African Rainbow Capital (ARC) injected R750 million in TymeBank in the last financial year ended June, a tough period for the relatively new digital bank, which saw it experience a drop in footfall to its kiosks under national lockdown.
Announcing its year-end results today, ARC says the bank onboarded 1.9 million customers, during the period under review, which was ahead of business plans.
The Patrice Motsepe-controlled ARC owns 70% of TymeBank equity.
The company says TymeBank is one entity in the ARC Investments portfolio that experienced some initial difficulty due to the COVID-19 lockdown.
“TymeBank experienced a drop in footfall to its kiosks located inside Pick n Pay stores in March and April under national lockdown levels five and four. With the easing of the lockdown regulations, the bank managed to increase its customer onboarding rate to pre-lockdown levels. As before, it now enrols about 110 000 to 120 000 new customers each month,” says ARC.
It adds that TymeBank is now signing up between 3 000 and 3 500 customers per day, with about half of the customers actively using their bank accounts.
“TymeBank is well-positioned within the SA banking sector to implement its unique low-cost banking fee model,” it says.
TymeBank is one of the new digital banks that launched to challenge the incumbents.
In July, the bank revealed it had introduced a fast mode of transaction, SendMoney, which allows users to send and receive money through their electronic gadgets, as a way of adding value for its clients.
TymeBank clients can now send cash to anyone with a valid South African cellphone number and the recipient will receive it immediately.
The service costs R4 per transaction when the recipient opts to cash the money out using the voucher, which it claims is one of the lowest rates in the industry, and is free when the recipient has a TymeBank account.
Commenting on the overall ARC performance during the period, Johan van der Merwe, co-chief executive officer of ARC, says: “Our performance in the period under review was first impacted by the poor trading environment as a result of a pedestrian economy.
“Subsequently, with the onset of the COVID-19 pandemic, the challenging operating environment was exacerbated. Interestingly, some of our investments experienced a significant acceleration in business activity, while others experienced a marked slowdown.
“In this instance, we have clearly benefited from a diversified pool of investments in our portfolio. This has helped us to perform satisfactorily on a relative basis to our peers, as well as other listed investment holding companies. On an absolute basis, we missed our key performance metric as a result of a poor trading environment. We are certainly not pleased with this performance.”
Notwithstanding the setback with TymeBank, ARC’s telecommunications business Rain benefitted from the COVID-19-induced lockdown.
The data-only network saw a sharp increase in its subscriber customer base as a result of people wanting access to cost-effective data, says ARC.
It says the Rain 4G rollout has also progressed well, with 5 500 active sites live as at the end of April.
The ARC Fund’s investment in Rain also increased from R2.5 billion at 30 June 2019 to R3.11 billion at 30 June 2020, which the company says was mainly as a result of a fair value write-up of R479 million.
“The business experienced a surge in subscriber numbers during the national lockdown period as people were required to work from home. Economic and social activities have increasingly moved online, including schooling, entertainment and connecting with family and friends,” says ARC.
“Going forward, we expect the difficult trading environment to persist over the short- to medium-term,” says Van der Merwe. “The impact of COVID-19 on our economy has been widely reported, with the economy now in a contracting phase. This does not bode well for many companies, including companies in which we have invested.
“As a result, we have already made plans with the management teams of key companies in our portfolio to see how we can align the business’s growth objectives with the prevailing economic environment. It cannot be business as usual over the medium-term.”