Econet Wireless Zimbabwe unbundled its fintech unit last year and listed the business (Cassava Smartech Technology Zimbabwe Limited) separately on the Zimbabwe Stock Exchange (ZSE). All fintech operations are housed in Cassava and the business description (from the corporate website) is, “a diversified smartech group, with a mandate to use digital solutions to drive socio-economic development and to improve the overall quality of life for all Africans”. In our minds, it has been difficult to envision how the business will evolve beyond the mobile payment platform; Eco-Cash. Cassava has indicated potential areas of growth such as Insurtech, Edutech, Healthtech and Agritech. The main question though is whether these other “tech’ businesses can ever make money.
A case in point is Vaya lift services, an idea that has been borrowed straight from Uber, which is still in loss-making territory. This Uber-type hailing service allows riders to book taxis at the convenience of a mobile app. While this development is a direct result of the growing usage of smartphones and mobile apps, the economics behind the offering is not compelling in the Zimbabwean context. Firstly, major cities in Zimbabwe such as Harare and Bulawayo are smaller in size when compared to Johannesburg, Cape Town or even New York. This presents a significant constraint in terms of pricing given the short distances as well competition from public taxi operators. While the service targets the middle-income earners as well as high net-worth individuals, cheaper options are plentiful. The increase in the number of imported vehicles (mainly from Japan) has led to a proliferation of taxi businesses. Secondly, the use of mobile apps implies increased data usage. Zimbabwe has one of the highest mobile data costs in the region. This would also imply that the cost of using the Vaya service may be comparatively higher than other alternatives.
Being in the technology space, Cassava Smartech Zimbabwe will have to innovate and continuously disrupt the market so as to prove itself as a business that is beyond a mobile payments platform. Globally, we have noticed continuous research and innovations in the technology space. Jeff Bezos, the founder of Amazon religiously sells USD1.0bn worth of shares every year to fund his rocket company, Blue Origin, which he wants to cut the cost of space flight, put tourists into space and help return humans to the moon. Another example is Elon Musk, founder of SpaceX who has a goal of establishing a self-sufficient colony on Mars. Elsewhere, Russian Yuri Milner is looking to send a robot to Alpha Centauri, the closest star system to the sun.
While we do not expect Cassava to venture into Space Technology or Robotics, the bottom line is that even in the payments space, new technologies such as cryptocurrencies and blockchain technology are threatening traditional business models. That said, Cassava will, in the meantime, continue to “print money” given the growing cashless society in Zimbabwe and the rapid penetration of the Eco-Cash platform. The share price has de-rated since its listing days as illustrated but the upcoming results could trigger an upliftment.
Mind you, financial services groups such as CBZ Holdings, FBC Holdings and NMBZ Holdings have taken advantage of the “non-interest income opportunity” and have racked in millions from electronic transactions and it is clear that Eco Cash (Cassava) will not be left behind. Investors should consider taking a punt on this one ahead of the earnings release!
Author – Batanai Matsika
Head of Research – Morgan & Co
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