M-pesa
JF-Expert Member
- Sep 4, 2011
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[h=3]When Johan Meiring took over as CEO of Blue Financial Services in October 2010, he expected to spend 75% of his time turning the troubled microlending company around, and 25% on Mayibuye Group, the private-equity firm that bought Blue Financial Services, of which Meiring is also CEO.[/h] "I ended up spending 99.9% of my time on Blue," he joked on Tuesday.
But the time investment is paying off. Blue lost close to R1 billion between September 2009 and February 2010, before Mayibuye stepped in that June. By the same period the next year, it had shrunk its losses to just over R100 million.
Blue, which is listed on the Johannesburg Alternative Stock Exchange, will release its next period report on October 10, and, although Meiring couldn't comment on Tuesday, belief is growing the company may well turn a profit.
In addition to debt-restructuring and cost containment, a major key to Blue's turnaround has been a decentralisation of power away from its headquarters in Pretoria and toward the 11 other African countries it serves.
Prior to the restructuring, data for all African operations was collected in Pretoria, and the individual country directors were largely South African nationals. The company lost money by not understanding local regulations, not tailoring financial products to local cultures, and from high international corporate taxes.
"Running [operations in other countries] from SA just doesn't work," Meiring said.
Blue has now hired deputy directors within each country, who will eventually take over operations in a local-agency model. Ghanaian and Kenyan operations have already been turned over to local directors. Data collection has also moved out of Pretoria.
Decentralising alleviates Blue's "extreme exposure" to currency risk.
"Other than the maybe the Japanese yen, we're exposed to all currencies," Meiring said.
According to CFO Shaun Strydom, Blue lost R50 million in 2010, due to currency exposure. Although the volatility of the rand-dollar has had some effect, the bigger problem was translation loss and tax leakages when converting between the 12 African currencies it dealt with daily.
Understanding local holidays and seasonal adjustments optimised cash flow, and the less they converted currencies to the rand, the better, Meiring said. In Malawi, where the currency had been greatly devalued, the only way to make a profit was to keep the currency within the country, and to lend it.
Blue is now focused on increasing distribution points for its microlending products, which, again, means looking outward to the rest of Africa. While it plans to expand to more than 900 new distribution points in 2012, less than 20% of those will be in SA, where there is "an oversupply of quality demand," Meiring said.
"Look at Jo'burg, Nairobi, Dar [es Salaam] - if you turn a corner, you fall over a microlender," he said. "We're going for the low-hanging fruit," in underserved rural areas, and in countries that have government payroll deductions in place. The company now averages 14,000-15,000 new customers per month.
At 16:30 today the share was trading at 37 cents, up 5.71% on the day.
But the time investment is paying off. Blue lost close to R1 billion between September 2009 and February 2010, before Mayibuye stepped in that June. By the same period the next year, it had shrunk its losses to just over R100 million.
Blue, which is listed on the Johannesburg Alternative Stock Exchange, will release its next period report on October 10, and, although Meiring couldn't comment on Tuesday, belief is growing the company may well turn a profit.
In addition to debt-restructuring and cost containment, a major key to Blue's turnaround has been a decentralisation of power away from its headquarters in Pretoria and toward the 11 other African countries it serves.
Prior to the restructuring, data for all African operations was collected in Pretoria, and the individual country directors were largely South African nationals. The company lost money by not understanding local regulations, not tailoring financial products to local cultures, and from high international corporate taxes.
"Running [operations in other countries] from SA just doesn't work," Meiring said.
Blue has now hired deputy directors within each country, who will eventually take over operations in a local-agency model. Ghanaian and Kenyan operations have already been turned over to local directors. Data collection has also moved out of Pretoria.
Decentralising alleviates Blue's "extreme exposure" to currency risk.
"Other than the maybe the Japanese yen, we're exposed to all currencies," Meiring said.
According to CFO Shaun Strydom, Blue lost R50 million in 2010, due to currency exposure. Although the volatility of the rand-dollar has had some effect, the bigger problem was translation loss and tax leakages when converting between the 12 African currencies it dealt with daily.
Understanding local holidays and seasonal adjustments optimised cash flow, and the less they converted currencies to the rand, the better, Meiring said. In Malawi, where the currency had been greatly devalued, the only way to make a profit was to keep the currency within the country, and to lend it.
Blue is now focused on increasing distribution points for its microlending products, which, again, means looking outward to the rest of Africa. While it plans to expand to more than 900 new distribution points in 2012, less than 20% of those will be in SA, where there is "an oversupply of quality demand," Meiring said.
"Look at Jo'burg, Nairobi, Dar [es Salaam] - if you turn a corner, you fall over a microlender," he said. "We're going for the low-hanging fruit," in underserved rural areas, and in countries that have government payroll deductions in place. The company now averages 14,000-15,000 new customers per month.
At 16:30 today the share was trading at 37 cents, up 5.71% on the day.
