Monday, May 13, 2013

Reprint - "Lenders scramble for distance from African Bank"

via Business Report (South Africa)


The past week has seen almost everyone who has anything to do with the unsecured lending market jump up and energetically explain why they are different to African Bank, the share price of which slumped 22 percent in just a few days.
Capitec rushed to explain to the less discerning among us that it had moved from a microlending business many years ago and had become a fully fledged bank and in fact it was now the fourth-largest bank in the country. Almost half of Capitec’s 4.7 million active clients use its banking services and not just its credit offering, which is why more than 45 percent of Capitec’s operating costs are now covered by transactional fee income. In addition, Capitec is not in the furniture business and does not carry the same insurance risk as African Bank.
Then Transaction Capital, which released interim results during the week, stressed that its Bayport business, which offers unsecured personal loans to middle-market consumers, was just a minor player in the unsecured lending space with a market share of only 3.3 percent, compared with African Bank’s 20 percent to 25 percent. And so, we’re told, it’ll be okay.
Finally we had African Bank jumping up yesterday to explain why it is so different to… well, itself or at least different to the version of African Bank that has been dealt a massive smack by investors. Group chief executive Leon Kirkinis provided a reasonably impressive explanation for why investors should remain calm and relaxed. Without trying to gloss over the difficulties facing the group, he reminded the unusually large teleconference audience of 220 that the group had a sound base that would see it through the current difficulties.
Financial 2013 is going to be grim as African Bank adjusts to a trading environment that became significantly tougher in about June last year. But financial 2014 is expected to show some improvement.
Franchising
It is good to see two African powerhouses like Nigeria and South Africa forging trade partnerships. With all the resources and the expected potential economic growth from the continent, trade between any of the 53 countries is good.
While big deals are being signed by government leaders and big corporations, small businesses such as franchises are also forging ahead with deals.
Today, the Pan African Franchise Federation will be born. The inaugural meeting of this new baby would take place alongside the International Franchise & Entrepreneurs Expo taking place in Sandton.
It would be spearheaded by the Franchise Association of SA (Fasa) with delegates from Egypt, Ethiopia, Mauritius, Tanzania and Nigeria.
Fasa executive director Vera Valasis believes the time is right to bring African countries together and explore opportunities that franchising can bring to growing African economies.
“While we in South Africa have had a thriving first-world franchise sector since the 1960s, with over 80 percent of franchise concepts home-grown and have also ventured into Africa with many of our food and retail brands, Africa as a whole has lagged behind in franchise development.”
Valasis said it was time Fasa played a bigger role in promoting franchising and expanding this unique business format through the continent.
The inaugural meeting will put a spotlight on South Africa and its franchise sector, which contributes about 12 percent to the country’s gross domestic product.
While the fast-food sector could be a good start for the new federation, according to the International Franchise Association, sectors such as business and professional services had the highest growth in the US. The association’s HIS Global Insight report showed that these two sectors increased by 2.2 percent followed by the quick-service restaurants at 2 percent and personal services at 1.9 percent.
Social classes
There are different ways of defining class and they vary from country to country. The topic was raised at a presentation yesterday by the UCT Unilever Institute of Strategic Marketing.
The focus of the research was the black middle class, which the institute defined as black households earning between R16 000 and R50 000 a month. Alternatively, it classified people according to certain other criteria such as education, occupation, assets and accommodation. Institute director John Simpson said that in the UK there were seven social classes rather than the more conventional upper, middle and working classes.
The segmentation is based on what The Times of London called “one of the largest surveys of British class undertaken – involving 160 000 people”.
The survey was initially conducted online by the BBC in 2011 and was later backed up by research conducted by a survey company to broaden the sample.
The results, released last month, classified people according to money, social connections and cultural experience.
Topping the list are the elite – which include chief executives, judges, bankers, dentists and advertising executives. Next comes the established middle class – town planners, police, engineers and midwives. The technical middle class includes pilots, radiographers and pharmacists.
The new affluent workers are electrical fitters, heating engineers and sales people.
In the traditional working class are secretaries, lorry drivers and electricians, while the emergent service workers are chefs, musicians and care workers. At the bottom are cleaners, cashiers, drivers and the unemployed, described as the precariat – a contraction for precarious proletariat.
Researchers said the new affluent workers and emergent service workers seemed to be the children of the traditional working class, which was fragmented by mass unemployment, de-industrialisation, immigration and restructuring of urban space.

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