Billions flowing into South Africa’s tech scene
While many segments of South Africa’s economy have been struggling to keep heads above water amid the Covid-19 pandemic, one has been flourishing — tech.
Across the world, technology firms have generally benefitted from the disruption that came from the crisis, with their innovative solutions offering alternatives to the ways of life that were no longer possible due to strict curbs on movement and business activity.
Zoom’s shares boomed because it offered a competent and free video-conferencing tool that appealed to businesses and home users.
Adoption of Microsoft’s Teams remote working software surged from 20 million daily active users in November 2019 to 75 million in April 2020. It then climbed to 145 million a year later.
Ecommerce sites like Amazon and Takealot also experienced tremendous growth as more people preferred or were required to shop online.
These changes have shown the potential of technological innovation in ensuring sustainable businesses and led to investors pouring billions more into the tech.
In South Africa, one particular area has received most of the attention — financial technology (fintech), including cryptocurrency.
Fintech firms like iKhoka and Yoco are making it more affordable for informal and small-scale traders to offer their customers the ability to pay with cards.
Cryptocurrency platforms such as VALR and Luno make it easier for the average South African to buy and trade digital assets.
Here are several South African tech companies that have amassed millions or even billions in funding since the start of 2021.
FlexClub — R74 million
Car subscription marketplace FlexClub received $5 million (R74 million) as a part of a seed extension round that brought its total investment to around $6.2 million (R92 million) since its founding in 2019.
The brainchild of Marlon Gallardo, Rudolf Vavruch and Tinashe Ruzanne, FlexClub is an online marketplace that provides customers with flexible access to long-term car rentals.
It has specially tailored an offering toward ride-hailing drivers that cannot afford or don’t qualify for vehicle financing. It even has a dedicated section for Uber drivers on its website.
iKhokha — R1.5 billion for 37% of Crossfin
Patrice Motsepe’s African Rainbow Capital recently spent R1.5 billion to buy a 37.33% stake in the Crossfin Technology Group.
Crossfin will use the money to continue growing its portfolio of businesses, including iKhokha, a bank-agnostic payments company first launched at the end of 2014.
Since then, it has grown its footprint to over 35,000 merchants, supporting the growth of SMEs with low-cost mobile point-of-sale devices.
Mobiz — R59 million
Mobiz integrates hyper-personalisation into mobile marketing with a code-free tool that allows marketers, enterprises, and small to medium businesses to create and send SMS campaigns to their customers.
Founder and CEO Greg Chen established the company in 2014, building on his 15 years of experience in the mobile industry.
In November 2021, the startup announced it had raised pre-Series A round funding of $4 million (R59 million) from HAVAÍC, Futuregrowth, Launch Africa, Allan Gray E-Squared Ventures, CapaciTech and Endeavor’s Harvest Fund.
It will use part of the investment to employ more staff, while the company is also planning to expand into the US.
Naked Insurance — R160 million
Disruptive app-based South African insurer Naked raised R160 million in a funding round led by Naspers.
The technology giant invested R120 million in Naked, with the firm’s existing investors, Yellowwoods and Hollard, also participating.
Naked offers users the ability to take out short-term insurance cover on their home, car, or individual possessions via an app or browser.
The app uses a set of questions posed by a chatbot and combines the answers with artificial intelligence to calculate a premium in less than two minutes.
Parcelninja
Specialised warehousing and distribution management company Parcelninja offloaded a 60% share of its business to JSE-listed logistics giant Imperial in February 2021.
Parcelninja offers a smart warehouse and tracking services for fulfilling orders made in small online shops. It provides real-time reporting on inventory as it moves from arrival at the warehouse to delivery at the customer’s door.
The company picks up and packs over 18,000 items for about 3,000 orders per day.
TymeBank — R1.03 billion
TymeBank’s international arm Tyme raised an astounding $70 million (R1.03 billion) from Tencent and CDC in its latest round of funding.
Combined with the previous round, Tyme has amassed $180 million (R2.66 billion), which will go towards growing TymeBank in South Africa and funding GOTyme in the Philippines.
As recently pointed out in the Solidarity Research Institute’s 2022 Bank Charges report, TymeBank offers the cheapest banking account in South Africa.
One of the bank’s distinctive services is the ability to print a card with initials from one of its kiosks, located at various Pick n Pay outlets across the country.
VALR — R738 million
The cryptocurrency platform is barely three years old but is already worth an estimated R3.7 billion.
Recently, it raised $50 million (R738 million) in a funding round for an expansion across new markets in Africa and India.
The funding came from Alameda Research, Cadenza, CMT Digital, Coinbase Ventures, Distributed Global, GSR, Third Prime and Avon Ventures, and existing investors Bittrex and 4Di Capital, among others.
Partner at Pantera Capital, Paul Veradittakit, who spearheaded the funding drive, believes Africa has a bright future for the adoption of cryptocurrencies for both asset diversification and payments.
“VALR brings an amazing product and service to onboard both retail customers and institutions,” he said.
Ozow — R709 million
Payments gateway company Ozow recently announced it had secured Series B funding of $48 million (R709 million).
Led by Tencent, the investment round also included Endeavor Catalyst and Endeavor Harvest Fund. Notably, Endeavor Catalyst’s investment committee approval was chaired by Greylock co-founder and former executive chairman of LinkedIn, Reid Hoffman.
The company said it was processing over $100 million in transaction volumes monthly across thousands of merchants, while users grew by over 120,000 per month.
It is using its latest funding to develop new products and plans to expand into the rest of the continent.
Ozow offers Instant EFT payments via Scan to Pay QR codes at points of sale and online shops.
Teraco — R28.12 billion
At the start of 2022, Digital Realty Trust confirmed it would buy a 55% stake in South Africa’s biggest data centre company Teraco, putting its total valuation at $3.5 billion (R51.67 billion).
Teraco has seven data centres across three metros in South Africa, offering a total space of 48,000m2 and power capacity of 75MW.
It plans to expand its facilities with a further 93MW of capacity adjacent to its Johannesburg and Cape Town campuses, while another project will deliver a further 19MW.
Stitch — R398 million
The API fintech has raised a total of $27 million (R398 million) in various funding rounds since February 2021.
Stitch’s API allows fintechs, ecommerce players, marketplaces, and payment aggregators to integrate bank-to-bank payments within a few days.
The major advantage is that businesses pay 50% lower interchange and transition fees.
The startup expanded its offering to Nigeria towards the end of 2021.
Yoco — R1.2 billion
Affordable card machine and online payments provider Yoco announced it raised $83 million (R1.2 billion) in funding in July 2021, the largest ever for a payments company in South Africa.
Yoco offers a similar service as iKhokha, with low-cost mobile payment devices accepting contactless payments.
Its cheapest product is the Yoco Go, which can take contactless payments and costs as little as R199.
Yuppiechef — R500 million
Mr Price Group announced it planned to buy 100% of kitchen and homeware-focused ecommerce store Yuppiechef in March 2021. The Competition Commission approved the deal in July 2021.
The acquisition was valued at around R500 million, making it one of the biggest-ever ecommerce deals in South Africa.
Yuppiechef was started in Cape Town in 2006 by Andrew Smith and Shane Dryden. It was originally run from Smith’s home.
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