view both pick-up and destination points before accepting rides.
The competition would, of course, be fierce. Drivers who are willing to work long hours may win, not riders. This is because each driver can now sign up on all the competing platforms and become more loyal to the ones that respect their time and hard work, at the same time honoring riders by giving them more reasons to hail them.
Does this mean more income for the ride-hailing industries yet? Not very much in the offing. Each of them would have to contend with operational cost and the need to make profit and scale to the business. But the problem still remains that winning drivers’ loyalty only by doling out incentives will most possibly mean subsidizing customer rides for a longer time, and more promotions, of course, to boost drivers’ earnings.
In all these, the startups may keep losing, failing to even record a profitable outing. Ask Uber which just filed its SEC-1 and completed its IPO recently. The company’s largest expense in the middle of huge losses on a global scale is its “cost of revenue.” The cost of revenue is a category that includes incentives paid to drivers.
The news may be more pessimistic than it is cheerful, but here is the fact: over the past seven months, inDriver, a five-year-old Russian ride-hailing company, has gone from launching in its first African city to operating in four. It does seem something has finally come home to roost.
And gradually, global ride-hailing giant Uber has gone from having no competitors in Africa to having more than 50.
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.
