🌝 Dawn of SA's New Financial Future…

Hi there,

Grand entrance? Don’t take it too far. A tech CEO plunged to his death this week making a theatrical stage entrance at a company event. Sheez, sorry, man.

In this Open Letter:

• Fast forward: A bold new financial future for SA.

• VR treadmills, raising R82m & Chinese walkie-talkies.

• Solid start: How to build a startup in a funding drought.

• The results: How fast you want your claims processed.

• Tell a friend: Share this and get free stuff.

TRENDING NOW

The Future of Finance in SA

There are two schools of thought when it comes to cryptocurrency… 

1. Leave it unregulated to keep it open and free from government controls.

2. OR regulate so that mainstream adoption of tech can accelerate us into the glorious fin-tech future for our dreams.

And whilst the dream of keeping it open and free gives us all the noble Robin Hoodsy feels, unfortunately, the world has proven itself a little less than trustworthy with this tech. 

Between Bitconnect, Onecoin, Quadriga (the one where the founder faked his own death), our very own MTI and of course FTX, Crypto has a bad reputation.

That’s why many industry players have been working with the South African Reserve Bank to develop a framework to introduce regulation. 

SA’s Crypto FSP pioneers

Just this week the Reserve Bank announced that the first 50 Crypto Asset Service Provider (CASP) license applications have been submitted for review and are expected to be issued within weeks.

What this means:

• Declaration as Financial Products: In October 2022, the FSCA declared crypto assets as financial products under the Financial Advisory and Intermediary Services Act (FAIS Act). This subjects Crypto-Asset Service Providers (CASPs), e.g., trading platforms, exchanges, etc. to FSCA registration and compliance with its regulations.

• Anti-Money Laundering and Combating Terrorism (AML/CFT): Amendments to the Financial Centre Intelligence Act (FICA) are proposed, making CASPs "accountable institutions" subject to FICA's AML/CFT obligations. This includes Know Your Customer (KYC) procedures, transaction monitoring, and reporting suspicious activities.

• Consumer Protection: The "treating customers fairly" requirements of the FAIS Act will apply to CASPs, aiming to protect consumers from scams and unfair practices.

• Taxation: SARS is developing regulations clarifying the tax treatment of crypto transactions, including income tax, capital gains tax, and value-added tax (VAT).

• New players: Most importantly, perhaps, is that regulation paves the way for listed companies and banks to join the party!

But it also opens a whole lot of exciting new doors for fintech and beyond…

Opportunities lurking

Regulations will surely bring about some limitations, but what it does also do is provide a level of legitimacy to crypto assets and the technology behind them in general. 

Particularly people will most likely easily adopt it as legal tender and more will consider it as part of investment options, bringing about opportunities:

• Making digital ownership certificates: Having a digital authentic ownership certificate can facilitate a whole host of financial products and transactions. From more efficient escrow in purchases (managed by smart contracts) to raising liquidity against all kinds of assets. 

  One to watch out for here is digital title deeds for property – something FNB’s CEO has said they’re looking into. Fanfire is a Stellenbosch-based company that has run a few projects including selling ownership certificates to fine wine. These kinds of solutions stand to benefit mightily once there is mainstream adoption of crypto as it will introduce more buyers.

• Raising funding: IPOs have gone out of favour, at least in South Africa. But the blockchain could provide a way to raise funds. 

  This is something Momint is doing with SunCash. By purchasing ownership certificates to shares in solar projects, you get the returns from these projects over time as long as you hold them. 

  The exciting part is really that once crypto gets regulated, this can become a recognised financial instrument that can be traded or used as surety for loans.

• Instant payments: Blockchain has long been seen as the answer to borderless payment mechanisms. VALR has already introduced this in VALR Pay and has introduced the ability to pay using crypto at Pick n Pay, for example.

• All kinds of other verifications or certificates will get a boost: Wanna know where your meat’s been grazing? BeefLedgerSA can give you irrefutable proof — sure they have been going for some time, but mainstream adoption is bound to help companies like this.

Whilst there are quite a few blockchain solutions in play, once banks warm up to crypto due to regulation, expect to see way more action here… we are watching this space.

IN SHORT

💪 Digital Muscle. The Western Cape Government has launched The Western Cape Digital Productivity Business Technology and Innovation Support Programme which aims to catapult local businesses into the digital age by offering support to start-up businesses valued up to R100 000.00.

🥽 VR Treadmills. Tired of banging your knees and shins into furniture while wearing VR headsets? Well, Disney has developed HoloTile, a system that allows a VR user to remain on the system’s pad whilst walking on tiny round tiles that act as an omnidirectional treadmill.

🦾 Jobs Secure. Still worried about AI snatching jobs? Don’t be. An MIT study just proved that it’s way too expensive to replace humans with AI. At least, for now.

🐔 Walkie Talkies. 540 million tons of chicken feet, a South African delicacy will be making its way to China every month in a new deal worth R300 million per year. Despite the recent bird flu challenges faced by the industry, it’s great news for poultry farmers and clients.

🧑‍💻 Big Dev Push. SA’s leading developer job marketplace gets a shot in the arm as OfferZen just secured R82 million in funding and plans some of the biggest platform updates yet.

HOW WOULD YOU BUILD IT?

How to Build Startups in a Funding-Drought

If you’re wrestling with how to fund big ideas without bootstrapping, this week’s podcast is for you. We spoke to venture studio Next176 CVO Tramayne Monaghan about strategies for de-risking and building with an exit strategy.

Just the highlights

1. The state of startup funding in SA

The macro-economic reality in SA, and thus the amount of risk a funder knows they can safely take on, is starkly different to developed countries. And, as Tramayne explains here, the sentiment among funds here is really that they only want to back ventures that are generating revenue.

This naturally means getting early-stage funding is tough, and it’s not likely we’ll see much of a shift with the current economic flux we’re in. And that’s part of the reason why he believes venture studios are an important new way for founders to get their ideas built.

2. A new way to build in SA

As Tramayne discusses here, incubators and accelerators started because the developed markets had many VCs and not enough early-stage ideas to invest in. Africa has the opposite problem. And that’s where venture studios come in.

Venture Studios house a collective of really top-notch people – at Next176, for example, Tramayne has a team of people from Google, Salesforce, Tencent etc. – and they sit with founders and really build out the idea, validate, shape and start building it with you. Not over a few weeks, but in-depth and long-term.

And what’s great about bringing such an experienced team together is you create a space that is at once rigorous and creative.

3. Building to Exit

Thinking about exiting before you build is often a bit tricky for founders, as Tramayne mentions here. And where VC conversations can get a bit uncomfortable in later sales stages, his personal experience has been a greater sense of security since they’re corporate-backed (Old Mutual, if you didn’t know), which means there are quite a few natural exit opportunities almost baked into the process.

You can also grab the Spotify and Apple Podcast links on our website here.

THE RESULTS

We asked how long you think is acceptable to wait for an insurance claim to pay out, and 7 days is where you draw the line…

🟨⬜️⬜️⬜️⬜️⬜️ Immediately (8%)

🟨🟨🟨🟨⬜️⬜️ Less than 3 days (37%)

🟩🟩🟩🟩🟩🟩 Less than a week (45%)

⬜️⬜️⬜️⬜️⬜️⬜️ Who cares? (2%)

🟨⬜️⬜️⬜️⬜️⬜️ I don't have insurance (8%)