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AFRICAN RAINBOW CAPITAL

April 16, 2024
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Know what you own!!!

An investment holding firm is as good as its underlying investments. In this article I will attempt to unpack the positives and red flags.

 

ABOUT THE COMPANY

You cannot mention the name Patrice Motsepe without evoking some type of emotion amongst retail investors in South Africa. Love him or hate him, he is worth a few billion Rands.

 

African Rainbow Capital (ARC), which was formed in 2015, is a fully Black owned and controlled company of significant scale focusing on opportunities in the South African and African financial services and diversified investments (non-financial) industries.

 

ARC is an investment holding company. Its most prominent investments include

  • RAIN
  • Tyme Bank
  • Afrimat
  • Kropz
  • Alexander Forbes
  • Afrocentric
  • Many more others including the prestigious lifestyle estate, Val de Vie in the Cape Winelands

 

RAIN

ARC Investments acquired 20% of Rain in 2018, a start-up telecommunications company with significant growth prospects. Rains primary product is data, and the company is building a dedicated national LTE Advanced network and infrastructure. The acquisition price was R1.8 billion. ARC injected an additional R180 million into RAIN.

 

The companys market share has grown significantly, with work-from-home requirements during the Covid-19 pandemic doubling data traffic and accelerating the business plan by a few years. Importantly, the growth has been in subscribers, a key driver of revenue, more than in usage. Rains 5G network has grown rapidly, covering Gauteng and Cape Town, and expanding across the larger metro areas along the coastlines.

 

The 5G offer is attracting a higher-value customer, with average revenue per user (ARPU) growing significantly in the past year, and it enables a more diversified revenue stream for the company.

 

Keep an eye on government contracts for RAIN. In March 2022 Telkom and Rain Networks won the first round of SA's radio frequency spectrum auction for ICASA. For both operators, it's the first time they will have access to radio frequencies below 1 GHz, crucial to provide better internet services in underserved and rural areas and better indoor coverage as such frequencies are able to penetrate building walls and underground structures.

 

TYME BANK

Founded in 2015 and launched in February 2019, Tyme is South Africas first digital bank to fully operate in the cloud, first majority Black-owned bank and the first bank to be granted a commercial banking licence since 1999.

 

It is very important to note that Tyme is not profitable yet. Tyme offers customers personal and business transactions, savings accounts and value-added services, providing customers with easy, one-stop solutions integrated with their lifestyle needs. Tyme forecasts to break even in 2022.

 

2021, Tyme successfully raised R1.6 billion in one of the largest foreign investments ever secured by a fintech company in South Africa. Tyme is part of TymeGlobal, a multi-country digital banking group with more than 8 million loyalty members to whom banking products could potentially be offered.

 

AFRIMAT

Afrimat has been a gold-mine for ARC. The ARC Fund acquired 26.3 million shares (18.35%) for R400 million in September 2017. Afrimat performed exceedingly well during the Covid-19 pandemic, increasing its share price from R25 in March 2020, to R61 recently, a growth of 145% in 16 months.

 

Afrimat is a leading black empowered open pit mining company, listed on the JSE, which supplies construction materials, industrial minerals, bulk commodities, as well as contracting services in the form of mobile crushing, screening, drilling and blasting to its clients. The group services include from major infrastructure and construction projects for public sector and government owned enterprises, to small private sector contracts.

 

Important to note that ARC sold a portion of their investment in Afrimat to lock in some profits. Smart, if you ask me. They still hold a big portion.

 

KROPZ

Kropz is an emerging African phosphate explorer and developer, listed on the London Stock Exchange. Kropz has an advanced-stage phosphate mining project in South Africa, and Hinda in the Republic of Congo. Phosphate is a key ingredient required in fertilizer production, which in turn is essential for food security. With the ongoing war between Russia and Ukraine food security has been top of mind for many countries.

 

Important to note: Kropz is still in development. The company announced that additional funding would be required. The company also announced that they received an unexpected notification from Transnet about capacity constraints at the Saldanha Bay port, which could hamper exports.

 

AFROCENTRIC

This little company is less than 1% of the ARC portfolio, but I just love the growth story here and it is far from over. AfroCentric is a black-empowered investment holding Company that provides administration and risk management solutions to the healthcare sector. Its diversified business model and growth strategy enables the Company to achieve sustainable growth and value creation across the healthcare sector by leveraging its competitive advantages of a strong market positioning.

 

CONCLUSION 

I suggest you familiarize yourself with all the underlying investments of ARC. I've seen many posts on social media where people are claiming that they are buying Tyme shares at R6, and that it is the next Capitec. Capitec is a pure bank. ARC is NOT only Tyme. You can see attached that less than 10% of ARC is attributable to Tyme.

 

KNOW WHAT YOU OWN ~ SOUL

 

 


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