WeBuyCars allows customers to buy and sell used cars, acting as a middleman in the transactions. In 2023, the company sold a total of 142,337 vehicles and bought a total of 141,851. According to its parent company Transaction Capital, also JSE-listed, the unbundling and listing allows WeBuyCars shareholders to have direct access to a market-leading asset. 

The listing of WeBuyCars presents a signal of the renaissance of South Africa’s IPO activity which saw only 13 listings in the last 3 years. When the JSE trade opening bell rings on Thursday, whether the market will agree with or brush off  WeBuyCars’ R18.75 per share ask remains to be seen.

According to Jimmy Moyaha, founder of investment firm Lebowa Capital, WeBuyCars’ R18.75 per share price is reasonable considering the company’s strong business case. “R18,75 may be a little undervalued based on the book-build value they had identified. However, playing it safe only means more upside if you’ve got it right,” Moyaha told TechCabal.

Furthermore, Moyaha stated that the share price has the potential to reach highs of as much as R25 per share in the future. WeBuyCars, on the other hand, stated that it is investing in its proprietary AI, data, and analytics to boost its e-commerce sales. Currently, e-commerce sales represent 22% of total sales, down from the 27% recorded in 2022, showing that a lot of work is yet to be done to attract e-commerce customers to the platform.

However, other analysts are a bit sceptical about the company’s fortunes on the public markets, pointing to the company’s financial performance as a put-off factor. Transaction Capital’s latest financial results show that although the volume of cars bought and sold by WeBuyCars increased by 9% and 13% respectively, its earnings were down by as much as 14% from the previous year. The company’s cost-to-income ratio also increased from 57% in 2022 to 66% in 2023.

“[After April 12], the Reserve Bank expects that all the online payment platforms will be operating smoothly for all transactions,” the bank said in a statement.

Following the introduction of the ZiG on April 5, online payment platforms in the country could not transact with the Zimbabwean dollar, the predecessor to the ZiG. This led to consumers being unable to pay for goods and services online. Banks and payment providers stated that they could not support payments because they had to recalibrate their systems to the new currency. 

Some Zimbabweans expressed concern about the lack of organisation regarding the new currency. “Bank balances have been converted to ZiG but its circulation starts on 30 April and I can’t use it for online payments, so how will I make any payments between now and April 12?” said a consumer who preferred anonymity.

Online transactions have been slow to garner widespread usage as Zimbabweans have developed a culture of cash-based transactions in more stable currencies including the South African rand, Botswana pula, and US dollar. This stems from a fear of having money kept in bank accounts abruptly converted by the government to unstable currencies, as has happened in the past.

However, a sprouting of online payment solutions over the last few years has seen adoption gradually increase in Zimbabwe. Technologies which has gained prominence include Innbucks, which allows customers to receive loose change at restaurants; Ecocash, a digital wallet; and O’Mari, a superapp which includes mobile money, insurtech, and investech products.

When the draft regulations were published in February, the government invited the public to share feedback and comments that would shape the eventual outcome of the visa. However, the draft regulations and the official ones are the same, meaning that none of the public opinion was taken into consideration.

Although some South Africans favour the digital nomad visa on the premise that it would make the country’s tech ecosystem attractive to foreign talent, others believe an influx would lead to a rise in the cost of living, an increase in inequality, and tax leakage concerns. Others also pointed to several regulations which could impede the effectiveness of the visa.

According to Andreas Krensel, founder of immigration firm IBN Immigration Solutions, the lack of consideration for public opinion on the bill is problematic. “Although the confirmation of [the] digital nomad visa is great news, the same questions asked almost two months ago [when regulations were announced in February] remain unanswered,” said Krensel. Among these questions is whether the minimum salary requirement of R1,000,000 (~$53,000) is gross or net and whether freelancers would be eligible for the visa.

Additionally, South Africa’s current legislature has numerous laws that have to be amended if the digital nomad bill is to become law. For instance, the digital nomad bill proposes an income tax exemption for foreign employees working in South Africa for less than six months, and the income tax act would have to be amended to provide for the exemption to be legal.

The proposed tax administration bill introduced by South Africa’s Revenue Service in 2023 is another potential obstacle. Under the proposed amendments, employers of South Africa-based remote workers must deduct pay-as-you-earn (PAYE) tax. Foreign companies would need to apply for and receive a SARS income tax number and register a branch company within South Africa.

Another legislation that might put off digital nomads is a proposed amendment to the country’s Copyright Bill. For example, universities and other institutions will have the right to reproduce software products without having to pay producers of said products. 

“What the bill proposes [is] to water down copyright owners’ protection, and that [is] deeply concerning,” stated Sadullar Kajiker, professor of intellectual property at the University of Stellenbosch. This could prove to be a disincentive for nomads building proprietary software while in the country. 

With the visa law now official, it will be interesting to see how the government traverses through the unaddressed challenges as applications start flooding in.

The acquisition of Reflector Marketing comes at a time when early-stage investors are under pressure to have portfolio companies with solid business cases beyond just venture capital cheques. In Reflector Marketing, Baobab states that it will help its portfolio companies with specialised in-house marketing, branding, and digital services, amplifying their potential for success and further funding.

Through the acquisition, the Reflector Marketing team will join Baobab to provide portfolio companies with in-house digital marketing support. Klyne Maharaj, founder of Reflector Marketing, will assume the role of director of Baobab Network’s accelerator. Founded in 2016, Baobab Network is a sector and geographically agnostic investor who issues a ticket size of $100,000 to its portfolio companies. The company claims that its portfolio’s cumulative valuation is more than $225 million from 50 companies. 

According to Toby Hanington, co-founder of Baobab, the move is evidence of Baobab’s ambitious plans and long-term commitment to investing across Africa. “We’ve worked with the Reflector team since early 2023, and the move to acquire them is a testament to the work they’ve already done with our portfolio,” he said.

In the past, digital marketing, which comprises elements such as Search Engine Optimisation (SEO), social media marketing, product strategy, pitch deck preparation and branding, has been the go-to marketing medium for startups. This is because of its affordability compared to traditional marketing, relevance to target customers of startups, and its ability to adapt to the changing interests of the target market.

According to Maharaj, the acquisition is in line with its mission to enable the growth of startups via digital marketing. “Our goal has always been to help the world’s best startups nail their positioning, win their markets, and raise capital to fuel their growth.”

According to companies’ regulations in South Africa, a foreign entity cannot have more than 20% of voting rights in a South African broadcasting company. Mpumelelo Ndiweni, CEO of Colmin Group, an African markets advisory and investment company, told TechCabal that the CAF president’s involvement could help Canal+, a French company, to bypass this requirement. “The coming on board of [Motsepe] would ensure Multichoice remains in South Africa and meets the threshold of local ownership required by authorities,” he said.

Sherilyn Kamga, a senior strategic finance analyst, also states that a partnership with local players like Motsepe via a holding company structure would address this regulatory requirement. Motsepe would likely hold a majority stake in the holding company. “This way, it could exert indirect influence over the company’s management without exceeding the 20% voting rights limit,” she said.

Where there’s interest, there’s conflict

CAF, Africa’s football governing body, usually invites bidders for broadcasting rights to some of the continent’s premier football competitions including the African Cup of Nations (AFCON) and other inter-club competitions. Supersport, wholly owned by MultiChoice, bids for these rights. For Motsepe who owns Africa Rainbow Capital (ARC), having an ownership stake in MultiChoice could mean that he would have an impact, directly or indirectly, on which broadcaster gets the lucrative rights.

According to Jimmy Moyaha, founder of investment firm Lebowa Capital, although the conflict of interest is a potential issue, it would largely depend on the ownership structure that Motsepe and Canal+ would agree on. “Motsepe isn’t directly involved in the management of ARC, his investment vehicle, and I doubt he would be involved in the management of Multichoice,“ he told TechCabal. 

Moyaha also noted that ARC’s position as an investment firm could easily be limited to a shareholder with minority voting rights which would address this conflict of interest.

Additionally, Motsepe’s tenure at the helm of African football’s governing body ends next year. He could easily decide to step down from the position should he desire to have a more active role in the entity which would come about as a result of the partnership with Canal+.

For Motsepe’s ARC, an investment company whose portfolio companies include mobile network operator Rain and neobank TymeBank, having MultiChoice on its portfolio could help with diversification. 

The company, which is listed on the Joburg Stock Exchange, has stated that it invests in companies with an established market position, a demonstrable track record, and strong cash flow generation, among other qualities. MultiChoice—with its 22 million subscribers in Africa, its 30-year presence on the continent, and R3 billion (~$156 million) cash flow, per its latest financial results—ticks most of these boxes.

“For ARC, [the investment into] MultiChoice would diversify the business into media, further strengthening its operating model and investment strategy as an [investment vehicle],” Moyaha added.

Back in 2011, Cell C sold off its 3,200 towers to American Tower Corporation for $430 million.  In June 2022, MTN sold its 5,701 towers to Nigeria’s IHS Towers for R6.4 billion (~$337 million), with the company stating that it will use the proceeds of the sale to fund the purchase of spectrum to high-demand spectrum frequencies and provide it with additional balance sheet flexibility. The following month, in July 2022, Vodacom announced that it would unbundle its over 9,000 tower assets into a separate subsidiary in which it would hold a 100% shareholding. The telco said the move was to enhance asset returns and lower communication costs. Last year, Cell C announced that it would switch off tower access and have its subscribers roam on towers owned or leased by MTN.

As these SA telcos continue to sell off their tower assets, with reasons ranging from raising funds for other investments to supposedly lowering communication costs and shifting business strategies, experts who spoke to TechCabal say there may be other reasons at play.

According to Jimmy Moyaha, founder of investment firm Lebowa Capital, telcos may be pursuing strategic goals which do not necessitate having the towers on their balance sheets. “We’re seeing telcos rather deploy their capex into more strategic things like buying spectrum and improving network capabilities,” he said. Cell C and MTN took this route as they immediately leased back the towers from their respective buyers.

Additionally, according to Moyaha, loadshedding might also be a factor in pushing telcos to move the towers off of their balance sheets. With the loadshedding situation having gotten worse over the last few years, telcos have constantly reiterated in their financial results the investment that they have had to make in backup power during blackouts.

MTN has stated in the past that loadshedding led to an increase in thefts at its towers; Vodacom has said it had to invest R1 billion (~$200 million) on backup power for its towers; and Telkom has said it had to spend over R500 million (~$100 million) on diesel for the backup generators needed to run its towers. 

“When loadshedding is severe, backup power doesn’t have enough time to recharge and replenish itself,” added Moyaha. “This then necessitates the need for additional power solutions to be deployed and that becomes a very capex-intensive undertaking.”

Yet another (possible) reason…

According to Tshepo Magagane, an investment analyst, shareholder pressure might also be a significant factor behind the selloffs. Over the last two years, when most of the sell-offs have taken place, Vodacom, MTN and Telkom have all seen their share prices tumble by 38%, 53% and 39% respectively. “Share price underperformance [has led] to pressure from shareholders which results in the companies convincing themselves that the tower assets are ‘non-core’.”

He adds that the fact that private equity firms, which emphasise cashflow generation, are buying up the assets indicates their cashflow importance. “Infrastructure assets [like towers] allow revenue prediction, stable margins, efficient working capital deployment, manageable and incremental maintenance capex to investors,” said Magagane. 

Following its acquisition of Cell C’s towers, American Tower Corporation reported significant returns from the purchase. At the time, the company stated that it was generating a return on invested capital of approximately 20%. Each tower had approximately two tenants at a lease rate of $2,500 per tenant.

According to Magagane, the prominence of such deals is likely to attract even more private equity investors to seek similar opportunities on the continent. “A consummation of deals this large should act as a catalyst for other investors to wake up to the fact that there are opportunities in South Africa and Africa,” he concluded.

Motsepe, worth $2.4 billion according to Forbes, is the founder and chairman of Ubuntu-Botho Investments and African Rainbow Capital (ARC). Some of the companies’ investments include mobile network operator Rain and neobank TymeBank. Motsepe also has mining interests through Africa Rainbow Minerals (ARM).

Earlier this month, Canal+ made an offer of R125 per share for the pan-African broadcaster, a 20% increase from the initial offer of R105 per share submitted in early February. 

The offer valued MultiChoice at about $2.9 billion. Since 2020, the French company has increased its stake in MultiChoice from 20.1% to 35.01% when the first offer was made in February 2023.

Since Canal+’s flirtations, experts have pointed out the regulatory complexities that the deal to acquire MultiChoice might incur. 

Motsepe’s involvement in the deal may be able to address some of these complexities, which include the fact that foreign companies are not allowed to have more than 20% voting rights in South African broadcasting companies. 

“With its roots in South Africa, the coming onboard by [Motsepe] would ensure Multichoice remains in South Africa and meets the threshold of local ownership required by authorities,” said Mpumelelo Ndiweni, CEO of Colmin Group, an African markets advisory and investment company.

Swiftnet operates over 4,000 towers in South Africa.

In a statement to shareholders, Telkom said that the sale aligns with the company’s strategy to sell off non-core assets to focus on unlocking the intrinsic value of its more core operations. “Proceeds [will be] utilised to primarily pay down Telkom debt, thereby strengthening [its] balance sheet and enabling it to release free cash flow.” 

In November, Telkom announced a pivot into a more infrastructure-led business model. The model would be underpinned by investing capital into building and maintaining infrastructure assets including fibre networks, data centres, satellite, and marine cables. Swiftnet’s sale follows the company’s announcement in 2023 that it was considering selling a minority stake in its fibre infrastructure subsidiary, Openserve, which was unbundled in 2022.

According to the company, the strategy will enable the company to be “an enabler of South Africa’s digital future.” The strategy, which has been in place for a year, is expected to be completed by 2025.

According to the company, the high demand for infrastructure, a leading market position, significant barriers to entry in infrastructure, a strong balance sheet and a so-called experienced management team puts it in a favourable position to pursue the infraco model.

“[An] InfraCo strategy realises our true competitive advantage – showing Telkom to be a strategic national asset – the backbone of the SA’s digital economy and the enabler of the country’s digital future,” the company stated.

The company’s stock price is down by 2% following the news of the retrenchment.

“We routinely ensure that our business operations are fit for purpose as we transition from a telco to a leading technology company,” said a spokesman for Vodacom. “Additionally, Vodacom South Africa continues to proactively implement various cost reduction measures to ensure sustainable operations and maintain financial resilience.”

Per Vodacom’s latest financial report released in September 2023, the company’s revenue and operating income increased by 35% and 32%, respectively. However, the company’s profit margin and cash in hand were also down 20% and 57%, respectively, with the company citing investment into alternative power sources because of load-shedding as a contributing factor.

Vodacom’s next financial results are set to be released in May for the financial year ended March 31, 2024.

With the news of the retrenchments, Vodacom continues to face a flurry of issues in recent times. The company is currently involved in a protracted legal battle with a former employee about remuneration for the invention of the “Please Call Me” service. 

According to a court ruling, the ex-employee is eligible for a percentage of revenue from the service which might go as high as R63 billion. This would be equal to about 10% of Vodacom’s market capitalisation.

The four-part documentary follows the story of Bester, who was serving a life sentence for murder and a series of rapes—a sentence passed in 2012. Bester lured women by promising them international modeling gigs via Facebook.

Thabo Bester and Nandipha Magudumana had asked the court to prevent the documentary from airing because it could impact an ongoing court case centered around his 2022 prison escape. They argued that some of the documentary participants are considered witnesses in their court case.

Showmax had argued that giving in to the co-accused’s demands would encroach on South Africans’ constitutional rights to access information. Showmax also argued that the documentary’s content was information already in the public domain.

Handing down the judgment, Judge Wilson stated that Bester and Magundana had not presented a strong enough argument to bar the airing of the documentary. “There is no basis that I can recognise upon which [Bester & Magundana]’s relief can be granted hence, the application is dismissed,” ruled Judge Wilson.

Bester escaped from prison in 2022 by faking his death with the assistance of his girlfriend Nandipha Magudumana. The latter is facing charges of aiding and abetting the escape. In May 2022, prison authorities reported that Bester had died in his cell from injuries relating to a fire that erupted in his cell. A charred body was found in the cell, which was later discovered was not Bester.

Bester was later arrested in Tanzania in April 2023 following a manhunt. Magudana, who is said to have sourced the body burnt in Bester’s cell during his escape, was arrested with him and has been in custody since.