African banks have been late to the fintech party, but after leaving huge swaths of the population to get their financial services from telcos(most famously Safaricom’s M-Pesa in Kenya), banks here are increasingly seeing the continent as a testing ground for new financial technologies like bitcoin and the blockchain.
“You have a headwind from Silicon Valley and Europe blowing into Africa now around the disruption in fintech. The banks are really nervous and they want to get ahead of this,” says Mbwana Alliy, managing partner at African technology venture firm, the Savannah Fund.
Blockchain is the hot topic at shiny new fintech innovation hubs like Rand Merchant’s AlphaCode in Johannesburg, which hosted the Afrikoin conference last December and is running a fintech acceleratorthis year, and Barclays Rise in Cape Town, which is hosting Fintech Africa’s blockchain conference on Feb. 25.
Blockchain is the “distributed ledger” that keeps track of bitcoin trades around the world. In the simplest of terms, the promise of blockchain is the tracking and transparency of all transactions, tamper-proof because no one transaction is kept in any one place, but stored on computers all around the world.
There’s good reason for banks to be afraid, says Vinny Lingham, a South African serial entrepreneur whose current blockchain startup, Civic, is based in Silicon Valley. “I think the banking sector in Africa is going to be disrupted faster than anywhere else in the world. What you have with bitcoin and blockchain is a trustless method of operating. You don’t need third parties like banks operating as trust brokers anymore. It’s all built into the code. The way mobile leapfrogged fixed lines communications in Africa, blockchain will leapfrog a lot of the financial infrastructure that exists today.”
In order to get ahead of that, Barclays opened the first African branch of Rise, its global network of innovation spaces, in December 2015. The goal is to work with fintech entrepreneurs who would otherwise be beyond the banking behemoth’s grasp.
“People in Africa do banking on their mobile phones, but our talent base is all built on bricks and mortar banking,” says Barclays’ Head of Open Innovation Arian Lewis. “So we’re thinking, are we actually a tech company? To make that shift, you have to approach talent that sits at the front end of that change curve.”
The 300-year old startup
Barclays Africa, which is 62% owned by UK-based Barclays Plc, operates in 13 African countries, hopes that a beautiful work space, an accelerator run by the US chain TechStars, and access to its customers will bring in new ways of thinking that the 300 year-old bank can’t conceive of on its own.
“Startups can build quicker, they can find ways around problems which banks can’t, they don’t have all the red tape, and they have a wider vision of the world,” says Warren Squires, head of Barclays Africa’s VC arm, the Seeker Fund.
A couple walks past a Barclays logo in Johannesburg(Reuters/Siphiwe Sibeko)
One of Barclays’ first blockchain collaborations in Africa is with Consent, a startup who went through the bank’s pilot accelerator in Cape Town in late 2015.
“Barclays is trying to define what they become in the future. It’s like they’re going through a midlife crisis,” says Consent co-founder Shaun Conway, a medical doctor previously focused on m-health.
While Consent originally used blockchain to improve fidelity with individual medical records across different databases, Conway saw how Barclays could use his system to help comply with Know Your Customer (KYC) regulations in the short term, and safeguard customer identities in the long term.
After the accelerator, Consent won a year-long contract to build a proof of concept for the bank worth more than half a million dollars.
Barclays is working with several blockchain startups across the globe but sees special application in Africa. “Blockchain could be the most significant social and political innovation to impact Africa in 100 years,” says Lewis. A digital economy based on blockchain and bitcoin could hold African leaders to a new level of accountability. “If digital currencies become adopted in African nations, it could significantly reduce corruption from government, it could provide transparency and control to every day citizens.”
But the recent thinking that blockchain has a much wider application as a general purpose ledger beyond cryptocurrencies is up for debate. In a recent post “Beyond the Blockchain,” Marcus Swanepoel, the CEO of South African-born bitcoin startup BitX, argues the blockchain itself isn’t the magic ray of sunlight people are looking for.
The World Bank on Thursday called on Botswana to make details of its large mining contracts with companies public to improve transparency in the diamond rich country's business dealings.
Botswana earns 89 percent of its foreign exchange income and 30 percent of national revenues from mining, predominantly diamonds. It has various large-scale mining, sales and marketing contracts with Anglo American's diamond unit, De Beers.
World Bank Group consultant Nils Handler said in a report the government’s decision to keep the negotiation process around contracts for diamond mining and large integrated projects confidential was a cause for concern.
"A more open process, including published contracts, would assist Botswana in becoming a more transparent and accountable jurisdiction,” he said.
The government could not immediately be reached for comment.
De Beers and Botswana currently jointly own Debswana and DTC Botswana which are involved in the exploration, mining, manufacturing, and trading of diamonds.
($1 = 10.5263 pulas)
(Writing by Tanisha Heiberg; Editing by James Macharia and Mark Potter) - Reuters
South Africa is capable of quickly addressing concerns raised by credit ratings agencies to avoid further downgrades, central bank governor Lesetja Kganyago said on Thursday.
Africa's most industrialised economy was cut to "junk" last month by two major ratings agencies which cited political uncertainty after President Jacob Zuma sacked respected Pravin Gordhan from the finance minister's portfolio.
"The issues raised by the ratings agencies are issues that we as South Africa can do something about, it's not things that are beyond us country as a country," Kganyago told Reuters on the sidelines of a World Economic Forum meeting on Africa.
"If we are able to deal with issues raised by the ratings agencies we could actually avert further ratings downgrades."
Lower ratings typically make it more expensive to borrow, particularly when they fall below investment-grade, and risk deterring the foreign investors on whom South Africa relies to finance its big budget and balance of payments deficits.
The central bank said in a report on Tuesday that it was concerned about further downgrades to local currency debt and the impact on the stability of the domestic financial system.
S&P Global Ratings cut South Africa's foreign debt and Fitch downgraded both its foreign and local currency debt to sub-investment grade in April.
Moody's has also put South Africa's rating, currently two notches above junk status, on review for a downgrade.
"What is useful is how quickly can South Africa deal with the concerns raised by the ratings agencies ... and when the agencies raise issues and you deal with the issues, they want to see if that will be sustained," Kganyago said.
Finance Minister Malusi Gigaba told Reuters on Wednesday that ratings agencies were concerned about government plans to grow the economy, polices such as the procurement of nuclear power, and whether there was sufficient fiscal discipline to manage the budget.
Kganyago said the bank will focus on its mandate to lower inflation to within its target range of 3-6 percent to help the government achieve inclusive growth, which is meant to benefit the black majority.
"Our contribution to any growth plan is to protect the buying power of the currency, which means we must bring down inflation," the governor said.
"If inflation is sustained within the target, that gives economic agents certainty that with inflation lower the cost of capital will come down."
He said the rand currency remained a risk to the inflation outlook, however.
The rand fell to its weakest in three weeks on Thursday after a survey showed private sector activity contracted for the first time in nine months in April, with a hawkish statement from the U.S. central bank adding to the bearish sentiment.
By Olivia Kumwenda-Mtambo (Editing by James Macharia and Catherine Evans) - Reuters
Experts have credited South Africa with having all the major ingredients to produce food that can feed the rest of the continent and other parts of the world.
Bosparadys Farm is near Magaliesburg and run by the Khourie family, which includes William and his sons, Joe, Anthony and Pieter, who all take charge of various enterprises. Dairying is the dominant business, accounting for 80 percent of the total farm income, but the Khouries also produce sheep, pigs, hens, goats and game.
They have farmed there for more than 20 years and have built up a profitable business with total farm income of about $19.3 million. The family owns 5,000 acres and rents a further 1,200 from a local landowner. Around 1,000 acres of this land are planted in grasses and 2,700 acres are used to produce corn silage averaging 5.6 tonnes per acre.
The remainder is natural land used for game farming.
Anthony Khourie is in charge of feed planning and production, and runs a stable feed bank for dairy production. Joe manages the dairy herd and the heifer herd while Pieter is the overall marketing manager for the farm. Bosparadys Farm milks 800 cows with an average yield of 30 litres per cow per day but it has a high yielding batch of 250 cows producing 40 litres per day. The high yielders are milked three times per day in the 14/28 herringbone milking parlour while the rest are milked twice per day.
“Our farm currently averages milk quality of 3.3 percent protein and 3.6 percent butterfat that is quite important as we bottle our own milk and produce yogurt, cheese and buttermilk on site as well,” said Anthony.
“In total, the farm’s daily production of 24,000 litres is used in our on-site factory together with an additional 26,000 litres that we buy in each day from a local supply network of 12 other dairy farmers.”
Liquid milk accounts for 85 percent while 12 percent is made into buttermilk and three percent goes into yogurt and cheese. Other dairy livestock includes 200 dry cows, 150 bred heifers aged up to two years old and 420 young heifers from birth to 15 months old. Artificial insemination is used on the older cows, using Dutch sires. The younger heifers run with groups of young Holstein bulls.
The business operates its own fleet of delivery trucks that deliver the milk to a network of 200 shops and supermarkets. Milk is most popular with customers when sold in two litre containers, which sell in the shops for around $2.41. The farmer receives 96 cents per litre for the milk and his cost of production is 39 cents per litre.
The dairy cows are kept outdoors in corrals and are fed according to yield, with the majority being fed to produce 30 litres per day, “Cows are fed 38.9 kilograms of a total mixed ration per day using our own feed mixers. The ration contains 2.3 kg grass, 6.7 kg brewers grain, 17.7 kg of maize silage, 6.3 kg of a 28 percent high protein content supplement and 5.9 kg of maize meal,” said Anthony.
“This ration costs 69.34 rand ($6.69) per cow per day and equates to a feed cost per litre of 2.72 rand (26 cents),” he said. The Khourie family employs 250 staff who work in all the sectors on the farm. The dairy factory operates on two shifts almost 24 hours per day, with a more relaxed timetable at the weekend.
The farm also runs 22,000 hens, 100 pigs, 1,000 ewes, 300 goats and a tourist holiday park. A herd of 1,000 Suffolk ewes produces meat lambs. All the ewes lamb outdoors with a lambing percentage of 150 percent.
Using Suffolk with the traditional black pigment colour in its face means less eye problems. “Rams run with the sheep outdoors from November to December to allow for lambing in May. Lambs are reared to 40 kg liveweight and are then sold for meat at around ($2.89) per kg. “The sheep graze on rougher pastures and are rotated every three weeks but are allowed to feed in the maize fields once we finish harvesting in April to clean up any surplus silage and maize stocks.
“One of the major threats to the lambs is the jackal, which kills them, but there are some diseases including bluetongue, Rift Valley Fever and pulpy kidney that we vaccinate for.” Pigs are purchased as weaners weighing 15 kg for $28.95 each. They are then primarily fattened on the waste dairy produce and are sold at 45 to 50 kg for $115.79.
There are 20,000 laying hens on the farm, with eggs sold in the same retail outlets as the dairy products. Anthony’s wife, Nina, helps to look after this enterprise. “We use the Hyline Red and White breeds as we receive a higher income from those breeds when they are being sold after their laying term finishes, usually after one year,” she said.
“The birds are purchased in at 20 weeks of age as laying pullets and reach their laying peak at 30 weeks with a 95 per cent laying rate.” The Khouries have found that the most profitable period to keep the birds within is around a year old, while maintaining an average 85 percent laying rate. “Eggs are collected twice per day from the cages and are marketed according to their size with the large ones measuring 30 to 40 millimetres commanding an income of 15 rand ($1.45) for one dozen. The retail outlets will add on its margin and sell the eggs for 24 rand ($2.32),” said Nina.
“When the hens arrive on the farm they are fed phase one starter feed with 16 percent protein content. Later in phase two they are fed a lower percentage protein feed, which is cheaper to buy. “All the feed is purchased but if the farm has any surplus maize from the dairy enterprise we mix it with a high protein content supplement and feed to the birds. “The manure produced by the birds is used to fertilize the grassland pastures with additional assistance from some 28 percent nitrogen bag fertilizer that is bought in,” Nina said.