When the Young Women in Business Network was given the authorisation to establish a mutual bank, South Africans had high hopes.
- When the Young Women in Business Network was given the authorisation to establish a mutual bank, many black South Africans had high hopes.
- But the founders’ press briefing on Monday turned out disastrous.
- The founders will make no monetary contribution to establishing the bank, and they don’t know how much that process will cost.
It was not the most convincing press briefing for someone promising to run a bank. A lousy network connection, multiple broken streaming links and the repeated statement of an “expensive letter” that the founders of Young Women in Business Network (YWBN) Mutual Bank bring to the table diverted the attention from the occasion.
But when Nthabeleng Likotsi, who is set to become the first woman to own a mutual bank in South Africa, finally engaged with the inquisitive public, her passion came through. She shared her vision on how YWBN Mutual Bank wants to change things for the better for black entrepreneurs.
“Unemployment is high; it’s a fact. Black businesses are not being supported; it’s a fact. It’s up to you and me, all of us, to come together and use our resources to fund people that are in business … We need to build this thing ourselves. Nobody is going to be our Messiah,” said Likotsi.
She said the YWBN Mutual Bank wants to be the bank that understands small businesses, one that finally gives access to credit to the informal sector and helps South Africans get back their spaza shops in the townships.
Without the theatrics that became the focal point of the media briefing, the vision looked good on paper, especially in a country where the majority of small and medium black-owned businesses rely on the so-called soft loans from friends and family to survive.
But Likotsi’s media briefing likely left many wondering if YWBN Mutual Bank can execute her vision. As YWBN Mutual Bank has promised to “democratise bank ownership” in South Africa, it has opened the door for investors to purchase shares from just R1 000 from 1 to 30 June 2021. The general public will own 17% of the bank’s shares.
YWBN Mutual Bank is hoping to raise R5 billion from the public. Each share costs R10, and investors can buy a minimum of 100 shares for R1 000 and a maximum of 200 000 shares for R2 million. They will be locked into this investment for six years. There may or may not be dividends after the initial six years, depending on whether shareholders vote to reinvest any profits into the business or reward themselves.
But that is where the clarity ends.
No monetary value contribution from founders
Asked what the founding shareholders, who will own 40% of the bank, bring to the table, Likotsi said: “The expensive letter” from the SA Reserve Bank (SARB). So, the first cent towards establishing the bank will come from the public.
“The funders will be contributing this expensive letter. It is very expensive. It has no value. So, that’s what we are contributing to establishing this. But more than anything else, we are also saying that we are going to be working in the six-year period to grow the R5 billion. So, it’s not in monetary value,” she said.
So, Likotsi said the bank was selling South Africans a “vision” to become part of establishing a bank that wants to command 1% of a R475 billion banking sector market share and hope that it can have an estimated net asset value of R11 billion in six years’ time.
With the R5 billion it’s hoping to raise, YWBN Mutual Bank said it will use only less than R100 million of the R5 billion for establishment costs – but the problem is that this figure was a thumb-suck.
“The establishment cost, even the auditors don’t know. We did ask for a quotation on how much this thing is going to cost us. The answer was ‘we don’t even know the amount of work that is going to go into it,'” said Likotsi.
No banking licence yet
Furthermore, the SARB has granted the Young Women in Business Network “authorisation to establish a mutual bank”. YWBN Mutual Bank has not yet been granted a licence to operate. There’s still a risk that the SARB might not grant the licence after all, but Likotsi appealed to black South Africans that this was a risk worth taking.
If the SARB doesn’t grant the licence, there will be a process to refund investors, minus the establishment costs and then “life carries on” said Likotsi.
“Obviously, we don’t think like that. We don’t think the Reserve Bank will say no,” said Likotsi.
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