Jobs Fund renews partnership with tech firm A2Pay, committing R161m for project

SA tech company A2Pay has landed R161-million from The Jobs Fund, a R9-billion fund which is managed by The National Treasury. The debt funding will help the company to roll out its end-to-end technology solutions to informal market traders.

The Jobs Fund, which aims to back job-creating projects, made the announcement last week. It’s the third time since 2012 that A2Pay has netted Jobs Fund money.

A2Pay offers township retailers a point-of-sale and stock management portal as well as a vending platform for virtual prepaid products.

As per the fund’s matched funding criteria, A2Pay will contribute an additional R232-million drawn from private sector partners.

The Jobs Fund has renewed its partnership with A2Pay, providing R161m for the firm to roll out tech solutions to spaza shops

The company’s marketing manager Jon Harris told Ventureburn that the company’s own contribution will include funding drawn from shareholders, private sector funding and company funds. He didn’t name any of the investors.

The leveraged grant will allow A2Pay to provide point-of-sale hardware, business development support, access to a virtual products retail platform and access to bulk stock purchasing and last mile delivery services to 4400 township businesses across South Africa.

The partnership will also provide full-time employment to nearly 6000 skilled and semi-skilled workers, 74 of whom will work as internal A2Pay technicians, installers and business coaches.

The project undertaken by A2Pay is one of four partnerships that highlight the Jobs Fund’s efforts to support the growth of township and rural economies.

The three other projects include R35-million to micro-lender Phakamani Foundation, R11-million to the SaveAct Trust and R74-million to SmartStart Early Learning to support early childhood development micro enterprises. All three enterprises will match or surpass the Jobs Fund’s injections with own contributions.

Founded with R20m investment

A2Pay was founded in 2009 by Bert Roux (pictured above). Roux started the business as purely a vending platform to sell airtime and electricity in the informal market. He initially invested R20-million of his own capital to get the company up and running.

A similar business, SA fintech Selpal, revealed in August that it had grown its revenue and customer footprint “fourfold” since First Rand announced that it had acquired an undisclosed minority stake in the Johannesburg-based firm in November last year.

The company, which CEO Stephen Goldberg helped found in 2012, offers a point-of-sale device and tech platform aimed at township businesses.

Reduced costs

A2Pay is making progress too. With each new funding injection from The Jobs Fund, the company has sharpened its distribution model.

In a 2015 article in Business Day, Harris said the company had in some cases battled to find good operators, partly because the equipment is given for free to operators. To remedy this the company tightened its selection criteria.

Harris told Ventureburn this week that the company had changed its operating model substantially since 2015, while the business has tried to reduce costs where possible.

“Equipment is provided to the Jobs Fund recipient at no charge along with the coaching and support. The value of this effort is between R30 000 and R50 000 (down from a ceiling of R120 000 in 2015).

The technology now offers all popular prepaid products and services. A2Pay covers its costs by taking commission of between 20% and 50% on sales.

In addition, while the equipment and coaching is provided at no charge, the store owner pays a small license fee every month for support, data usage, software licenses and software upgrades. Harris did not reveal how much this fee is.

The devices now also provide full business intelligence and a full point-of-sale device with comprehensive stock management. The merchant is now able to view business reports and full trading history for any period they select.

“The Jobs Fund division, a division within the commercial business of A2Pay has a break-even social purpose strategy and we share the commission derived from the sale of prepaid products and services of the prepaid product with our merchants.

“We use our portion of the commission to cover overheads and costs related to running the platform,” he explained.

In addition, Harris points out that A2Pay’s methodology now allows the company’s staff to work area by area and consolidate clusters of merchants

“Finally, our stores are being equipped with the knowledge and technology to enable them to handle aspects of social welfare and compensation payouts in the near future,” he says.

Training has helped improve operators

Another big challenge back in 2015 was that the business struggled with township operators who failed to deliver, and the company often had to terminate contracts with those that didn’t perform.

But Harris says since 2015, the business has been able to reduce the number of unsuccessful operators to “almost zero”. “We worked incredibly hard at addressing this issue,” he says.

In this, training operators has helped.

Harris says the business now offers an interactive six-week coaching programme that has increased financial literacy and developed the requisite retail and fast moving consumer goods (FMCG) skills. The training also focuses on planning and numeracy.

He points out that an independent assessment of the project found the A2Pay Jobs Fund project has the potential to effect long term systemic change in the spaza shops, with improvements in financial record keeping, retail disciplines and financial sustainability as well as facilitating market integration and financial inclusion through the platform.

A2Pay also has a pure vending device for all prepaid products and services that is sold to any type of retailer.

The business also sells its business management system Biz Pos 2 to any retailers that do not qualify for the Jobs Fund criteria.

The township economy, while not without its challenges, is cooking reckons Harris.

What with SA fintechs like uKheshe, Yoco, Nomanini and Selpal having all landed big money of late to provide financial services to the informal sector, things are getting more interesting.

Watch this space.

Read more: Standard Bank leads $4m investment round in SA fintech Nomanini [Updated]
Read more: We’ve grown fourfold since First Rand deal reveals co-founder of fintech Selpal
Read more: SA fintech uKheshe nets over R7m from investors on R100m valuation
Read more: SA’s richest, potential-loaded retail markets are in traditional townships [Opinion]
Read more: How South African startups are solving informal sector problems [Opinion]

Featured image: A2Pay founder Bert Roux (Supplied)