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TymeBank, backed by billionaire Patrice Motsepe’s African Rainbow Capital (ARC) investment group, has signed 1.9 million clients, of which 50% were active at the end of June 2020.
Launched in November 2018, the digital banking startup said its goal was to break even by 2022, with a customer base of around 2.2 million.
TymeBank, which represents 8.3% of ARC’s fund value (2019: 7.2%), focuses on banking for the unbanked and underserved in South Africa. ARC detailed the bank’s progress in a review of its financial results for the year ended June 2020.
He said that by the end of June 2020, the bank had onboard 1.9 million customers, which is ahead of its business plan. “The bank is registering between 3,000 and 3,500 clients per day, and half of the clients are actively using their bank accounts.”
ARC said that the impact of Covid-19 on the bank has resulted in the delay in the rollout of its partnership with the Christian Church of Zion (ZCC), as well as a change in its proposal for unsecured personal loans.
“In response to a significant change in market conditions, the bank’s management has introduced cost reduction measures, while focusing on diversifying income and activating partnerships.
“The progress to date, combined with the additional capital that has been injected, results in a fair value of R1.86 billion in ARC Financial Services as of June 30, 2020 and therefore R927 million for the ARC Fund “.
ARC Financial Services injected an additional R750 million into TymeBank during the reporting period as part of the scheduled capital requirements for the new bank.
As of June 30, 2020, the ARC Fund has an effective stake of 35.18% in TymeBank, its 49.9% being the 70.5% that ARC Financial Services has in TymeBank. The ARC Fund’s effective capital contribution to TymeBank was R374 million for the year ended June 30, 2020, it said.
ARC said that its intrinsic investment in the ARC Fund increased 2.1% from R9.74 billion as of June 30, 2019 to R9.95 billion at the end of the year. The Company’s Intrinsic Net Asset Value (INAV) increased from R9.34 per share as of June 30, 2019 to R9.54 per share as of June 30, 2020, which also represents an increase of 2.1%.
He said that while this is significantly below the medium to long-term cap rate of 16% per annum, it is indicative and in line with the performance of the market in the current economic environment.
ARC’s investments also include data-driven mobile network operator Rain, MetroFibre, Alexander Forbes and EOH.
“The year analyzed has been characterized by tense business conditions, mainly as a result of the contraction of the economy. This has had an adverse impact on most of the companies in our portfolio. An economy that was already deficient was exacerbated by the sudden onset of the Covid-19 pandemic, “he said.
Fair value gains and losses for the year ended June 2020
Rain
Rain, which represents 27.9% of the total value of the ARC fund and in which it has a 20.7% stake, successfully launched its 5G network during the reporting period. The operator saw a fair value increase of R479 million during the period.
Rain has three main sources of income. First, it earns roaming revenue from Vodacom in terms of an infrastructure and services contract. Second, it earns revenue from 4G data sales and also earns some revenue from the fixed reseller business which is in the process of being wound up to build capacity to expand the 5G network. That network launched in September 2019.
ARC said that by the end of April 2020, Rain had deployed 447 5G towers and aims to increase this to 1,500 by December 2021. Ultimately, more than 2,000 5G towers are planned in larger metropolitan areas in South Africa.
“During the national shutdown period, Rain experienced an increase in subscriber numbers as people had to work from home. Economic and social activities have increasingly moved online, including education, entertainment and connecting with family and friends, ”said ARC.
The Rain 4G rollout has also progressed well with 5,500 active sites active at the end of April. The ARC Fund’s investment in Rain increased from R2 508 million as of June 30, 2019 to R3 111 million as of June 30, 2020, mainly as a result of a fair value correction of R479 million (2019: R364 million).
ARC said that its investment in MetroFibre increased from R203 million to R242 million at the end of June 2020 as a result of the capital injection of R27 million and a fair value increase of R12 million (2019: gain of R11 million).
Read: TymeBank is registering 100,000 new customers every month
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