Hi there,

Our Linkedin community is growing faster than the list of mayors of Gauteng metros– up 35% just this week! If you’re a part of it, thank you. If not, come see what all the fuss is about. PS: While you’re there, check out our next Open Conversation about scaling globally with Stephen from OfferZen.

In this Open Letter:

• About the money: The SVB collapse & SA’s new real-time payment system.
• ChatGPT-4, replacing CEOs with AI & goodbye Naspers Foundry.
• In case you missed it: 5 Startup insights from Founders Den.
• Team & culture sorted: How Ollie's mental health platform works.
• Funding VS Bootstrapping: New in How would you build it?

TRENDING NOW

Getting the money up to speed

SA welcomed a brand new interbank instant payment mechanism called PayShap this week, a real-time payment system that allows you to pay cross-bank and mobile to mobile.

After launching a pilot project between the 4 biggest banks in SA, it will be rolled out to other banks in 6 months' time. Here are some interesting PayShap features and insights:

• Pioneered by BankServ
• One objective is to drive financial inclusion and possibly eliminate cash
• Can pay to a mobile number (using your unique PayShap ID)
• Money instantly available cross-bank

A similar project in Brazil called Pix launched in 2020 and already bolsters 132 million registered users, roughly 62% of the population. And only 3 years in, it’s already the second most used e-commerce payment method.

From a pricing perspective, there isn’t much consistency at the moment in terms of how much banks charge for a PayShap transaction – prices range from free to R45(!!) from Absa.

Now it's still only a pilot project, but it's disappointing to see a price tag of R7.50 and upward. R7.50 for an R20 transaction is simply not viable. But free transactions under R100? Now that’s shap payment.

What will this do?

Among the many things that excite us about this, there are 2 things that this will definitely do:

• Increase the velocity of money – more economic activity, more taxable events, better for all of us. It is estimated that 25% of the GDP happens in the informal economy and being able to tax these transactions will generate billions in tax revenue.
• Massive new markets to service if you are in the B2C space. Many startups are only able to receive payments from credit card holders and once APIs open up (which they should), increased addressable markets will improve substantially.

Whilst PayShap makes money transfers fast and cheap between different banks, with limits of R3500 in place, we doubt it will cause bank runs. But it just might give us frictionless transactions that will power the next era of economic growth.

IN SHORT

A CEO with $0 that works 24/7: Should we replace CEOs with AI? This company in China did it and it's beating the market.

Well, you can’t watch TV when the power’s never on, or at least that’s what DSTV is arguing amidst incoming poor results. DSTV shares drop 14% in a day after announcing a warning on reduced earnings.

In an effort to align its global investment strategy, Nasper Foundry is closing its SA operations. After investing R700m of the planned R1.4b, where are these startups now?

What big 4? With more than 20 million customers, roughly one in every three South Africans bank with Capitec.

GPT-4 is here: Get it to build browser-based games, turn hand-drawn wireframes into designed websites and more.

Up in flames! Your Gizzu portable power station model could be part of a recall due to combustion during charging.

GLOBAL TRENDS WITH LOCAL IMPACT

The fastest bank run yet

Silicon Valley Bank’s 48-hour collapse has sent shockwaves through the financial world, with bank stocks taking a dive and fears mounting that a similar fate awaits other banks. In case you missed it, the TLDR of what went down is as follows:

• Silicon Valley Bank (SVB)’s deposits tripled in 4 years from 2019-2023.
• They had to park the money somewhere to be able to pay the interest they promised depositors while customers’ appetite for loans was substantially lower than their deposits than deposits. Meaning they had to find another place to create interest.
• And one of the safest instruments to achieve this is US government bonds. However, they made the mistake of using short-term deposits to buy long-term assets.
• When people started to withdraw money, they had to sell their long-term assets at a loss to cover deposits.
• This loss caused havoc on the balance sheet and created fear everywhere, sparking VCs to advise their portfolio companies to move money.
• And they did. 48 hours later the bank was closed to prevent further damage. A bank run.
• As of today, the FIDC has promised to “make whole” everyone (the FED will make ‘additional money available’), and they promised not to use taxpayer money to do so. This got us thinking…can’t we get the FIDC to do this magic trick with Eskom, please? Anyhow…

A run on the bank

It has been some time since we saw one of these in traditional banks, however, if you have spent any time in DeFi the last two years, you would be very familiar with this term. After Mark Cuban gave Iron Finance a shoutout, its token price went intergalactic only for a run on the bank to happen a few days later. Depositors weren’t able to withdraw due to network congestion of note, bringing the Polygon network to a standstill. A similar situation happened with Terra Luna only a few months later, wiping out $60bn in value in a matter of days.

But whether in crypto or traditional banking, the principle is the same. When too many depositors try to withdraw their money at the same time, a ‘bank’ could find itself in a position where it’s not liquid enough to pay out the money. And when this happens, panic sets in and even more people try to withdraw, compounding the problem.

Now in the pre-internet banking era, pictures of people queueing at banks and ATMs hit the front pages of newspapers for weeks.

And if the bank and central banks could calm the storm in time, well… they could avoid the run or at least the damage it caused. But not so in the era of digital banking.

What is phenomenal about the SVB bank run is the pace at which money was withdrawn. For ten hours on Thursday, customers withdrew a total of $42 billion. That's ±$1 million per second for 10 hours straight. This compared to the Washington Mutual Bank run of 2008, which saw $16.7bn withdrawn over 10 days mostly through manual withdrawals, just shows how much more devastating a bank run can be in the era of digital banking.

Interestingly back home, the last South African bank failure happened in 2002, when R1 billion ($55 mil in today’s terms) was withdrawn from Saambou Bank accounts over a period of 2 days, causing the SA Reserve Bank to step in and pause withdrawals.

It’s pretty clear that digital banking increases the risk of a run on the bank. The world has changed, and this needs to be factored into the future of banking.

WATCH THIS SPACE

Networks, Eco-systems & Bootstrapping

5 Insights from this year’s Founders Den at Specno

Rewatch the whole thing on Specno’s Linkedin Event.

1. As a startup founder, it’s vital to build not only local but also international networks. The sheer concentration of startups in somewhere like Silicon Valley pales in comparison, so having that experience to tap into can be priceless. Reach out, connect, ask for advice and stay connected.
   
2. It’s vital to support and enable each other. SA startups are not competing against each other (for business, funding etc.) but building an ecosystem. The more investors see a larger number of successful startups originating from here, the more funding will become available for everyone. Let’s keep cheering each other on towards success!
   
3. There’s an art to knowing when to bootstrap and when to raise capital. A) lack of capital can become a restraint when you start too late, or B) getting VC funding can limit the freedom necessary to really build something. If, for example, you raise and then you need to pivot 3 months into something that falls outside of the VC’s original brief to their Limited Partner (LP), it puts them in a tough place because it shows they didn’t do their due diligence. So consider carefully before going the funding route.
4. One solution to bootstrapping is to make select corporates aware of what you’re building and approach them for funding in exchange for services you offer, related to “on the side”, (and, from OfferZen’s Philip Joubert’s experience, it’s possible even without having to give up equity). In essence, partner with corporates to make progress. But a word of caution, though partnering with a corporate early on can be very lucrative and add a lot of weight and legitimacy to your business, it’s important to keep sight of your goals and not get distracted by such a bigger more established partner.
5. OfferZen specifically chose a business model that generated cash early on, instead of a model that perhaps suited the business better in the long run, but would have cost too much to get there.

A TEAM THING

How does Ollie mental health work?

For the month of March, we have partnered with Ollie to offer our readers one month of unlimited mental health credits. Mental health credits shared between teams. Check out this video to see how Ollie works.

Keen to give it a try? One month, unlimited credits for our readers.

Fill out this form and the team from Ollie will be in touch.

THE THREAD

This week in How would you build it?

To get funding or not to get funding…there are benefits and drawbacks to each. What would you do for your startup? In this week’s How would you build it?

ONE LAST THING

We moved to Beehiiv! It’s rated as one of the best newsletter providers around. Features and future are bright, BUT despite our best efforts to hit your main inbox, Google categorises us as promotional. (Due to our curation and world-class memes!). So even if you have done this before, please move us from promotions to your main inbox again (last time we promise).

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This Open Letter is brought to you by Renier Kriel, Jason Mill and Elvorne Palmer. And we discuss these topics every Thursday on our Linkedin page.

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Hi there,

We’ve partnered with Ollie and to celebrate, we’re giving you the chance to claim unlimited mental health credits for your team. Yes, you read that right: every single person who clicks on this link right here and signs up, gets unlimited mental health credits for their entire company. You’re welcome!

In this Open Letter:

• What’s eating the margins: Tech to lower food costs.
• Recession woes, expensive braais & 3D-printed housing.
• Silver linings: Inside SA’s mental health crisis.
• New podcasts: How would you build it?

TRENDING NOW

Tech, Potatoes & Lucrative Margins

A win-win for SA food prices?

Last week we dropped a short on the rise of food prices. Potato prices have been more volatile than Bitcoin in a bull run, seeing a staggering rise of 40%+ in one year. And whilst these prices go up, they seldom go down at the same rate. This isn’t sustainable…

The Travelling Vegetable

2400km. That’s the estimated distance a food item travels from farm to plate in the USA, so it should be a few hundred to a thousand km in SA. And considering that many of these food items need a cold chain, the cost to get them to you is staggering.

In fact, in 2020, the competition commission determined that the average retail price for milk is 3.5 times the production cost. Meaning that of the price you pay, only ±28% ends up paying for the production of the milk.

But transport isn’t the only cost, diesel to keep generators going will amount to R1b for Shoprite in the year to come. This is not to mention the capital outlay to install and the operational expense to keep these generators going. It’s all adding to the cost of food for the man on the street.

The Make-Up of Food Prices

If production cost is 30% of the cost, then what constitutes the other 70%? It differs per food item and where in SA you live but generally, the basket that gets the food to your table is made up of production, transport, retailer operations and a whole host of brokers and agents that facilitate these interactions.

Is 70% of the price up for grabs?

If one were to cut some of the middlemen, shorten the supply chain and even go direct to consumers, there are some lucrative margins to be made. And it’s busy happening.

The fishing industry in South Africa provides income for some 27k people in SA, and an estimated 75% of these are informal fishermen. Traditionally these fishermen would supply into a supply chain that is constantly squeezing their margins and enriching others along the way.

But Abalobi has been changing the game for them since 2017. What started out as a small social enterprise to capture fish data evolved into a full-blown sea-to-table solution for small-scale fishermen. Whilst at sea, fishermen can log their catches which then get listed on a marketplace that chefs, restaurants and even the public can access. Enabling the cook to buy directly from the producer.

The impact? Over 250 000 kg of fish sold and more than R16m paid out to fishermen. What’s more, the data that is generated is crucial to the preservation of marine life around the world.

But What About the Price of Potatoes?

1. 10 months ago, Nile announced a $5.1m round of funding to further their mission of connecting producers and entities that sell to the public. The solution is in essence a B2B marketplace that helps retailers with price discovery, quality verification, payments and traceability. Streamlining the supply chain and ultimately reducing costs.
   
2. The estimated 2 million small-scale farmers in South Africa mostly suffer from low yields and a lack of financing. Both issues can be addressed through training and providing finance and market opportunity. This is what Agrikool is working on, aggregating produce from smaller farmers and then linking them with market opportunities such as Shoprite and Boxer. All of this contributes to more supply which will have a positive impact on prices for retailers.

Whilst the short-term impact of supply chain costs and loadshedding is for the consumer to bear, the food industry is set for a shakeup in the medium term. We are watching this space…

IN SHORT

Change of heart: RIP the metaverse.

Where are all the iPhones at? This neighbourhood has the highest concentration of iPhones in SA.

It's all pointing to a recession, GDP contracted 1.3% last quarter.

“No Time to Braai,” the new Bond film about skyrocketing Shisa Nyama prices is… depressing.

Are 3D-printed houses the solution to SA’s low-cost housing crisis?

Now you can swear on YouTube again.

Balanced view: What if AI is just the next bubble?

Price wars: Twitter owes Amazon $70m, so Amazon stopped paying its Twitter ads bill.

WATCH THIS SPACE

Inside SA’s Mental Health Crisis

Key innovations, needs & opportunities in Tech

You don’t need to look very far for proof of the “global mental health crisis” UN Secretary-General Antonio Guterres highlighted at the launch of last year’s World Mental health Report.

The WHO concurs, and explains why:

1. Depression is a leading cause of disability worldwide,
2. Suicide is the 4th leading cause of death in people between the ages of 15 and 29
3. People with mental health issues often die up to 2 years prematurely from perfectly preventable physical conditions.

You get the picture.

But what is the situation locally in SA?

Mental (Un)Health SA

According to the SA Depression and Anxiety Group (SADAG), as many as 1 in 6 South Africans suffer from anxiety, depression or substance-use problems. (That’s around 16 million people, confirmed by a more recent Wits study that says only a quarter of these South Africans are getting adequate treatment.)

And SADAG should know, they handle around 2’200 suicide-related calls per day.

And it’s costing our economy about R200bn per year in absenteeism and “presenteeism” alone. That’s about half of what the country spends on healthcare for an entire year [circa R462bn] and probably quite close to 5% of GDP.

So an entrepreneur looking to build a happy, healthy, thriving team is facing some unique challenges.

SA’s “special case” challenges

South Africa has over 10’000 psychologists, so why don’t employees and families just get treatment?

3 possible reasons:

1. Logistics: How accessible is treatment really if you need to make an appointment for some time in the future, take off work and then trek across town to their offices? It ends up costing patients far more in time and travel than just the session alone.
   
2. Costs: At an average of R1000 per session, and most therapists will advise multiple, weekly sessions (so about R4000pm), is it even affordable? Now one can assume that a large portion of those fees goes towards the therapist’s office space, administration and staff.
   
3. Stigma: As wonderful as SA’s mix of cultures are, they are nearly all patriarchal and the stigma and discrimination against people with mental illness are both well documented, and still alive and kicking to this day.

4 Ways Tech can help us Rise to the Challenge

Affordable accessibility is something Tech by nature does very well, but solid tech solutions could also help break the stigma too. Just imagine:

1. Connecting an employee discreetly with a professional via their device reduces the cost for everyone, and they can do it virtually anywhere (in a breakaway room or during lunch), and the best part is no one needs to know about it (stigma nullified).
   
2. You can even facilitate highly specialised services by connecting people with professionals virtually anywhere in the world. Simultaneously helping spread the load among psychologists in various locations.
   
3. And it doesn’t need to be a major monthly cost-to-company per individual, either. Take Ollie for example; they let companies purchase credits for psychological help and share them among staff – those who need it can use it.
   
4. This type of tech solution opens the door to other related services that help you boost productivity and build a culture – it’s easy to facilitate extras like coaching sessions, group classes and short courses on managing stress etc. via a savvy tech provider.

Speaking of, we’ve launched a new partnership with Ollie Health. And to celebrate, we’re giving away free mental health credits – sign your team up for Ollie and you’ll get 1 month’s unlimited free credits.

SOMETHING NEW

Introducing “How would you build it?”

Ever had a startup idea and no idea how to get it going? We all have. And that’s the problem that Bobby Sequira and Renier Kriel are trying to solve on their latest podcast series called “How would you build it?”

They take trends, some of which are covered in this newsletter, and break them open to help aspiring founders and builders find ways to get going. Like this.

How would you build it releases a new episode every Friday, subscribe here and never miss an episode!

DID YOU LIKE THIS WEEK’S OPEN LETTER?

We are new at this, in fact, we have only been going for 4 months! Any feedback goes a long way to help us hit the mark more regularly. So hit us up, good or bad, we can take it, and it helps (even though it hurts sometimes).

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Hi there,

Keen to meet some startup founders doing incredible things? Specno is hosting an invite-only event called the Founders Den featuring founders from Offerzen, Momint, Beeline, Ollie, Sky Internet and more. Reply to this email and tell us why you love The Open Letter and we’ll hook the first 5 up with a ticket.

In this Open Letter

• Need more STEM: Why India attracts more funding than Africa (and what to do about it).
• Gaming for life, you didn’t know you were rich, & hot (expensive) potatoes.
• Where the devs are: World’s 27 mil Software engineers, mapped.
• 21 million customers: Getting SA’s townships online.
• VC & funding myths: 10 tips for founders.

TRENDING NOW

The Key to Africa Tech Growth

For a long time, most of the English-speaking world’s software developers were based in the USA. But this year it's estimated that India will overtake the US with their developer numbers set to surpass 5.2 million.

That means that almost 1 out of 6 developers worldwide is of Indian origin. Not surprising, considering almost 1/6th of the world lives in India (1.4b out of 8b).

And yet Africa, with a similar sized population only has an estimated 690 000 software developers.

And it’s showing in startups

In 2022, India raised more money and had more unicorns than Africa by a long shot.

Not even South African-born Elon Musk taking up 3 CEO roles (Tesla, Twitter and SpaceX) could compete with the 26 CEOs of Indian origin of companies on the S&P500. Amongst these, are the CEOs of Microsoft and Alphabet (Google). It really is impressive how tech talent in India has grown to play a major role in the global tech scene.

How did India do it?

Only 20 years ago, the GPD per capita in India was a mere $500. The majority of Indians grew up in poverty, with many non-functioning schools, not dissimilar to the realities of Africa.

But with the schools that did function, there was a massive shift towards STEM (Science, Technology, Engineering and Math) subjects. Developing a hard work ethic and a passion for STEM, many Indians saw STEM careers as a path out of poverty and for many, it's working.

What can Africa learn from this?

Investment in the teaching of STEM subjects is key to accelerating Africa’s growth, this is not new information.

So what’s holding Africa back?

For one, it's not always practical to move a high-quality, passionate, teacher to teach in a faraway or rural location. What’s more, teaching coding well in a practical manner, is well, a relatively new subject matter. We need more qualified, passionate and equipped teachers that can build a generation of STEM subject lovers.

And that’s what a local startup, Mindjoy, is working on. Currently, in Beta mode, Mindjoy has worked with more than 50 schools helping more than 3000 students not only learn how to code but develop a love for it. Whilst 3000 is a long way from the required 5 million to catch up to the likes of India, it is exciting to see startups tackling this important problem. Once they nail the scale, we are excited to see what it’s going to do for the continent. We are watching this space….

IN SHORT

Keen on gaming for life? Apply for a scholarship at this South African Online Gaming school.

Everyone’s launching AI! Meta and Snap are about to join the AI game hard.

Earning more than the nominal amount in SA? If you earn upward of R14k, you might be considered wealthy.

The rise of the creator. Spotify plans to have 50 million creators on its platform by 2025

Holy potatoes those are expensive. Potatoes lead the charge of the biggest rise in price year on year.

“Every day I’m Shuffling”: SA Cabinet Shakeup imminent in wake of Deputy President’s immediate resignation.

Up, Up and Away: SpaceX launching 2x missions in today’s potential launch window at 19h34 & 20h52 local time.

DEVELOPERS AROUND THE WORLD

We did some digging on where developers are based around the world. Note, most of the research is based on estimates, but reason to believe that they are accurate.

WATCH THIS SPACE

Highway to the Information Zone

Is high-speed pre-paid wireless the key to unlocking a 21 million-strong market?

Remember when startup Isizwe (now under the PayGoZo banner) rolled out uncapped 100mbps internet for R5 a day in Kayamandi township near Stellenbosch? Well, they might be onto something big.

Most of us in the cities, towns and suburbs benefit from established ISPs’ cutthroat fibre price wars as they vie for a share of the homes with fibre access.

However, lest we forget that 21.9 mil of our 59.39 mil population (over a third of South Africans) live in townships. And the moon will probably fall into the Atlantic before anyone can figure out how to profitably roll out fibre there.

But the opportunity, market and scale are there

South Africa has about 18 mil households, and math says that means at least 6 mil of those are in townships. And, although we don’t know what exactly the township's spending power is, we can presume they’re mainly using mobile data for internet access – and the volumes in fibre VS broadband VS mobile market size disparity is just astronomical…

Ok, ok, so we’re not saying that the township internet market is even a fraction of that size. Just that mobile penetration is so big, we almost know for sure that people in townships are already using the internet. And we are talking about a third of the country here (50% of which are in Gauteng alone for those entrepreneurs who’ve already caught on to what we’re saying).

But that’s not the trend, the trend is in realising that you have to adapt your model to a very different lifestyle.

Why fibre can’t serve townships

Apart from stigma, there are some very simple economic and cultural reasons why no ISP is clamouring to serve fibre to townships:

1. The cost of installing 1km of fibre is such a big investment, you need the surety of a certain level of locked-in monthly return to even consider it. And, this is where point 2 comes in…
   
2. People in townships often don’t have a monthly pay cycle. They are likely to have daily and weekly wages, so their lifestyle just doesn’t work with a monthly commitment, at least not at the current fibre prices.

With that in mind, together with the density of townships, it makes sense to roll out wireless internet, in small, daily packages to the 21-odd million market. It’s cheaper to roll out, and you actually can add and remove as many people as you like.

Get the price, offering and market’s wage and commitment cycles in balance… and you might be onto something big.

Pre-paid wireless for SA’s townships?

And we think it makes sense. Currently, they have very little competition and still have time to catch up. And PayGoZo/Isizwe has shown that you can come in very competitively. That R5 per day for uncapped 100mbps is way better than alternatives

PayGoZo R5 per day UNCAPPED 100mbps

Vodacom R5 for 20MB up to R29 for 1GB

MTN R29 for 1GB up to R49 for 2GB

Cell C R10 for 80MB up to R35 for 2GB

Telkom R10 for 150MB

You get the picture…

With an opportunity this big, we are sure there will be more competition in this space soon. We are excited….

­

IN CASE YOU MISSED IT

Debunking VC & Funding Myths

10 highlights from our Open Conversation with GrindstoneXL Programme Director Will Green

1. Some quick clarity in terms: 1) An Incubator helps entrepreneurs flesh out their basic product idea, usually to the point of MVP stage, and 2) an Accelerator takes it to the next level, getting to market, getting customers, generating income and becoming sustainable.
   
2. GrindstoneXL is an Accelerator geared for the scale-up stage – after the startup phase when you already have some customers and want to grow. They have been doing this for 10 years!

3. In an emerging market like SA, VCs are actually entrepreneurs themselves – they raise funds from a Limited Partner (LP) like a bank, institution etc. and they invest money with the intent of seeing a return for that LP. They have a mandate to fill – they told their LPs what types of companies and ideas they want to grow and they have a target money growth rate. So your startup needs to 1) be in the category that the VC is looking to fund and 2) show it can deliver that return rate to even qualify to be considered.

4. Over the last 12 months, there’s been a big shift towards the startup a VC has funded to really show they can deliver a return – it’s become about how much money you actually generated.
   
5. 10x is the gold standard for how much a fund wants to generate from a startup investment. This is telling because if you know your idea is too small to generate the kind of scale they’re looking for, you should understand that it might not be worth it for the VC – they have an enormous amount of additional costs they have to incur to be able to fund you, so it needs to be worth it for them.
   
6. What VCs are looking for 1) you have a big vision of where you want to grow and 2) you can execute it – you’re on top of due diligence, you have a pipeline of sales, you know your conversion rate and your sales cycle enough to be able to project accurately where you’re going so you can show the growth.
   
7. Too many founders start building before they’ve really done all the research and shown that the need and the market are big enough.
   
8. Africa only attracts 1% of the global VC funding ($6 billion). From a VC perspective, in order to justify any more investment in Africa, you need to see more than $6 billion worth of liquidity in Africa per year: either listings or mergers and acquisitions. So, if Africa wants more VC money, we need to see a higher value of listings and sales (founders exiting their startups/companies), especially if you want to attract more global VC funding.

9. South African founders seem to generally have trouble with marketing and sales. To help, an accelerator comes in and does basic checks – your website, your corporate image, sales materials etc. But then also consider where current sales are coming from and really focus and double down on that market to grow. An idea for new B2C startups is to partner with a company that already has the right distribution network, so you’re not starting from scratch or reinventing the wheel.
   
10. To be the kind of founder a VC wants to back, the best thing you can do is to really invest in building your network. Most VC deals come through networks, so activate the people you know, and see how close you really are to a VC. Or if you don't have those connections, go out and make them – attend events, be in the places they will likely be and have your pitch ready. Hustle your way in!

BONUS Tip from Will

The first thing you should do when you start something is to open your WhatsApp, scroll through and activate all your connections. Tell them, “hey, I’m building this new thing, can I ask your advice on it?” Just have a few conversations, and you’ll be surprised how much support (and possibly even funding) you can get just from that alone.

DID YOU LIKE THIS WEEK’S OPEN LETTER?

How did we do this week?

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ONE LAST THING

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So do us all a favour and add rk@theopenletter.io to your Contacts and drag your latest Open Letter from Promotions to your Primary Inbox, like so…

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Find more awesome business ideas from South Africa's favourite startup and tech newsletter.

So, you know how we got Grindstone’s Will Green as a guest on the Open Conversation on LinkedIn Live next week (see below)? Well, we’re spicing things up by giving away 2x R500 vouchers. Reply to this email with a question you want our guest, Will, to answer – the best questions win.

Also, join the event on 1 March and ask a question live and you can win the other R500 voucher!

In this Open Letter:

• Getting it: What makes a SuperApp.
• SA’s sugariest soda, a R1.1m iPhone & greener money.
• Innovation space: How tech can capitalise on tax.
• The contenders: SA’s next SuperApp candidates.
• VC funding insights: Will Green Open Conversation reminder.
• Watch: Africa startup cash & when politics affect business.

TRENDING NOW

The SuperApp Race Is On

A few weeks ago we reported how you can buy doughnut vouchers using a credit line in your Vodacom app. Well, you can now also buy an on-demand security subscription with your DSTV. Has the world gone mad? No, everyone is just trying to be a SuperApp. Let us explain…

“You’re not getting it”

That’s what Elon Musk said to a Twitter employee who asked questions about his planned SuperApp, just called “X”. The reason people aren’t getting it, is that they think “X” will simply be a neobank or allow payments…a new form of PayPal if you will.

But there’s more to SuperApps than simply adding features or adding payments. The SuperApp philosophy is about attention conversion. How do you convert time spent at a specific place (in this case, in an app) into more revenue?

The concept isn’t novel.

Shopping malls are built on the same premise. Modern malls are massive, designed to make it hard for you to find your exit, and offer an array of attractions and distractions to keep you there. The longer you linger, the likelier you are to spend more money.

That’s what a SuperApp is meant to be. And, just like the mall doesn’t own all the stores in it, so too the SuperApp simply facilitates engagement with various services.

South Africa’s first SuperApp

You might be surprised it already came and went.

Back in 2003, a small services company in Stellenbosch under Herman Heunis started playing around with an app for cheaper messaging than SMS. At the time, an SMS cost 75 cents for 160 characters. Mxit officially launched in 2005, offering messaging at a fraction of the cost.

Soon, Mxit was everywhere and people were spending an enormous amount of time on the app. So Mxit brought in other apps, games and third-party applications. Eventually a peripheral would catch your attention, just like in a shopping mall.

Now, Mxit went bust after selling to World of Avatar in 2011, just after WhatsApp launched (2009), and they soon learnt the magic of Mxit was never the side services, it was the initial promise of cheaper messaging.

Lesson learnt. But it’s worthwhile noting not even Meta has fully capitalised WhatsApp yet. But its Chinese Tencent equivalent has…

WeChat’s Rise to SuperApp Status

When WeChat launched back in 2011, Chinese language keyboards weren’t well developed. So the app offered voice notes long before WhatsApp. And, just like Mxit, WeChat quickly captured a massive market share and, unlike Mxit, kept developing the app’s core function, to keep it modern and fresh.

With a little help from the Chinese government in keeping out international competitors, WeChat soon became the app where most Chinese people spent their time on their phones. Now the peripheral services started, essentially creating a one-stop app for everything you want to do in China.

And we mean everything

But WeChat failed in SA?

WeChat threw everything at making it work in SA. We had SnapScan integration, and they gave away thousands of rands to users to start using it. But when the free money dried up, so did the active users. The same problem Mxit had, if the users aren’t spending time there already, they aren’t going to use the peripheral services.

The Open Letter Guide to Building a SuperApp

Step 1: Find something that is super sticky, I mean really sticky. As in 10 times cheaper or better than the current alternative sticky. And grow a user base.

Step 2: Introduce payments that work seamlessly for your user base.

Step 3: Make it super easy for third parties to integrate and sell services to your user base.

Step 4: Make sure step 1 stays relevant and sticky.

“Now you’re getting it.”

Elon didn’t buy Twitter to irritate the left. He bought it because it's sticky and has the potential to be even more so. And he realised the only way this user base will grow and continue to be relevant (step 1) is by making it more balanced.

It's working, user numbers are up every month. And payments and third-party are likely to follow.

What’s not clear to us is why someone hasn’t called Zuck out of the Metaverse sooner to come and help Whatsapp dominate this battle. They’ve been making SuperApp moves, WhatsApp business generated $5 billion in revenue in 2020, but with a staff contingent of 55-odd, a CEO sidetracked by a failing passion project and Musk as an opponent, this might soon become a one-horse race….

IN SHORT

Those overpriced soy milk lattes will now save even more of the planet. Contribute to fighting climate change with every swipe.

Would you eat 10 spoons of sugar in one sitting? You would if you drank this drink.

“People will never pay to use social media!” until they are. Meta is following Musk in charging for verification.

Are you paying your cleaning lady enough? Check the updated minimum wage in SA.

What an investment: An iPhone 1 sold for 100 times its original price on auction.

Flashback: Guns ‘n Roses' “November Rain” just became the first pre-2005 hard rock song to get over 2 billion views on YouTube.

A truly green home: This startup builds houses out of plant material.

WATCH THIS SPACE

What’s Missing in the Tax Space

Millions of users are sitting and waiting…

It’s tax time in South Africa with this tax year ending on 28 Feb 2023 and many side hustlers and crypto traders filing provisional tax returns.

And let’s face it, even amidst a lot of corruption, the government needs tax money to have any chance of functioning properly. And although paying tax is the right thing to do, it does make sense to pay absolutely only that which is legally necessary.

With some exciting announcements around what qualifies for refunds for those that WFH, the potential of refunds for load-shedding equipment/solar (although only for the next tax year), and the rise of PolyJobbing, it’s become an absolute minefield for us mere mortals to navigate.

To add to all of that, the SARS e-filling platform still looks like it’s built and maintained in Windows Vista.

Filing tax is mandatory, and the fines imposed for non-compliance are severe. And with a guaranteed annual customer base, one would think that this space is a great opportunity for tech innovation and disruption.

Options for a personal tax return

If you don’t have a mate that’s an accountant, you can make use of TaxTim.

Having helped over 7 million South Africans complete their taxes since 2011, TaxTim is one of the best-known tax help platforms. Taking the form of a conversation with a “TaxBot” called (yep, you guessed it) Tim, users answer a bunch of questions across all the sections of your tax return, which then integrates directly with the SARS e-filling platform and submits your tax return for you. Simple.

Tax Tim also offers a range of tools like calculators, logbooks etc. and partners with several financial institutions to provide their customers discounts on tax return submissions.

Got some crypto losses to report?

If you have spent any time in DeFi, you would know that moving to the next best-yield farm is often the name of the game. But keeping track of what was a reward token (taxed as income) and what was increased in token price (capital gains tax) is well, impossible.

Koinly is a product built for this problem. With integrations into many crypto platforms as well as on-chain analysis of your DeFi activity, it's bound to make the process of filing the right data, simpler.

What we didn’t find

Since the launch of ChatGPT, almost every problem faced is met with the thought “Maybe chatGPT could do this”. We tried, and it gave some good, solid, chatGPT-generic advice.

It couldn’t however do the work for us. So, surely the time is ripe for an automated AI solution for tax reporting? We are watching this space…

­

SA SUPERAPP CANDIDATES

Moyo – a data-free app (use it without paying for the data) multi-functional browser app with some real traction. It might be hard to convert users into paying for services, though – if your stickiness factor is “no charge”, will users have cash for Uber Eats?

Ayoba – offers everything you would want to see in a SuperApp: chats, payments, games, music & more. Questions remain on whether it can stay sticky and grow the user base fast enough.

Avo – claims to be Africa’s first “supershop app”. Offering e-commerce, take-out, vouchers, prepaid & more. There’s a lot you can do in-app, but if this is not already your store of choice and the offering isn’t substantially more convenient than Uber Eats, MrD and/or Takealot, what’s going to get people to spend a lot of time on here in the first place?

The Corporate Plays

Many corporates have added an array of features to their core offering in an effort to upsell to their current clients.

FNB offers probably more non-banking features on their app than banking, as do a lot of other big banks.

Vodacom added payments, vouchers and even discounted offers. While Discovery always makes a strong case for being the starting point of any purchase for their customers with a great loyalty program.

DStv is also following suit, starting to offer an array of other subscriptions.

Who is winning? Hit reply and let us know what you think…

VC FUNDING INSIGHTS

As a startup, securing the right funding and support can mean the difference between success and becoming a statistic. And, with funding a little in short supply in Africa, we connected with entrepreneurship engineers GrindstoneXL Programme Director, Will Green.

Bringing years of VC, entrepreneur support and global startup ecosystem knowledge to the table, Will joins us for the next Open Conversation happening on LinkedIn Live on 1 March 2023 – register here for free.­

THE THREAD

Renier and Bobby Sequeira delve into African startup funding levels – and why SA’s lagging – as well as political trends that could impact your venture in a new instalment of Busines Gambit.

ONE LAST THING

We moved to Beehiiv! It’s rated as one of the best newsletter providers around. Features and future are bright, BUT Despite our best efforts to hit your main inbox, Google’s fancy email filter categorises us as promotional. (Due to our curation and world-class memes!). So even if you have done this before, please move us from promotions to your main inbox again (last time we promise).

So do us all a favour and add rk@theopenletter.io to your Contacts and drag your latest Open Letter from Promotions to your Primary Inbox, like so…

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Hi

If the world feels a little lighter today, it might be because Microsoft released an Edge update yesterday on Windows 10 that finally kills off Internet Explorer for good – ending just under 3 decades of PC-user-browser hate in one fell swoop, we hope.

In this Open Letter:

• AI Wars: Microsoft’s real edge over Google.
• Amazon robotaxi, SA’s rural crypto farmers & stuff that make you dance.
• Time to thrift: Opportunities in the SA pre-loved space.
• VC funding insights: Our next Open Conversation with Will Green.
• New podcast: More on AI wars, SA diaspora and Super Apps.

TRENDING NOW

Microsoft’s Real AI Advantage over Google

It’s not what you think – and is prophetic for the future of corporate innovation

When ChatGPT3 (an OpenAI product that’s backed by Microsoft to the tune of $10b+) became publicly accessible, some were quick to label it “the Google Killer!”. But for that to be true, they’d have to connect ChatGPT to the internet. And, as it turns out, that’s where it's a bit harder for an AI to impress.

We saw it when Google launched it’s AI assistant, Bard, which immediately incorrectly stated that the James Webb Space Telescope took the first pictures of an exoplanet. (Rubbish, that honour goes to astrophysicist Grant Tremblay back in 2004.)

But what happened next was very telling for AI and corporate innovation in general…

Google shareholders panicked, which sent Alphabet (Google’s parent company) stock plummeting, resulting in an 8% drop and wiping $100 billion of its market cap. Ouch.

But was it a fair assessment? Perhaps not.

With machine learning models, garbage in-garbage out is particularly applicable. (And we all know how much garbage there is on the internet.) And, while Google is training AI to distinguish between fact and fiction in an online environment with ever-changing versions of “ the truth”, in building ChatGPT3, OpenAI pulled data from the same garbage bin, but protected us from it with an army of underpaid African workers and others to train the language model.

Effectively creating a little box that can be controlled (and is very much controlled by zeitgeist).
 

Microsoft’s true advantage  

ChatGPT also makes mistakes – and they’re well documented – but none of them has tanked Microsoft’s share price. In fact, we overlook ChatGPT’s mistakes. Why?

Because OpenAI is a startup and Google is not.

Startups are allowed to fail. Most people expect them to. So any kind of success they obtain is newsworthy. Listed companies have to manage the sentiment of loads of stakeholders and loss aversion could send many not-so-savvy shareholders running for the hills at the first sign of bad news.

What does this mean for corporate innovation?  

In case it's not clear, the lesson in this is that corporates could and maybe should be investing in savvy startups to drive their innovation. Because it protects your share price.

Ok, so how does a corporate go about this?

While every circumstance is unique, it’s clear that corporate investing in startups and corporate venture building is a viable option for corporates to stay relevant in the innovation game. But startups are risky, so how do you know who to back?

Get yourself a tech partner that knows the corporate space…

Agencies like Specno offer venture building as a service to corporates. Within venture building, the corporate has all the potential upside that Microsoft had backing OpenAI, but very limited downside in terms of reputational damage (like what happened to Google).

That said, there is a third way…

The Apple way

Apple takes a completely different approach to innovation. One could say a customer-centric approach, where the latest tech is not driving the rollout of features, but rather how something fits into the lives of an Apple customer. Examples include:

• Delays 4G launch by 2 years because 4G chips weren’t energy efficient enough.
• Delays roll-out of fingerprint scanners by 2 years to perfect the technology (beating Motorola with a superior product.
• Delays Near Field Communication (NFC) rollout by 10 years, again to perfect their technology

 And they’re doing the same with conversational chatbots

Well, Apple has been implementing AI for some time, with FaceID being a prime example. Siri also makes use of AI to understand the context and execute tasks. But in direct response to ChatGPT making waves, Tim Cook just stated that Apple has a major focus on AI and that it will impact every single part of Apple’s product offering.

He wasn’t joking. Apple is currently actively hiring more than 300 people in AI – which says a lot in an era of mass tech layoffs.

For now the verdict is still out on whether conversational AI can even provide accurate information when connected to the internet. And whilst Microsoft and Google are publicly flexing their tech muscle, it’ll be interesting to see what Apple is cooking up with AI (probably in the next few years).
 

IN SHORT

World's most expensive ad: 30 seconds during the Superbowl costs $7m, and many believe it's worth it.

137 unicorns in one: SpaceX is raising at a staggering $137 billion valuation with investors including VC a16z.

All phoned up? African smartphone sales were down 18% from last year and 80% of smartphone sales were for devices costing less than $200.

Farm to DeFi: Binance to educate 2’800 rural South African women on web3.

Good tunes: Apparently, it's not your favourite 2000s pop song that makes you want to boogie, it all has to do with inaudible bass lines.

Is it a bird? Is it a toaster? No, it's Amazon’s new robotaxi hitting the road for the first time.­

WATCH THIS SPACE

Thrift It!

Tech opportunities in SA’s pre-loved space

Clothes are expensive. With the average person buying 60% more clothes than 15 years ago, combined with retailers marking up prices by 300-400%, the cost of looking fashionable is skyrocketing.

But there is a solution: thrift it!

Thrifting itself isn't a new concept, with Hospice and Salvation Army stores selling second-hand clothes at selected outlets for years to raise money for charity. But thrifting in-person at a physical shop has always been a little less than ideal…

But with the growth of the internet, there are now specialized platforms that make buying and selling pre-loved clothes easier than ever.

Thrift online in SA

1. Online thrift space Yaga has seen massive growth, having recently raised €2.2m from international investors and is now reporting over 500k active monthly users on their platform. Importantly, Yaga is creating opportunities for the public to make money – reporting over R10 million worth of items traded in October 2022.
    
2. But it's not just about making a profit. Some platforms, like Vintage with Love, are dedicated to using second-hand clothes as a way to raise money for charity. They collect brand clothes, market and sell them, and donate 100% of the proceeds to good causes.
    
3. Another burgeoning market is that of second-hand baby clothes and gear. With children growing up so fast, parents are always in need of new clothes and gear for their little ones. Services like Pr3loved provide a platform for buying and even renting pre-loved baby clothes and items.
    
4. And it's not only clothes, hobbies have also found their way to creating niche second-hand marketplaces. Take Surfcore, a marketplace to buy and sell surf gear. Most likely a smaller audience than fashion, yet the age-old saying of “riches in niches” could very well ring true.

So, is thrifting just a way to offload our bad impulsive buys? Or can we actually make some money while doing good for the planet and our wallets? We haven’t tried, but the sheer volume of items being sold on these platforms is showings signs of a bustling industry.

­

VC FUNDING INSIGHTS

As a startup, securing the right funding and support can mean the difference between success and becoming a statistic. And, with funding a little in short supply in Africa, we connected with entrepreneurship engineers GrindstoneXL Programme Director, Will Green.

Bringing years of VC, entrepreneur support and global startup ecosystem knowledge to the table, Will joins us for the next Open Conversation happening on LinkedIn Live on 1 March 2023 – register here for free.­

THE THREAD

Renier and Bobby Sequeira of Mastercast have been testing out a new podcast format featuring local tech business insights – so there'll be more in-depth looks at some of the things you read in The Open Letter. And it's looking pretty cool.

Here's a sneak peek featuring more on ChatGPT VS Google AI, what exactly constitutes a Super App, SA diaspora (from last week) and SA's proposed new electricity minister…

Watch it here on YouTube.

ONE LAST THING

Despite our best efforts to hit your main inbox, Google’s fancy email filter categorises us as promotional. (Due to our curation and world-class memes!)

So do us all a favour and add rk@theopenletter.io to your Contacts and drag your latest Open Letter from Promotions to your Primary Inbox, like so…

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This open letter is brought to you by Renier Kriel, Jason Mill and Elvorne Palmer. And we discuss these topics every Thursday on our Linkedin page.

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The last two weeks, we said we’d give sweet R1’000 Takealot vouchers to email repliers. And we have two winners – congratulations, Justin Coomber and Kieran Raffle!

And, to show you we don’t play when it comes to prizes, we decided to give R500 bonus vouchers to Lesley Arenz and Louis van Wyk for being good sports (read: entering multiple times).

Your vouchers are already in your inbox, guys. Enjoy!

In this Open Letter:

• Tech layoffs: The global VS local view.
• TikTok for text, big energy buyouts & Shoprite’s diesel dilemma.
• Buy Now Pay Later: The doughnuts you couldn’t afford.
• Visual data: Africa tech redundancies in one image.
• Tokenisation: 10 Trends & highlights with Momint CEO.

TRENDING NOW

When Big Bets Don’t Quite Come Off

A few months ago we shared how Twitter’s lay-offs were probably just correcting a bit of overhiring. Now it seems that most big tech companies have followed suit.

Recent news of Alphabet (Google) and Microsoft laying off large amounts of employees was almost to be expected, as layoffs at tech companies being tracked have reached close to 80 000 in 2023 alone (and we’re barely 1 month in ).

But why does this happen?

Big tech made a bet.

By now everyone knows that Covid lockdowns change a lot of behaviour. Work from home, e-commerce boom and even Grandma having to learn how to Zoom.

For those in tech, it felt like the “finally everyone is on board” moment. And the numbers were showing. Now when a listed company sees a rise in revenue and free cash flow, it’s likely that shareholders would expect leadership to pounce on the opportunity. And capturing opportunity, means hires!

But fast forward to 2023 and the situation has changed. Did the bets come off? Hard to say when the layoffs are in the thousands. But considering the steep rise in staff counts over the last 2 years, the nett gain of employee count is still significant. Likely signs that some of the covid-era adoption became permanent.

Whilst it’s easier to hire and fire in the USA, labour laws in South Africa favour the worker so one would think that SA companies are more conservative. Yet with not-so-recent layoffs at Yoco and recent news of layoffs at Luno, SA tech workers seem to not be immune to this problem.

Which begs the question…

How much hiring has taken place at local tech companies?

We dug around on LinkedIn to monitor the rise of employee count (as per employees listing themselves as employed by said company, so yeah, not 100% accurate).

Interesting to note that not only have most local startups grown substantially in staff numbers but there also doesn’t seem to be a slowdown in hires, with most startups peaking in staff count as we speak. Testimony to all the action happening in the fintech space in Africa as of late or bets that are still to play out?

Will these bets pay off? We certainly hope so. Only time will tell, but for now, we are keeping an eye on this.

IN SHORT

Remember Ellies who installed your TV? (Way, way back when…) Well, now they’re going into alternative energy by buying Bundu for R203m.

Powerless: Stage 6 loadshedding costs Shoprite group over R3 million per day in diesel alone.

Let Siri wish ‘em: New app lets your iPhone automatically send happy birthday messages. Now just hook up ChatGPT for custom text and a life problem’s solved forever.

Warehouse robot: Boston Dynamics & DHL unpack a super-efficient new robot that can unload 350 boxes per hour.

Step aside Mike Ross: Just a week after passing a business exam, ChatGPT now also passed law school exams. (Complete with ultra-realistic “stupid” mistakes and all.)

The Instagram founders are back and building a TikTok for text.

Ghostly swirl over Hawaii: Is it a bird? Is it a plane? No, it’s probably just rocket fuel.

IN SHORT

The Donuts You Couldn’t Afford

If there’s one idea worse than buying doughnuts, it’s buying doughnuts with money you don’t have.

That’s what the world has come to with “Buy Now Pay Later” (BNPL). It used to be reserved exclusively for big banks, financial institutions, retailers and back alley loan sharks who like introducing kneecaps to cricket bats.

Whilst the BNPL concept isn’t novel or new, the lockdown e-commerce boom saw these repayment solutions being made more accessible.

In the US, the BNPL market could hit $76.20 billion in US payments volume. And some local players have caught on, with estimates suggesting it’ll reach R2bil per year soon.

Takealot offers not 1, but 2 BNPL solutions. Payflex for 4-month repayments, and Mobicred for 12.

And it’s not just them. Between Mobicred & Payflex they serve nearly 2’500 retailers, with countless other BNPL providers leveraging the explosion of online shopping during the pandemic.

And it goes beyond e-commerce

Advanced airtime has also been around for some time. Out of airtime? Dial a USSD code and get an advance of airtime. The premise is that if you’ve had the number for a while, and recharge often, you’ll probably repay the airtime to keep your number.

And after collecting vast amounts of user behavioural data, they’ve started extending it to other “vouchers” – technically not credit, but a voucher in advance that you’ll need to repay later. Like a doughnut voucher when you recharge.

‍

The broader impact  

South Africans are already drowning in debt, with the average household debt-to-income ratio at 66.1% and credit rejection rates rising every year.

Introducing new credit types to already indebted consumers could push everything over the edge. Something that could see more loan defaults at institutions traditionally offering credit to lower-income markets (like Capitec and African Bank).

The verdict isn’t out yet on whether BNPL is good or bad for SA consumers. What is certain, though, is that machines used to better understand user behaviour enables creative risk modelling that will make more unique BNPL offerings possible.

So, we could see more of this pop up everywhere.

Exciting developments for fintech and e-commerce. Let’s just hope the NCA adapts fast enough to protect the consumers from binging on those debt-inducing doughnuts…

SHINY NEW GRAPHICS

Doing great infographics is an art. And, while we’ve come a long way with just Canva and Figma, alas we needed help! And who better than a company that does on-the-ground market research in Africa?

This team not only gets data, they really get how to present it. The infographic in today’s Open Letter is brought to you by Yazi.

This week we cover local VS global tech layoffs. Now let’s get a look at the tech layoffs in Africa thus far.

IN CASE YOU MISSED IT

Tokenisation Going Mainstream

10 highlights from our Open Conversation with Momint CEO Ahren Posthumous

1. Ahren reminisces about Project Kooda (relaunching as Now Now, soon) a savvier and cheaper South African alternative to Calendly and OnceHub.

2. First NFT Ahren bought was an Ethereum domain name – now invests in NFT art.

3. Watch Ahren sweat as Renier drops off at 8 minutes due to loadshedding – totally not a publicity stunt for Momint’s solar initiative…

4. Momint’s blockchain-based solar initiative SunCash, which allows you to buy shares in solar installations for schools, hospitals etc. and earn dividends is really taking off – “Like being strapped to a rocket”.

5. Ahren explains how even when the crypto bubble bursts (as it so often seems to do), the real long-term value we get out of the blockchain exercise is Smart Contracts – a smart digital holding space for all info around an asset.

6. Banks are using tokenisation already – we don’t know, but they use crypto-related tech for inter-bank settlements.

7. The next level in gaming is beyond just buying loot that are NFTs, but actually allowing the community to create and trade content as NFTs, like Roblox.

8. The only thing holding SA back from complete and wide-scale adoption of tokenisation, for example, for the title deed of a house, is regulators – they can’t tell who’s trustworthy or not, and are sadly just slowing the process down.

9. Although still small in total volume of transactions, Africa is one of the leading crypto adopters in the world – probably for the very reason that blockchain allows you to fund, trade and raise funds without all the cost and red tape (and slow regulators).

10. In case you didn’t know, Momint’s entire business journey is documented as a web series, and you can buy tokens for a share of their ad revenue on it – watch here.

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The post 20 Trends 🔥 Shaping SA Business this Week appeared first on The Open Letter.

Find more awesome business ideas from South Africa's favourite startup and tech newsletter.

Secured your YouTube handle yet, Elvorne? Here’s how to pick your own before someone steals it. Plus how your new handle will affect your channel URL.

In this Open Letter:

• Crypto regulation: It’s here and it’s not all bad.
• Ever hacked yourself? It’s becoming a thing. We dive into Biohacking
• No-code websites: Launch your startup in days.
• Down the rabbit hole: What AI thinks about this newsletter.

TRENDING NOW

A Hand on Grandma’s Wallet

Inside a Crypto-Regulated SA

So we can’t say we’re too surprised at crypto getting regulated. A South African is, after all, accused of perpetrating the biggest global crypto scam of 2020!

Just imagine: In a country where it’s next to impossible to raise startup funding, Johann Steynberg and co, collected R8bn from investors in just 2 years.

But why did people fall for this?

Much like Mr CrossFit, the cyclist and the vegan, Bitcoin Guy has pretty good PR. So South Africans invested their hard-earned cash in Johann’s Bitcoin wallet without checking what he actually does with user funds.

Turns out he’s a pretty bad trader – only ever depositing 1900 BTC and losing 566. (Kinda like the QuadrigaCX story on Netflix). So the Financial Sector Conduct Authority (FSCA) published a notice that it had updated the FAIS Act to include digital assets.

It defines a “crypto asset” as a “digital representation of value”, declaring it as a financial product – but that excludes miners, node operators and NFTs (for now).

Was it all Johann’s fault?

Not entirely. Other mounting risks also contributed:

• SA implemented exchange control in 1939 to protect the Rand and stabilise the economy, and crypto’s cross-border payment capability by nature kinda demolishes that.
• Global money laundering and terrorism watchdogs, Financial Action Task Force (FATF)’s recent evaluation of SA threatens to restrict direct foreign investment. So everyone’s a little on edge right now.
• Intermediaries are safeguards – your bank can reverse a fraudulent transfer. Not so with crypto, you have full control (and risk). A freedom your regular geek might relish, but grandma transferring your birthday money to the wrong Ethereum wallet, less so.
• Another SA-based crypto hedge fund lost $100m of investor funds when it invested in UST. Regulation could have prevented them from going into such high-risk Defi projects.

So what does regulation mean for the industry?

For now, anybody offering services to buy and sell these crypto “financial instruments” (such as VALR, Luno, Binance or Ovex) needs to be registered as a financial service provider and comply with all the necessary regulations.

Once that’s in place, you’ll be pressed to “provide the FSCA with any information” they may request. Good for managing bad guys, but not great for decentralisation and privacy. Something Edward Snowden is working on countering with ZCash.

And the South African early birds have been digging for some worms in the expectation of inevitable regulation:

• Regulated crypto funds: Petrock Capital.
• ZAR-based stablecoins for the peer-to-peer exchange of value: ZARP.
• Wallet custody solutions – Allows financial institutions to keep your private keys, and thus your wallet and its content in their possession: KeyStore by BMA.
• Tax management for your crypto assets: Koinly (not South African, but compatible with SA exchanges and SARS).
• Tokenisation of real-world assets: Momint and Fanfire.
• Investment into regulated blockchain solutions by none other than South Africa’s very own “father of Defi”.

Currently, SA ranks 30th on the global crypto index, with about 10-30% of people owning crypto. Ultimately, however, the regulation of crypto is likely to get even more people and institutions excited and rallying behind the technology.

And with numbers rising, regulations in place and mainstream adoption, there are bound to be more opportunities.

IN SHORT

Why buy crypto when you can take 30% of NFT transactions like Apple?

Bulls hoping for a bull run with BTC bonuses.

We all knew it, yet we lived in denial. Coco Pops wins the sugar Olympics.

Elon Musk has no idea who the Twitter CEO is.

Sailing when the sun’s out is taking on a new meaning with SA-built solar-powered catamaran.

Need to swap those gains for food? You can now Pick n Pay with crypto.

WATCH THIS SPACE

Prevention, Cures & Biohacking Billions

Cyber-humans. The rise of the Icemen. And how to grab your share of R16 Billion by 2027. It’s no secret that, like many African countries, South Africa can’t provide proper healthcare for 84% of its population (50 million people without proper care).

That’s because just 16%–21% of our population consume about 50% of the country’s total healthcare expenditure (circa R157 billion, from Stats SA gov expenditure reports). No surprise then SA loves healthcare alternatives…

Digital Healthcare Boom

Even before Covid, digital healthcare was booming in SA. (During the pandemic, telehealth providers like Momentum’s Hello Doctor would see up to 115% usage increases in a single month.) A trend that 56% of doctors are really happy about, but 94% are worried about lack of rural internet access, language barriers and lawsuits – insurers aren’t quite sure how to cover them for malpractice via the phone yet.

But that’s just the tip of the iceberg. Statistica pegs the SA digital health market at R1bn this year (2022), to grow to R16 Billion by 2027.

With “e-health” services just delivering one 3rd of the potential revenue, the big bucks are in “Digital Fitness & Well-Being”. Which inevitably brings us to…

Hacking the most complex biological machine

Biohacking is taking a “systems approach to biology”, and it ranges from the pretty obvious lifestyle improvements like better sleep, optimal diet and nutrition. To tailored exercise for your body type, right the way through to implanting microchips into your hand to easily make payments or serve as your train ticket. Or even Neuralink’s implantable brain-machine interfaces.

It would seem like everyone is biohacking. From Twitter Founder Jack Dorsey, to Elon Musk (Neuralink co-founder), to the Ice-Man Wim Hof. Even the lady sucking down a menthol cigarette, shivering in a towel, post-Full Moon Dip proclaiming the health benefits of cold water immersion, is biohacking.

And we picked up on a rise in interest when Google noted a 900% rise in interest in “curative health” in South Africa. Part of a larger Europe/Africa trend in “healing”. And you can see it clearly in the rise of interest in “intermittent fasting” (another form of biohacking) in SA over the last few years…

Biohacking Levels

Since it’s quite new, it’s still broad. These are the current main categories of Biohacking:

NutrigenomicsThe study of food and how it affects the way we act, feel and think. (Probably the easiest and most viable entry-point – the SA health food market is valued at R61 Billion).

DIY biologyThis is where educated/qualified (and sometimes Facebook-educated) Biohackers run experiments on their bodies outside of a controlled lab environment.

GrinderThe most extreme version of biohacking, Grinders will go to any length to optimise their bodies – from chemical injections, implants and chips. Think former NASA biochemist Josiah Zayner: watch his “grotesque” gut-bacteria hacking experiment (if you have the stomach for it).

Biohacking startups in South Africa

ThriveLabs says it’s SA’s first biohacking facility, with all kinds of treatments like Infrared Sauna, Cold Hydrotherapy/Ice Bath, Red Light Therapy, HBOT (Oxygen therapy), Lymphatic Presso Therapy and Ozone Rectal Insufflation (which is exactly what it sounds like and totally worth looking up).

Made to Thrive connects people with consultants, including SA’s first self-proclaimed professional biohacker, Steve Stavs, for biohack coaching.

NuHuman takes hair tissue samples to analyse your mineral and microbiome balance before recommending custom diet & fitness plans.

Lifeq is building the tech that gives us feedback on vitals that can help us be more effective in our biohacking efforts.

It’s exciting to see some established players in the biohacking space. And we believe there’ll soon be more opportunities for different sectors and more industries to bring their specific domain knowledge to the biohacking party.

Know any? Thinking of starting something? Come on, share with us: rk@theopenletter.io.

A TOOL THAT’S COOL

The Low-code/No-code movement’s growing – helping not-so-technical founders launch startups within days. And Webflow is at the top of our list of must-learn low-code/no-code solutions.

Buy a template from their store and get going within minutes. It’s got the power of HTML and CSS (and even some JS) without having to actually write a single line of code. (We’re not affiliated, we just use it, so we know it works.)

ACCORDING TO AI

We fed this letter’s subject line into the Stable Diffusion AI image generator, and apparently, this is how robots summarise everything you’ve just read…

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