wiGroup grows 25% in year after financial management almost shut SA company

A year after having uncovered financial management which almost forced SA fintech wiGroup to shut down, the company has turned things around, having grown at 25% over the last 12 months, its founder Bevan Ducasse has revealed.

“Basically we managed to miraculously turn the business around,” he said, speaking at an event hosted by Lifecheq at the Radisson Hotel in Cape Town yesterday.

While the company had come close to closing down and had to shed 20% of its staff, it had “come out flying”, after breaking even in October last year, he said.

The 25% growth, explained Ducasse in a subsequent call with Ventureburn, was on the monthly revenue the company was generating just after the financial mismanagement was uncovered in July last year.

A year after uncovering financial mismanagement fintech wiGroup has come out flying says its founder Bevan Ducasse

Since then the company has signed up Dunkin Donuts, had launched Virgin Money Spot and a new app for food franchise Kauai and is about to add two new clients in Australia and New Zealand.

The company is also partnering with Dutch payment unicorn Adyen to develop a card-linked loyalty app, which will allow customers to earn their loyalty points just by tapping their credit card, doing away with the need for customers to carry a loyalty card around with them.

In addition, the company’s existing shareholders — including Investec, Smollan, Virgin and Ducasse himself — invested in the business in a new equity round in March.

The round was to convert into equity, an earlier amount in bridging finance that shareholders committed to fund staff retrenchments, Ducasse said, without revealing how much had been invested in the March round.

‘Former CFO overstated financials’

Ducasse meanwhile also revealed new details of the incident, including that it had emerged after the company’s then chief financial officer (CFO) Morne Patterson had overstated the company’s financial figures.

It resulted in about 35 of the company’s 170 employees having had to be immediately retrenched (and not 20 as estimated previously by Ventureburn — see this story).

Patterson resigned immediately after the incidence of financial mismanagement was uncovered and a probe was conducted by PwC at the time.

Ducasse told Ventureburn that the board is looking at how it can pursue the matter further and said he could not comment more on the matter.

He stressed that the incident amounted to financial mismanagement rather than fraud as no money was stolen. It involved the misrepresentation by Patterson to the board of the company’s financials at the time. “We were basically spending more money than was represented,” added Ducasse.

He said the PwC probe had exposed a weakness in wiGroup, in which two individuals in the fintech’s financial division had complete oversight over the business’s financials.

But by putting in place the recommendations made by PwC, the company now had the necessary checks and balances in place outside of the division, he said.

A R450m valuation company

Ducasse, who grew up on a farm in Escourt in KwaZulu-Natal, was 23 when he quit his job in 2007 to startup wiGroup. The idea was to develop a solution that would allow users to pay for products or services via their cellphone.

Working from his Beach Road, Green Point apartment in Cape Town with four other guys, he was able to raise an initial R2.5-million from an investor, who covered his flight to get him to pitch in Johannesburg to him.

He wasn’t even that worried that he had to give away 50% of the company for the investment. He was working on what he wanted to do and having fun while doing it.

Fast track to the middle of last year and Ducasse’s company had become one of the largest mobile transactional platforms in Africa with over 100 000 integrated till points accepting mobile payments, loyalty and rewards transactions. The company’s valuation stood at over R450-million, according to Ducasse.

Months earlier the company secured an undisclosed investment from the Virgin Group and retail solutions provider Smollan to fast-track its entry into emerging and developed markets. It followed an investment from Investec in 2015, reportedly believed by the industry to be worth just under R400-million.

Things could seemingly not go wrong for Ducasse and the company. But then they did.

‘You owe us tens of millions of rands’

It all started when Ducasse was boarding a flight back from Australia.

“I got a message from a client and they said there’s obviously something wrong with the recon, ‘You owe us tens of millions of rands’,” he told those at the Lifecheq event.

While he was concerned, the company at the time was processing about R7-billion in transactions a month, so he thought if it was a matter of being out by a few millions of rands things couldn’t be that bad.

“I landed and sent messages to my team and said guys let’s figure out what’s going on. Obviously there was some kind of recon issue. And so I got into the office and guys were running around and then I could start seeing a little bit of panic and then I was like, something is not right here,” he said.

It was then that he and colleagues uncovered “huge” financial mismanagement in the business, said Ducasse, who called it the “most devastating and stressful time” in his life.

‘They made mistakes and tried to cover it up’

“Within a week we went from what I thought was a thriving, strong, cashflow-amazing business, to a business that owed tens of millions of rands.

“We were burning, after more uncovering (of the financial mismanagement), millions of rands that were just being covered up in our statements and our management account.

“It’s quite a complex thing when we’re processing hundreds of millions (of rands) so I can’t go into details of basically how it (the financial mismanagement) was all done,” he said.

While he didn’t go into details, he hinted that the financial mismanagement had stemmed from errors by certain individuals who “made mistakes and then covered it up”, with the result that the cover up became “worse and worse and worse”. “What started really small just ended in a nuclear bomb,” he added.

He said the first thing he did after discovering the financial mismanagement was to call his shareholders to a meeting.

“You can imagine, rightfully so, they just looked at me and thought ‘what is this clown doing running this business’. I looked at myself and said ‘am I delusional, what have I been doing for 10, 12 years’. So you lose all self-confidence.”

‘We were basically done’

He then had to address clients.

“We were so deep under we were basically done… that’s how desperate it was. It was literally close the door and write to everybody (saying) we’re no longer here. That’s how desperate it was,” said Ducasse.

He then had to call the company’s 170 staff into a room and explain to them that the company had been hit by financial mismanagement and that he didn’t yet have all the details of how it was carried out, but that the only way the company was going to survive was if 20% of the staff were retrenched.

‘Daily game plan’

Ducasse called the period in his life “super, super though”. “I mean I was surprised that I wasn’t in hospital out of anxiety and stress,” he added.

He said he got through it all with the help of friends and family and by not wanting to give up on shareholders and staff. He took each day as it came during July.

“I had a game plan every day. I’d wake up and kind of struggle to get through the day but I would say ‘I need to do this, I need to call the CEO I need to speak to these people, I need to retrench five people, I need to whatever,” he said.

At the end of July he got married. “So you kind of have your happiest day of your life in the most difficult and stressful time of my life,” he said.

But things are looking up. Not only is the company growing, but the culture at the office has returned to how it was before July last year.

Said Ducasse: “There’s just such a good vibe in the office and just an amazing energy and the team are inspired and motivated”.

Read more: ‘I never saw it coming’ – wiGroup founder on financial mismanagement
Read more: PwC probe into financial mismanagement at wiGroup: CFO confirms he resigned
Read more: SA fintech wiGroup secures funding from Virgin, Smollan to boost global expansion
Read more: How wiGroup founder switched gears to build growth company around people

Featured image: wiGroup CEO Bevan Ducasse (Stephen Timm)