ARC reports portfolio growth; turns focus to fintech investments

Current investments stretch from data provider Rain to TymeBank, PayProp, Linebooker and a tie-up with Sanlam: Johan van der Merwe – Co-CEO, African Rainbow Capital.

FIFI PETERS: The second set of results for the show today, this time in the financial services space, comes from African Rainbow Capital. That is the investment firm that is majority controlled by billionaire Patrice Motsepe, which came out with its numbers a little earlier today (September 14, 2021). You might know some of their investments. They include Rain, the fibre provider that provides quite a lot of 4G and 5G to some homes, as well as TymeBank, the branchless bank that that opened recently here in South Africa. And then ARC had that big deal to create one of the largest black asset-management firms. I think it was with Sanlam – was it last year in 2020? But let’s get the facts from the co-CEO of African Rainbow Capital, Johan van der Merwe.

Johan, thanks so much for your time. Just by way of introduction, how would you describe the year that was?

JOHAN VAN DER MERWE: Good evening, Fifi, and always nice talking to you. Yeah, it was a tough year with Covid and the national lockdown – three times. It takes a lockdown to hamper the economy to a large extent.

One of the investments that you mentioned is Rain. It was one of the few investments that actually had a tailwind, because people wanted more data because they are working from home. We have seen quite an increase in demand for data and that stood that company in very good stead in the last year, We were selling 2 000 to 15 000 SIM cards – that’s individual data cards – to individuals on a monthly basis. That shot up to between 60 000 and 80 000 during the period.

Then it abated a little towards the end of last year to about 30 000 to 35 000; but it’s picked up again. But all in all it’s been a tough year. I think there’s less money around, people have lost their jobs and salary increases are much lower, and bonuses much lower – if at all. So I think the economy needs money to be able to operate and all in all it’s been tough out there, not only for us but also for any other businesses.

FIFI PETERS: Talking about Rain, you hear a lot of mixed reviews. You hear in certain areas how it’s great and it’s the most reliable network provider, but in another areas how it can sometimes often falter. So just talk to me about the plans that you have in perhaps improving the customer experience for using Rain. What kind of investments are you looking to make to improve the experience there?

JOHAN VAN DER MERWE: A network like that takes time to build. Obviously you want to get the footprint across the country and you have to get your equipment onto the cellphone towers, or on buildings or wherever people can actually offload the data. That took time. Obviously with the significant growth that we experienced last year there were definitely customer complaints, but most of them came from people who were just outside the areas where they should have bought it; when they buy it they think oh, I’m so close to it I’m still going to get the signal and will be able to upload the data – and that didn’t happen. I think it was quite negative for Rain at one stage but, if one looks at the last few months, it has definitely picked up. In any surveys done on that basis, Rain came out tops of all the companies. So I think we’ve dealt with unhappiness.

FIFI PETERS: Well, we’ll take your word for it. TymeBank is another one of your entities. I see you have almost 3.5 million customers, but would you say that the bank has met your targets so far – and if not, why?

JOHAN VAN DER MERWE: I think they met the targets that we set, but we actually thought that they would do much better. With one of our very strategic partners, which is Zion Christian Church, ZCC, we had an arrangement to roll out at all their venues. But with the lockdowns and people not being able to go to church, that basically didn’t exist.

But that opportunity doesn’t go away. Once things start normalising a bit more, we will be able to do that. We’re very encouraged that on average we were getting between 100 00 and 120 000 clients per month, which basically throughout the Covid period remained quite static. In fact, August, last month, was our best month when we onboarded 180 000 new customers. That’s all good. The main thing, Fifi, for this bank is obviously people who use those accounts as their main bank account. I think we still have a way to go to be able to do that. But we believe that with the technology that we bring, the easiness of transactions, the low cost and so on this bank will rise into the South African banking industry.

FIFI PETERS: Johan, I see that you’re looking to make further investments in the fintech space. There’s an article out there quoting you saying exactly that. Tell us a bit more about that.

JOHAN VAN DER MERWE: We’ve actually invested in a few platforms which are fintech-related, and there we talk about obviously TymeBank, but, but also companies like PayProp, which is banking of leasing, where about R1.2 billion goes through their system on a monthly basis for people renting properties and so on.

Then we invested in another business called Linebooker, which is really the Uber for transport companies where you can go onto a platform and make sure that you have booked for things to be transported from A to B. We’ve seen that in those paying systems and so on there are a lot of synergies with some of our existing businesses. We’ve come across a very interesting opportunity where you would be investing between R300 [million] and R400 million into like almost a little bit of a portfolio of fintech investments. So there are probably one or two that are really mature, have matured a little bit more, but there are quite a number of startups in there as well. I’m very confident that we will see some very good investments coming out of out of that small portfolio.

FIFI PETERS: Johan, just lastly, on that deal with Sanlam, where you created this entity that was punted as perhaps the largest black-owned asset management company in South Africa, how’s that coming along?

JOHAN VAN DER MERWE: That’s coming along very nicely. Obviously it’s a solid business that’s been there for many, many years. We think that we give them a very plausible proposition in the market by saying that we will be their largest black-owned asset manager in the country and people can trust it. (Sanlam) has been around for many, many years as they play in different spaces – in the alternative space, in the listed space; Satrix is part of that business and the multi manager. So it’s a solid business and obviously African Rainbow Capital with Patrice would also be a big shareholder in Sanlam. We see those type of partnerships with Sanlam as very positive, and so do they. We think that that business has got a long way to go.

FIFI PETERS: All right. Johan, thanks so much for joining us. We shall hope to be on that long bend with you, but we’ll leave it there for now, sir. That’s Johan van der Merwe, the co-CEO at African Rainbow Capital.



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