Patrice Motsepe’s African Rainbow Capital (ARC) Investments, which has made further investments into Rain and TymeBank to bump up the group’s total valuation to R20.2 billion, views the current government of national unity (GNU), dissipating inflationary pressures and easing of load shedding as providing tailwinds for its South African portfolio.
The business sector in SA has largely been optimistic about the GNU, viewing the inclusion of some opposition parties such as the DA in government as positive for economic and parastatal reforms. While the run-up to the May election period had been characterised by uncertainty, business executives are now seeing upshoots of stability in the South African operating and economic frameworks.
ARC Investments said yesterday that its ARC Fund portfolio was positively impacted by the GNU consummation, lower inflationary pressures and reduced levels of load shedding by Eskom for the full year to June 2024.
However, prevailing high interest rates, a high unemployment rate, falling levels of consumer spending and a volatile foreign exchange environment had created challenging trading conditions for some of our portfolio companies.
Against this backdrop, the investment company had made “advances in several early-stage assets leading to a maturing” portfolio. Over 80% of its portfolio was now made up of mature and high growth investments.
During the year to June 2024, ARC Fund invested a further R1.38bn under its current portfolio and disposed of R229 million of investments during the year.
Major additional investments included R216m in Rain and R169m in the Tyme Group while continued support of Kropz amounted to R602m.
This resulted in TymeBank achieving break-even status during the month of December 2023. Sustained profitability is now “expected in the coming months” after it generated fair value gains of R1.1bn during the period under review.
TymeBank notched up a growth of 11.8% to to 9.5 million customers against a growth trajectory of 3.6m new customers within 18 months of launch for Tyme Global to a user base of 3.6m in the Philippines.
In South Africa, TymeBank has been popular for its cash-in and cash-out network that it runs in partnership with Pick n Pay, Boxer, and The Foschini Group (TFG).
“TymeBank has shown strong customer acquisition, surpassing the 9.5m customer milestone this year with increasing activity per customer,” said ARC.
Deposits in SA had grown by 59% to R6.5bn while merchant credit advances have risen to R1.8bn, yielding a boost to the financial institution’s net operating income although costs increased by 10%. TymeBank reached breakeven in December 2023, and sustained profitability is expected in the coming months, said the company.
The telecoms unit, Rain has also recorded a 26% uptick in fund value,helped in part by the introduction of rainOne, along with the 5G router.
“Coupled with the business having moved beyond its most significant period of net cash outflows, has been a key factor in the increase in fair value of Rain’s investment,” said ARC Investments yesterday.
In July this year, Rain launched its standalone 4G mobile service while achieving its provisioned earnings before interest, tax, depreciation and armotisation (Ebitda) of R2.5bn for the year to the end of February 2024.
“Rain has solidified its position as an affordable data and mobile service provider and continues to experience substantial subscriber growth. While risks persist, Rain is well-positioned to manage them and further establish itself as a trusted brand in South Africa.”
As at the end of June, the valuation of the ARC Fund’s shareholding in Rain had increased by R598m compared to the previous same period a year ago after acquisitions of an additional R126m by the investment company.
Overall, the intrinsic net asset value (INAV)for ARC Investments firmed up by 21.5% to R18.6bn, made up of an increase in equity through a rights issue of R750m and a net gain of R2.6bn. This translates to an INAV per share increase of 8.5% over the year under review to R12.38 “in a sluggish economy” with debt in the Fund increased by 17.1% to R1.7bn.
BUSINESS REPORT