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Alternative funding becomes norm

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In a month when South Africa’s unemployment rate has hit its worst level in a decade (jumping to 29%), there’s a strong trend bubbling, which is tracing the explosive global growth of alternative financing for SMEs. In fact, in the US, they’ve dropped the word ‘alternative’. It has become the norm where banks are no longer the grand central for funding applications.

Analysts predict fintechs will be the solution to closing the staggering financing gap for small businesses across South Africa. Locally we’ve seen the emergence of alternative financing through local fintech’s such as Merchant Capital, which has experienced 150% growth in new customers in 2018 alone and has provided funding to 5000 merchants to the tune of R1-bn over the last six years. 

“In our experience, small businesses use the funds for anything that will be additive to the growth of their business: to hire more employees; buy new equipment; refurbish their store; buy more stock – and even for marketing – they don’t necessarily have to be elaborate plans, but each funding step is crucial to the next,” says Dov Girnun, Founder and CEO of Merchant Capital. He says it’s important to recognise that the average venture cycle for SMEs spans across about 10 years through various stages of growth. “The only thing you can truly count on is the constant need for working capital and the bottom line is that SMEs have an appetite for growth that traditional financial institutions have historically struggled to service.”

The reason for such exponential growth in the funding space during a time of a technical recession, a drop in GDP and staggering unemployment levels goes hand in hand with banks implementing stricter lending requirements, deterring many SMEs from applying for funding. This leaves an enormous gap among underserved SA small businesses who need to access capital quickly and easily either online or using financing alternatives. In Merchant Capital’s case, Girnun explains that they have an innovative repayment mechanism linked to the merchant’s point of sale device – using monthly credit and debit card turnover as an asset for merchants to lend against.

Global shift

Locally, the credit market has traditionally been dominated by a few main banks, and businesses that weren’t approved for funding didn’t have many options. But the landscape is opening up. While we are a smaller economy and just entering the space,  Canada – which like SA has traditionally been dominated by a number of big banks – has been slow out of the gates when it comes to mass adoption of alternative funding. Yet the latest available figures (2017) show that Canada experienced a 159% increase in market volume to $867.6-million within a single year.

According to a report by Ernst & Young, the UK has 5.5 million SMEs producing a  turnover of 1.9 trillion pounds, covering 51% of the private sector turnover in the UK, which has created a market with many diverse and complex funding needs.

In South Africa, SMEs have the greatest potential to reduce unemployment and raise South Africa’s GDP, which recently showed the biggest decline in a decade (3.2% in the first quarter of 2019). According to South Africa’s National Treasury, South Africa has an estimated 2.8m SMEs. One million of these are formally registered.

Girnun points out that in the new world of fintech funding credibility is a big thing. “The trust around a fast funding fintech model is still relatively new for SME’s, but there will be an exponential shift as this alternative moves to mainstream in the next few years. “It is often the company you keep that gives you the credibility that you need and comfort that a customer needs to have in order to use an alternative working capital option for the first time.”

The fintech caught the eye of RMI Holdings, which bought a 25.1 percent stake in September 2015. This significantly enhanced the scalability of the new disruptor and in 2018, it was announced that Standard Bank would formally offer SMEs the Merchant Capital branded lending capital solution – a move to close the gap for their small business clients. 

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Vodacom cuts cost of smallest bundle by 40%

The country’s largest mobile operator has kept to a promise made last month to slash the price of entry-level data packages

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Vodacom has cut the data price of its lowest-cost bundle by 40%, reducing the price of a 50MB 30-day bundle from R20 to to R12. This follows from the operator’s promise in March, when it announced a 33% cut in the cost of 1GB bundles, to reduce prices of all smaller bundles by up to 40%.

Vodacom’s various 30-day data bundle prices will be cut across all of its channels, with the new pricing as follows:

30-day bundle size New Price Reduction
50MB R12 40%
150MB R29 33%
325MB R55 33%
500MB R79 21%
1GB R99 34%
3GB R229 23%
5GB R349 14%
10GB R469 22%
20GB R699 31%

Vodacom confirmed it will provide free data to access essential services through Vodacom’s zero-rated platform ConnectU with immediate effect. The value of these initiatives, it says, is R2.7-billion over the next year.

“Vodacom can play a critical role in supporting society during this challenging time and we’re committed to doing whatever we can to help customers stay connected,” says Jorge Mendes, Chief Officer of Vodacom’s Consumer Business Unit. “Since we started our pricing transformation strategy three years ago, our customers have benefitted from significant reductions in data prices and the cost of voice calls. Over the same period, we invested over R26 billion in infrastructure and new technologies, so our customers enjoy wider 2G, 3G and 4G coverage and vastly increased data speeds.”

The latest data reductions will complement the discounted bundle offers that will also be made available to prepaid customers in more than 2,000 less affluent suburbs and villages around the country. For qualifying communities to access further discounted voice and data deals, they need to click on the scrolling ConnectU banner on the platform via connectu.vodacom.co.za

ConnectU – which is a zero-rated platform – also went live this week. It will provide content aimed at social development and offers a variety of essential services for free. Learners and students enrolled in schools and universities can access relevant information for free, with no data costs. The ConnectU portal includes a search engine linked to open sources such as Wikipedia and Wiktionary as well as free access to job portals; free educational content on the e-School platform; free health and wellness information and free access to Facebook Flex, the low data alternative to Facebook that enables customers to stay socially connected.

Vodacom’s popular Just4You platform has been a significant contributor to the approximately 50% reduction in effective data prices over the past two years. Substantial cuts in out-of-bundle tariffs and the introduction of hourly, daily and weekly bundles with much lower effective prices have also driven increased value and affordability, resulting in R2-billion in savings for customers in 2019.

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OneBlade shaves price of electric precision

Electric razors and their blades are usually quite expensive. But the Philips OneBlade shaves the cost, writes SEAN BACHER

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Electric razors come in all shapes and forms and their prices vary as well. When your nearest electronic retail outlet opens again, you will be able to pay a small fortune for a wet and dry razor that cleans itself, shows you when it needs to be recharged, and tells you to replace the cleaning solution – all via a little LCD panel in the handle.

But does everyone want that? Does everyone need that? Surely there must be customers who want an easy-to-use, no-mess, no-fuss razor that gets the job done just as well as a “smart razor”?

With this in mind, Philips has launched its OneBlade wet and dry electric razor. The razor is dead simple to use. It comes with three stubble combs – 1mm, 3mm and 5 mm –  which can be clicked onto the head much like one would with a hair shaver. Should you want a really close shave, simply the combs off. I found this to be the most effective as I don’t have a beard.

The razor’s blade is the size of the striking side of a matchbox and has 90-degree angles all round. This offers precise shaving and, because of its small size, it is able to get just about anywhere on a person’s face.

The blade has a usage indicator that shows when it is time to replace the blade – usually after four months – and an additional blade is included in the box.

The OneBlade’s battery takes up to eight hours to charge, and will give up to 45 minutes shaving time.

Overall, the Philips OneBlade will give a man a comfortable and precise shave. Its battery life, combined with its size, makes it a perfect travel companion as it is no bigger than an electric toothbrush. Its relatively low price compared to other electric razors also counts in its favour.

The One Blade can be bought from most electronic retailers or can be ordered online from websites like takealot.com. The razor retails for R650 and a set of two new blades will cost around R450.

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