TymeBank, backed by billionaire Patrice Motsepe’s investment group African Rainbow Capital (ARC), has signed on 1.9 million customers of which 50% were active at the end of June 2020.
Launched in November 2018, the digital banking startup said that it aimed to be at break-even by 2022, with a customer base of around 2.2 million
TymeBank, which makes up 8.3% ARC’s fund value (2019: 7.2%), is focused on banking the unbanked and under serviced in South Africa. ARC detailed the bank’s progress in a review of its financial results for the year ended June 2020.
It said that at the end of June 2020, the bank had on boarded 1.9 million customers, which is ahead of its business plan. “The bank is signing up between 3,000 and 3,500 customers per day, with half of the customers actively using their bank accounts.”
ARC said that the impact of Covid-19 on the bank has resulted in the delay in the roll out of its partnership with the Zion Christian Church (ZCC) as well as a change in its unsecured personal lending proposition.
“Responding to a significant change in market conditions, the bank’s management has introduced cost reduction measures, while also focusing on revenue diversification and partnerships activation.
“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 at 30 June 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.
At 30 June 2020 the ARC Fund has an effective ownership interest of 35.18% in TymeBank, being its 49.9% of the 70.5% interest that ARC Financial Services holds in TymeBank. ARC Fund’s effective capital contribution to TymeBank was R374 million for the year ended 30 June 2020, it said.
ARC said its intrinsic investment in the ARC Fund increased by 2.1% from R9.74 billion at 30 June 2019 to R9.95 billion at year end. The Intrinsic Net Asset Value (INAV) of the Company increased from R9.34 per share at 30 June 2019 to R9.54 per share at 30 June 2020 which also amounts to an increase of 2.1%.
It said that whilst this is significantly below the medium to long-term hurdle rate of 16% per annum, it is indicative of and aligned to market performance in the current economic environment.
ARC’s investments also include data based mobile network operator Rain, MetroFibre, Alexander Forbes, and EOH.
“The year under review has been characterised by strained trading conditions, mainly resulting from the contracting economy. This has adversely impacted most of the companies in our portfolio. An already poor performing economy was exacerbated by the sudden onset of the Covid-19 pandemic,” it said.
Fair value gains and losses for the year ended June 2020
Rain, which makes up 27.9% of ARC fund’s total value, and in which it has a 20.7% stake, successfully launched its 5G network over the reporting period. The operator saw a fair value increase of R479 million over the period.
Rain has three main income streams. Firstly, it earns roaming income from Vodacom in terms of an infrastructure and services agreement. It secondly earns revenue from 4G data sales and also earns some income on the fixed reseller business which is in the process of being wound down to create capacity to expand the 5G network. That network was launched in September 2019.
ARC said that by the end of April 2020, Rain had rolled out 447 5G towers and aims to increase this to 1,500 by December 2021. Ultimately more than 2,000 5G towers in larger metro areas throughout South Africa are planned.
“During the National Lockdown period, Rain experienced a surge in subscriber numbers 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,” ARC said.
Rain 4G roll-out has also progressed well with 5,500 active sites live as at the end of April. The ARC Fund’s investment in Rain increased from R2 508 million at 30 June 2019 to R3 111 million at 30 June 2020, mainly as a result of a fair value write-up of R479 million (2019: R364 million).
ARC said its investment in MetroFibre increased from R203 million, to R242 million at the end of June 2020 as a result of injecting capital of R27 million and a fair value increase of R12 million (2019: gain of R11 million).