African Dawn CEO Marius van Tonder and his team are making waves and their success formula is resulting in the company being noticed. Apart from banks willing to assist them with cheaper financing, a few private equity companies have also started to court African Dawn.
"We have had approaches from private equity companies and companies bigger than ourselves. We have a nice track record and so are less risky," says Van Tonder.
Rightly, private equity firms are identifying lots of opportunity on the high-growth AltX board. The JSE alternative exchange is becoming a more significant contributor to that exchange's revenues. And African Dawn is an AltX success story. Listing has enabled the company to grow at a rate that may not have been possible had it remained private. But it seems the team is too busy enjoying the business of problem-solving to be seduced into selling. Or maybe Mr Right hasn't yet come along.
"We are comfortable to go it alone, but we are also open to business if it makes sense for shareholders. Every director at African Dawn is also a shareholder," says Van Tonder. There are clearly synergies for a private equity player, as buyout groups always have their objectives aligned with management - growing and streamlining the business to make profits.
That being said, with the numbers it has been displaying, African Dawn is ready to contemplate a share buy-back, but it is also coming under increasing pressure to declare a dividend in the near future. It is all very well to play it safe, but investors will soon start demanding value or place their cash elsewhere if the long wait for returns does not pay off for them.
Meanwhile, gearing up for a listing on the JSE main board is uppermost on Van Tonder's mind. Though AltX has been very good for African Dawn, the company has outgrown the junior exchange. With a market cap of more than R1bn or 10% of AltX itself, it needs to spread its wings and realise its full potential.
Regarding growth, the group has a number of exciting projects up its sleeve and it is concentrating on raising its profile and simultaneously clarifying its business areas to the public, who still seem to think African Dawn is a vanilla microlender.
"One of our biggest challenges is trying to get the market to understand what it is we do," says Van Tonder.
"We are not microlenders. Our business is in secured and unsecured finance and also in marketing."
The group recently introduced Dumont Health, which focuses on back-office issues for doctors as well as preparing and submitting claims to medical aids for them. It mitigates delays for doctors in receiving payments, thereby making cash flow more reliable. With 55 doctors already on board, this innovative business unit should experience significant growth in 2008/2009.
Van Tonder says that the group needs to focus on "secure, affordable and sizeable funding to stimulate growth. Our margins are healthy, so now we don't need to grow as much".
However, there is still much more growth to be had, particularly in the secured business side, which is not even close to being fully exploited in the SA market. Secured financing is still relatively immature in SA and Van Tonder is excited by the prospects for growth.
"We are the leader on the secured side, and one of the biggest on the unsecured side. Our organic growth has been healthy and we hope to increase our market share with affordable funding. The local market still offers huge opportunities." And looking north to the rest of Africa, there are huge untapped opportunities.
Meanwhile, the company is not getting left behind the mobile revolution sweeping through the continent. From London to New York, the continent is seen as "the last frontier" in global markets.
There is a lot of opportunity for businesses to provide infrastructure to African countries whose governments have let them down. Aside from the obvious need to communicate, mobile telephony can also satisfy a large range of social needs.
African Dawn has already accessed this market through the provision of mobile telephone contracts to lower-income groups. They are targeting those who may not be able to access 24-month contracts because of the credit scoring requirements of traditional banks.
But the group has also taken it a step further by revolutionising the banking market with Africa's largest mobile phone operator, MTN and one of the largest banks, Standard Bank. African Dawn provides mobile telephone banking solutions to more than 130 000 clients. Undeniable evidence of the potential of this market in SA is that the company's teams open about 12 000 accounts per month. African Dawn has identified 24m mobile telephone users in SA, 31% of whom are unbanked.
