🏘️ Funding 2 Million New Homes…

Plus: Zim kicks Starlink, 👀 SA’s most valued brands & early-stage startup marketing musts.
Newsletter
April 16, 2024

Looks like the cake could be a lie after all. The creators of Half-Life and Portal have launched a Neuralink competitor. Yes, Starfish human-computer interfaces is the brainchild of Gabe Newell, the founder of gaming companies like Valve and Steam.

In this Open Letter:

  • Big moves: 2 Million opportunities in affordable housing.
  • Zim kicks Starlink, SA’s most valued brands & working smarter.
  • Savvy start: How to nail early-stage marketing and growth.
  • Are companies like Temu good for SA? The results are in.
  • Want some free stuff, share The Open Letter.

Funding 12.5M South Africans’s Homes

In South Africa, an estimated 2 million households live in informal dwellings. That’s roughly 12.5 million people. 

And, whilst the government has made progress in building roughly 5 million houses since 1994, the number of informal housing (or shacks) has just grown over the years (the latest census shows a decrease but with a major counting shortfall, story for another day). 

The reality is that government will likely never be able to meet the demand. And where that happens, there is always a chance for the private sector to capitalise (think private schools, private healthcare etc). 

But it’s tricky – affordability is why this never really took off in the first place.

One out a gazillion, maybe?

The cost to build a house

The Centre for Affordable Housing Finance Africa’s 2023 yearbook estimates that the cheapest price for a newly built house is R655k. Worse still, only 32.42% of urban-dwelling South Africans can afford such a house with traditional means of finance.

A 20-year loan for R655k at 11.75% interest would set you back roughly R7’098 per month. Hardly affordable for even a family of two incomes on minimum wage (roughly R8’800 combined). 

Big problem. Big opportunity. And traditional means and ideas simply won’t suffice. 

SA’s glorious housing future, according to AI.

Some progress

In a previous Open Letter, we covered how backyard dwelling is a booming industry in the township economy, generating an estimated R20 billion per year.

And, in identifying that this could be a step in the right direction to solve the housing crisis, the City of Cape Town launched an initiative some time ago to finance some of the costs associated with setting up such a backyard dwelling. Creating more housing opportunities, while helping the owner earn from it.

Along the same thinking, local startup Bitprop helps property owners build backyard dwellings. Basically, if your application is successful, for 10 years, 85% of the rent goes to Bitprop and 15% to the owner. Bitprop provides maintenance, insurance and guidance; and after 10 years, the owner gets the full rental per month and owns the building. 

Up to 2024, they have now constructed 372 flats, increasing property value on average by 209% and boosting monthly income per participant on average by 63%.

The bigger game

Interestingly, one of the co-founders of Bitprop, Glen Jordan, left to set his sights on a more ambitious cause, to solve the housing crisis across Africa where there is a 50m shortage.

Empowa is a platform that aims to enable the building of low-cost eco-friendly homes with local partners across Africa. They do so by:

  • Raising investment from accredited investors.
  • A chosen local property developer provides additional collateral to the loan issuer in the form of buying EMP tokens on an open market (or rents it from an online community) and locking it in a smart contract for the duration of the project (a blockchain solution plays a key role here).
  • A local partner issues the new homes out on a rent-to-own model, allowing additional rights on a default but also making the repayment more affordable.
  • A property payment application called Empowa Pay digitises tenant and service provider payments in real-time on the blockchain to provide a level of transparency and trust for both investors and the community funding these projects through capital or the provision of collateral.

It’s probably a long game to get enough data to understand how to reduce risk sufficiently to do this at scale, not to mention this is quite an ambitious project. But it’s exciting, nonetheless, to see startups tackling one of the biggest, most complicated challenges on the continent. We’re watching this space.

IN SHORT

🚀 EdTech Accelerated. Injini has announced its second cohort of 12 growth-stage EdTech companies to take part in a 6-month Mastercard Foundation EdTech Fellowship.

🚙 Electric Layoffs. Tesla announced yesterday that they will be cutting their global workforce by 10% effecting some 15’000 employees

🛰️ Cancelled Starlink. Zimbabwe’s Posts and Telecommunications Regulatory Authority has asked Starlink to disable its services in Zimbabwe until it has submitted a formal application to do so.

💰 MVBs. SA Telecom’s MTN and Vodacom, as well as Standard Bank, have cracked the Top 3 on SA’s most valuable brands list, with Nando’s making the list for the first time (in 4th), and Shoprite and MultiChoice rounding out the Top 10.

🏖️ Less is More. Turns out South Africans are doing less for more. The South African Reserve Bank’s (SARB) Quarterly Bulletin for Q1 2024 has revealed that while SA wages continue to rise, productivity is stagnating.

BUILDER’S CORNER

How to Market Your Early-Stage Startup

When you start a startup, the amount of effort you need to put into marketing to get any kind of result is enormous. This means most founders end up wasting a lot of time or – worse yet – not attempting anything.

So how do you make sure you do enough but not too much in the early days?

Smart Early-Days Marketing

1. People eat with their eyes: Impress them

This was one of the standout insights for me in a podcast we did with marketing expert, Dave Duarte. If something doesn’t look presentable and finished, people are less likely to give it a shot. 

So get the basics in place like a quality website, look and online presence. And this doesn’t have to cost a fortune, use templates from website builders such as Squarespace and Webflow to make you look super slick and professional.

We saw this with The Open Letter; something simple was OK for proof of concept, but as soon as we had validation, doubling down on a better-crafted website, made it easier to get things we wanted to do done.

2. Put in the effort 

Some people are natural marketers and promoters, others not so much.

Either way, one of a founder’s key responsibilities is to ensure the survival and growth of your organisation. Which inevitably means learning how to market or promote yourself and your business (and you won’t regret it).

Marketing and promoting your product or service itself gives you a lot of feedback that, importantly, makes you think critically about what you’re doing. Getting you way more value-focused on product development.

It also helps to get a team or a consultant in the early stages that can help you avoid some obvious expensive mistakes. Elvorne and I do this for a few startups, so simply reply to this email if you need help here.

3. Try things to get data points

If you’re B2C, paid media can be a great source of leads (if done right). Start early and learn some lessons. How much does a conversion cost? That’s a stake in the ground for you to work on either getting other channels at a cheaper cost, improving performance or figuring out how to max income per conversion to justify the spend. 

Similarly in B2B, data points are great for understanding the process and how to optimise your conversion funnel. Measure how long it takes to move a client from first engagement to closing them, how many times you engaged them in that journey and how many other team members were involved in the journey. Then use that data to craft your engagement and marketing strategy. Try to get each one through the required amount of engagements before closing into a sequence of events that will result in a shorter life cycle.

In both B2C and B2B, there are hacks and creative tactics you can employ to get better insights. And it's hard to say exactly what these could be for you – the important thing is to start trying so that you can learn.

4. Don’t bite off more than you can chew

Nothing builds a brand like consistency. Whatever you attempt to do, make sure you’re able to sustain it – most things don’t really yield results within even 3 months (when most people give up), so plan for 12 months or more. 

Rather start by doing less in a way that you can keep it going for a very long time. And, in time, people will notice and say: “This person has been talking about this thing for a very long time, let me check it out.”

Today’s Builder’s Corner was written by Renier Kriel from The Open Letter who is an expert in SA startup strategy & growth.

Connect with him on Linkedin here.

YOUR VOICE

We asked you if Temu is good for South Africa, and it’s a pretty equal spread but most are concerned…

🟩🟩🟩⬜️⬜️⬜️ 🥱 IDC. (20%)

🟩🟩🟩⬜️⬜️⬜️ 🤼 Yeah, brings competition, which is good. (19%)

🟩🟩🟩⬜️⬜️⬜️ 🎲 Good for me, bad for local companies. (20%)

🟩🟩⬜️⬜️⬜️⬜️ 😞 Gonna kill local businesses. (15%)

🟩🟩🟩🟩⬜️⬜️ 🚮 The junk they sell will destroy the earth. (26%)

Your 2 cents…

We love Braai Broeke Luke! (if you don’t know what we are talking about, check them out here. )

Agree Chris. This will be the test to see if that generation really cares about sustainability. Interestingly, Temu targeted the USA first and only slowly moved into Europe. Perhaps for this exact reason.

FOR THE MEMES

Instagram post by @theopenletterza

Got startup memes? Send them our way or tag us on socials.


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