South African Dave van Niekerk is the man behind the pan-African fintech company MyBucks. The Frankfurt-listed business leverages technology to provide financial products and services to the low and middle-income customer segment, predominantly in high-growth emerging markets. To date the company has provided loans to over 800,000 customers in 12 African markets, and has also expanded to Spain, Poland and (most recently) Australia.
Van Niekerk previously founded Blue Financial Services, which is now suspended on the Johannesburg Stock Exchange (JSE). Prior to that he spent years working at African Bank.
Kate Douglas talks to Van Niekerk to learn more about what it takes to start a pan-African business, why he listed MyBucks internationally, and how he has managed to bounce back from past failures. Here are slightly edited extracts of the interview.
What lessons did you learn from your time at African Bank and Blue Financial Services?
Infrastructure is so expensive to [set up] in Africa. To get that critical mass and scale that you need to justify setting up infrastructure – I think it [makes it] very difficult for players entering Africa. So I think new incumbents going into Africa need a lot of investment behind them – and I learned that at both those organisations… When I was at African Bank we were still putting African Bank together – we were merging three or four lenders together, we were [getting] the banking licence – and just learning what it took to go from being a normal business to being a bank… was a lesson on its own in terms of costs and the people involved.
And then with Blue Financial Services, when we went into other African markets, [I learned] it really takes a long time to get regulation and approved for licensing. It also takes you a long time to put down the branches for infrastructure, and the costs are extremely high. So I think along the way the biggest lesson was to do it cheaper and more cost-effectively because inevitably you build very big infrastructure and if you don’t have sufficient cash to put through it, and your organisation doesn’t have efficient scale, you are not going to be successful in the long term. So you need to make sure that your organisation is infrastructure light – specifically in Africa. Then you need to be cognisant of the fact that it is going to take you longer in Africa than it would in most places to get your licences and approvals to operate. You just have to understand that the time frames are very different. You almost need to start earlier, and so the lesson is if you want to be in Ghana two years from now, you need to start the process now.
There was a lot of negative press around Blue Financial Services’ demise. Was this a challenge with starting MyBucks?
It is two-fold. Firstly, when it came to Blue Financial Services, we ran into funding issues around the financial crisis time. One of our biggest shareholders at the time was AIG, and when you had AIG on board as a shareholder pre-2008 financial collapse, it was something to be proud of. In 2008 AIG was under massive pressure, we needed to raise more capital and [with] the nature of our funding structure and of our shareholders, we weren’t able to raise more capital. So we needed to recapitalise the business and that goes back to the comment I made to you about building new infrastructure – it is very expensive to maintain and run. And if you no longer have the liquidity to continue lending in Africa, but you have got 450 branches and 3,000 people – you have got a massive overhead structure you have to maintain. So we needed to recapitalise the business, which was a decision that the board and the shareholders made at the time…
And then ultimately we brought on board a new shareholder who said that they wanted to take the reins and actually run the business, and I was quite happy with that. So I stepped out as the CEO. They said that they had injected capital, and the next two years showed phenomenal growth. And then in year three they managed to get themselves suspended on the JSE, or on the AltX, and ever since then they have sort of said it is previous management’s fault. So it is a little bit like crying foul two or three years after the initial management team left.
On my watch, most certainly, I think we should’ve been better capitalised, but it was a perfect storm. It was 2008 and the liquidity in the markets was a problem. The funding lines we had lined up just dried up, and our shareholder structure – which at one stage was a massive advantage to us – became a disadvantage because people were solving the world’s problems with those players and not necessarily looking at one listed company down in South Africa.
But there were some articles that were published around Blue’s collapse that suggested that you were in part to blame. Did this not cause damage to your reputation with potential investors and partners?
Most certainly. Everyone always looks at your history and they look at what you’ve done before. Ironically enough, I have got a lot of investors that say they are happy that I [had my experience with] Blue before, and that it helped me in terms of my lessons and my understanding of the continent. So they have actually been very supportive about the fact that this is easier and better the second time round because I’ve learned lessons from the first round. And [it is] why I built more of a self-sustainable model that doesn’t require new capital all the time to continue to grow. The business is self-sustainable, it is self-funding, in many instances.
So it is a very different structure and I also have got a very different shareholder mix. My shareholders are very diverse, across the world, and are very high-net-worth individuals, so that when they put money behind things, they make it work. And I think with… what we are doing in Africa and in the rest of the world, they look at [my time at Blue] as being a good learning curve for me and they also understand the full story of what went down.
What advice do you have for other entrepreneurs in terms of overcoming the reputational challenges of previous failures and trying to win back trust from potential investors and partners?
First of all, it is obviously a confidence knock when the business goes through tough times. I think that it is a bit like falling off the horse – you just have to get back on… But you do need to understand that it’s like being on the rugby field: sometimes you’ll miss that try and you’ve just got to get back out there, do it again, and learn lessons from what you have done in the past. You must try finding ways to improve the way you operate. But the most important thing is to get back in the game.
Funny enough, the American market and much of the international market, respect failure because they see that as a learning experience for people. They understand that there are many entrepreneurs that only make it on their third or fourth attempt… And they eventually get it right, and when they get it right, they get it right spectacularly. But people will make mistakes, they will fail – and they need to just pick themselves up and remember it doesn’t mean you are a bad entrepreneur or a bad manager if you’ve had a failure. You should be reflective and have a look at what went wrong. But just having the ability to pick yourself up, dust yourself off and get on with it – people respect you more if you have managed to do that. And those war wounds give you the experience and toughen you up for what comes next.
Why did you decide to list MyBucks on the Frankfurt Stock Exchange, as opposed to the JSE?
We listed last year June on the Frankfurt Stock Exchange, and that was partly because we were starting to get banking licences… Regulators want to see a public company because they have ownership thresholds, so individuals and private companies can’t hold more than a certain percentage of a bank. If you want to hold a bank in many of the African jurisdictions – and much of the world too – there are ownership requirements. And the way to meet the requirements is to be a publically-listed company, and listed in a premier destination.
We could have listed on the JSE and the LSE… or in the States. But ironically enough, most of our initial investors are German, Austrian, and one or two from the UK – and they were leaning towards a European listing. And then it was a choice of the UK or Germany. But at that stage there was this whole Brexit thing going on – and so their advice was to go with Germany. It is a brilliant exchange. The Germans are everything when it comes to efficiency. It took us about a year to get the listing done and we finally finished it off in June last year. After that the banking licences in African [markets] started to be approved.
Currently we have a banking licence in Uganda, Mozambique, Zimbabwe, Zambia and we are looking at two or three other markets to get additional banking licences.
Why launch in Spain and Poland?
People said that we might be a great fintech player in Africa, but we won’t really compete in the international market, because it is different to Africa. But we – South African fintech businesses – are actually ahead of the game… Because we are used to dealing in emerging markets to get around hurdles and obstacles, we’ve got [innovations] like mobile payments – so we are actually ahead of the game when it comes to European players and even the US. So I think we decided to prove that our technology would work in Europe, and we launched in Spain and Poland.
Everyone always asks why Spain and Poland. But the thinking there was they were relatively easy markets to get into because our licensing requirements didn’t take more than six months. And secondly, the way I like to think of it is if we were a car manufacturer, McLaren, and building cars – we would want to test them on the Formula 1 track. [Similarly], we take that technology, pop it in Europe and see how we compete with the European financial service players, banks and lenders. It turned out to be beneficial for us in two ways. One, we took what we had learned in Africa to Europe, and we were doing things differently to European players. And then the European players also did teach us a thing or two on how they were processing data, and some of their architecture, and we bought that back to our African operation. So it has been quite a good R&D spin for us.
And then our latest foray is that we recently acquired an online credit provider in Australia – and that is our first entry into that part of the world. We think that Australia could be our base for East Asia markets going forward.
Tell me about MyBucks’ insurance offering in Africa. What works and doesn’t work?
So the jury is still out to be honest with you. I think it is early days. Insurance is something we launched after we launched the lending and banking products. We are typically doing anything from crop insurance, where the person takes an agricultural loan to small business insurance, to doing emergence type insurance, and credit, life, funeral insurance – we have even got a legal insurance. And different things work in different countries. So you can’t really paint Africa with the same paint brush. So Botswana we have got a big uptake on people wanting to have life cover and wanting legal cover. In Kenya, for instance, it is more about crop insurance. So it varies from market to market.
What we have seen is more of a need for short-term insurance products where people can pay small amounts on a daily, weekly, monthly basis rather than a big premium. People want to be almost able to sort of switch on and switch off their insurance when they need to. People don’t want to get stuck in a long contract where they have to pay every single month. So typically a farmer would want to insure for that season, he doesn’t want to sign a five year insurance product.
Because we are a fintech business we are dealing with a lot of data. So even customers that apply for credit, or insurance, or banking, we get access to what is going on in their financial world and then we can make a recommendation… We [also] tell a customer what the credit bureau thinks of him. So anyone who is applying for credit understands where he stands with the credit bureau and what his credit rating is… On top of that we tell him what his affordability is. Looking at the person’s financial history, be it off a mobile wallet or off a bank account, we can say ‘this is your income, this is your expenses, this your disposable income, that is why we are granting you a loan of X amount’… So that gives the customer a little more sort of a global view…
And then we built in quite a nice tool, specifically for the South African market recently, where customers were even told the minute there was a change to their credit profile. So if somebody has to list you on the credit bureau today, say you forget to pay a doctors bill for R50… then we would inform our customers saying there has been a default notice posted on the credit bureau for R50 from this doctor. Then customers can take remedial action.
Any advice to others with ventures targeting African markets?
First of all, you are going to have to look at local partnerships. More so than ever before, you need local partners in the markets. You need local shareholders and directors that understand the lay of the land, the legislative environment and almost the socio-political environment… Just having that day-to-day, on-the-ground knowledge is invaluable. You can’t launch in the African markets anymore without having a local partner or local influence in the business. So that is the foremost thing – look for local partners in those markets.
Second thing is be patient because, even with local partners, you’re in for a long ride to get all your approvals and finally get operating. But the scope is there and there is business out there. And you will see many of the South African multinational brands are crossing the borders into [other] African markets. But a lot of the times they will buy a local player or they will partner locally and get going.
What is the one thing you wish you knew about entrepreneurship before you got started?
I could tell my younger self a few things. One thing about entrepreneurs is we are always looking ahead and we don’t always even anticipate failure nor that not everyone has our best interests at heart. So I probably learned a lot about people as an entrepreneur – not necessarily all good things I have to tell you. So I would probably want to tell my younger self to be less naive when people tell and promise you things, and don’t base your business decisions on thinking always the best of people… You need to be a little bit more street smart in terms of dealing with people – be it a board or investor… It is quite a hard lesson to learn… My younger self was a little naive in thinking that everyone has your best interests at heart. But it doesn’t always work like that.