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Cryptocurrency is still a fairly new concept – and often shrouded in speculation, controversy and IT jargon. But as the price of Bitcoin skyrocketed in recent years, so has interest in digital currencies.
Companies like Luno, which makes it easy for South Africans to purchase and invest in Bitcoin, and Bitmart, an online retailer of the hardware needed to ‘mine’ (earn) cryptocurrencies, are opening this world to the public.
Producing cryptocurrencies isn’t anything like regular money. There’s no central authority that prints physical notes. Instead, cryptocurrencies are generated through a process known as ‘mining’. To put it simply, miners verify transactions on a blockchain, and in exchange for their efforts, they are rewarded with cryptocurrency. However, to start mining, you need a powerful computer, fitted with all the necessary parts – and that’s why Bitmart, located in the South African city of Nelspruit, exists.
Jacques Serfontein, CEO and founder of Bitmart, told How we made it in Africa about what it takes to profit from the cryptocurrency boom.
Give us an overview of Bitmart.
Bitmart specialises in cryptocurrency mining hardware and blockchain products. We also offer seminars to teach people about cryptocurrencies and how to trade and invest. Furthermore, we have a cryptocurrency trading signal service, where people can subscribe, and we send them the signals of what to buy, when to buy, and when to sell.
We import most of our hardware from international suppliers, although we do also make some ourselves. In addition, we have a facility in China that we work with to manufacture our own power supplies.
Do you sell hardware outside of South Africa?
Yes. International clients account for around 12% of our sales – we ship to countries such as Canada, the US, EU, Turkey, Australia and Japan. The nice thing about us is we are the sole distributers for some manufacturers in Africa – so people can only buy through Bitmart if they want a specific machine in Africa.
We’ve been using DHL for our express logistics for four years now. Our products normally arrive within two or three days in South Africa after ordering from the supplier – where competitors in the logistics space can take up to 21 days to get my machines here. The clearance is also done by DHL. They are quite on the ball when it comes to handling the packages.
How would you describe the competition in the industry?
In the beginning there wasn’t much competition because no one understood it, and we literally had to advertise to find clients. But when Bitcoin started picking up in 2016, when it went to R30,000 (US$2,245), there was considerably more interest.
In November 2016, we put up our first big R2m ($150,000) farm for a customer in the Free State province. Then as the Bitcoin price started going up in September, October, November, December last year – we saw hundreds of guys who are IT-savvy start selling machines from home. Luckily for us they didn’t know about the tax regulations – when you import something, you are not allowed to import more than R20,000 ($1,500) per year on your ID number. What happens is the parcels get held by Customs, and then Customs either destroys them, or it becomes a lengthy process getting them back.
So they kind of created a little barrier for entry into the market for just any guy who wants to import and sell machines. But there are some companies that have import numbers that also started popping up.
What differentiates Bitmart from its competitors?
We have a vast variety of hardware on offer. Some of the guys only sell one or two brands that they can get their hands on. We sell most of the trusted manufacturers’ machines.
We are a self-sustaining company – we don’t need customers to make our company work. We can mine our own Bitcoin and sell it for rands, pay salaries, pay power, pay rent. We can also trade cryptocurrencies and sell it for rands, and pay overheads.
Our competitors only do one thing – they sell hardware; we do the full spectrum.
Bitmart also has a physical store in the city of Nelspruit. How does your online revenues compare to brick-and-mortar sales?
We have one retail outlet in Nelspruit, but over 90% of our sales are generated online from our website. We had the opportunity to open 14 retail stores with another company that is already quite strong in the cellular space – but we decided against it. The overhead costs of running an online shop in comparison to running brick-and-mortar stores, that need four to six staff members, just doesn’t make sense. That is the old way of doing business.
What lessons have you learnt about running an e-commerce business?
E-commerce is all about engagement via live chat, communication with your client through artwork and simplicity, and selling a product in such a way that you never over promise and under deliver.