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crowdfunding

South Africa’s FSB to rule on crowdfunding by June 30

South Africa’s Financial Services Board (FSB) has set a date of 30 June by which it plans to rule on whether to craft specific rules or not for equity crowdfunding, an FSB spokesman said this week.

This follows the completion of a research report by the FSB on crowdfunding. FSB internal communications coordinator Thandolwethu Masango told Ventureburn however that the report on the FSB’s research would not be made public.

“The research was meant to assist the FSB to get insight into how other jurisdictions are supervising crowdfunding activities and which piece of legislation would be applicable in governing the said activities in South Africa,” said Masango.

The FSB is seeking to communicate its position to the industry by 30 June on whether to craft regulations or not for crowdfunding, he said.

The African Crowdfunding Association has been calling for the FSB to craft a specific regulatory framework on crowdfunding.

‘It’s not that equity crowdfunding is illegal – it’s just that there’s no clarity’

African Crowdfunding Association chair Kevin Allen said the June 30 date was news to him, but added that it was encouraging if clarity on any regulatory framework would be made public soon.

“It’s not that it (equity crowdfunding) is illegal – it’s just that there’s no clarity,” he said.

Meanwhile donations-based crowdfunding platform Thundafund is looking to pilot an equity crowdfunding platform.

Thundafund chief executive Patrick Schofield said he was not waiting for any regulatory certainty from the FSB and was going ahead with setting up a platform to facilitate equity crowdfunding in South Africa.

His idea is to use venture capital funds to vet deals and provide a certain percentage of the total equity injection, before placing these on the platform to attract investors.

Schofield said he was in talks with one investor to bankroll the platform, but said he was also considering using crowdfunding to fund the costs of the developing the platform.

Meanwhile a new lending threshold which came into effect in November under the National Credit Regulations is also likely to limit the ability of peer-to-peer lending platforms to fund startups.

It will mean that investors who use peer-to-peer lending platforms and who lend to any business with an annual turnover of below R1m will have to register as a credit provider with the National Credit Regulator (NCR).

A number of countries have regulations on equity crowdfunding, including the US and the UK as well as a number of countries, mainly developed nations. Last month Australia’s senate approved new equity crowdfunding laws.

In December Brazil’s securities exchange commission put out a request for input from the public for equity crowdfunding, while in the same month Chilean authorities authorised the setting up of working groups to look into regulating equity crowdfunding. Thailand and Malaysia released equity crowdfunding regulations in 2015.

Featured image: Investment Zen via Flickr (CC 2.0, resized)

  • GaZZA

    I really hope that the FSB adopts the ‘right’ light-handed approach for equity crowdfunding in June . I got involved in crowdfunding in New Zealand about 6 years ago and the Kiwi model, along with the UK model, are the best and most successful in the world (worth looking at for anyone wanting to lobby. Why? Because they are the most ‘hands off” with fewer investor restrictions. I lived and worked in SA for many years and if there is one thing that all African entrepreneurs need, it ‘alternative’ access to capital employing the power, support and reach of their respective ‘crowds’.

    gary.mersham@openpolytechnic.ac.nz