South Africa's ARC invests $16.75M into Rain, TymeBank

African Rainbow Capital (ARC) invested an additional 295 million South African rand (US$16.75 million) over the past year into South African mobile network Rain and neo bank TymeBank.

The numbers were reported in ARC's annual financial results for the year ended June, 30, 2024, which were published on Tuesday, September 17.

During the year, the Johannesburg Stock Exchange-listed company ARC invested an additional R126 million ($7.15 million) into Rain and R169 million ($9.6 million) into digital bank Tyme Group.

ARC is a holding company that acquires minority interests in businesses and manages a portfolio of 49, mainly South African investments, valued at R20.2 billion ($1.15 billion).

ARC said the year's results showed strong progress from several of the fund's early-stage assets, with TymeBank achieving breakeven and Rain generating R2.5 billion ($142 million) in earnings before interest, taxes, depreciation and amortization (EBITDA).

"Rain ranked first as the top-performing operator in the DataEQ/PwC Telecommunications Industry Index 2023. The company secured the number one position in both operational performance and public net sentiment, making it the only operator in the industry with a positive net sentiment. This achievement establishes Rain as South Africa's most liked network provider," ARC said in its results statement.

Rain is South Africa's smallest mobile operator out of five. Statistics from market research company Omdia, a sister company of Connecting Africa, show that at the end of June 2024, Rain had an estimated 693,500 mobile users.

In comparison, the next biggest operator Cell C recently revealed it had 7.7 million users at the end of May 2024, a bit lower than Omdia's estimated 8.7 million users at the end of June.

Omdia data shows that Telkom SA had 21.2 million users at the end of June 2024, MTN had 37.4 million and Vodacom had 57.4 million mobile subscribers.

Rain launched its 4G network in South Africa in 2018 and was initially focused on data as a primary offering, but it expanded to a "full mobile network operator," offering voice services, in May 2023.

Rain was South Africa's first network to launch 5G in February 2019.

"Rain has solidified its position as an affordable data and mobile service provider and continues to experience substantial subscriber growth. While risks persist, Rain is well-positioned to manage them and further establish itself as a trusted brand in South Africa," ARC said.

As of June 30, 2024, the valuation of the ARC Fund's shareholding in Rain increased by R598 million ($34 million) from June 2023, taking into account acquisitions of an additional R126 million ($7.15 million).

The ARC Fund also made an additional investment of R160 million ($9.1 million) in Rain during August 2024. The shares were acquired from another shareholder.

TymeBank's progress

According to ARC, TymeBank's customer base increased 11.8% year-over-year, to 9.5 million as of June 30, 2024, with increasing activity per customer.

TymeBank is a digital bank with the largest cash-in and cash-out network in South Africa, thanks to its retail partnership network with Pick n Pay, Boxer and The Foschini Group (TFG).

TymeBank launched in South Africa in February 2019, and it reached breakeven in December 2023. ARC said sustained profitability is expected in the coming months.

TymeBank doesn't have any physical branches but has kiosks at South African retailers like Pick n Pay and Boxer as part of partnership deals. (Source: TymeBank)

Tyme Global is a holding company based in Singapore. The company has begun launching digital banks in other countries.

GoTyme in the Philippines was launched in November 2022. By June 2024, GoTyme had grown its customer base to almost 3.6 million.

"The growth trajectory of the model is strong, with activity rates exceeding those of South Africa and deposits growing faster than anticipated," ARC said.

The bank is expected to reach profitability in the fourth quarter of 2025.

In Vietnam, the third country in Tyme Global's expansion plan, a merchant cash advance product is being piloted as the company progresses through the contracting stages with in-country partners.

— Paula Gilbert, Editor, Connecting Africa