The advent of Covid-19 created many challenges including pay cuts for employees and subsequent requests for loans and advances to make up for the loss of income. A number of qualitative surveys indicate that there has always been a high level of financial stress across the South African population.
WorldWide Worx and TymeBank commissioned a survey in 2018/19 which revealed that 76% of South Africans run out of money by the end of the month. Many employees have no flexibility over their money before payday. Thus, indicating that a financial life line, which will not have them waiting to be paid at the end of the month, is needed.
Smartwage, a company, which was established at the beginning of 2020 aims to give employees financial control, create a saving culture and decrease employee debt through its platform. Its software gives employees access to what they have earned in a responsible way before their payday. It was built on the concept of eliminating the payday poverty cycle and to give employees the financial support they truly need.
Smartwage secured an investment through Khulisa Investment Partners, which has taken a small equity position in the company. This has enabled the start up to grow immensely and to continue to reach its goals. The Khulisa investment was used to grow Smartwage’s technical and sales team – a key component of the business.
Khulisa’s focus is on creating an ecosystem of businesses that are making a collective difference. The core values and principles of both companies are aligned, making the partnership even more seamless and fruitful. It also supports companies that ensure the investment has heightened social impact.
According to Simon Ellis, Smartwage Chief Executive Officer at least 8 out of 10 South Africans struggle to make it to the end of the month and are forced to take a loan through unregulated loan sharks and pay lenders who charge high interest rates and thus the cycle of lending never stops.
“Smartwage bridges the gap by giving people access to what they have earned when they have earned it. About 80 percent of our users have reported a decrease in accessing money from lenders.”
Since its launch in February 2020, Smartwage has registered close to 7 000 users on its system including employees from three Spar supermarkets in KwaZulu-Natal.
Currently Smartwage has approximately 13 sales consultants and technicians working on the software, with plans to grow its team to 18 by June this year.
“Our goal is to service at least one million registered users in South Africa and to expand our solution across sub-Saharan Africa. Khulisa’s support has been amazing and has empowered us with tools, resources and capital to make great decisions.”
A TransUnion survey of 1,054 adults indicated that 89% of people were concerned about their ability to pay their current bills and loans. Employees who are in need of financial relief find themselves habitually taking up loans to make it through the next payday. Now employees can work without stretching the money to the last week of the month.
Previously employees were not able to access a portion of their earnings during the month, but Smartwage has changed that. The company currently charges a small subscription fee of R30 a month for access to the platform. It is one of the most affordable services in South Africa, with the best technical and sales consultants working on the secure and easy to use platform.
Ellis asserts that access to funding enables entrepreneurs to fully explore innovative ideas they have that solve issues in their communities. “Through Khulisa’s assistance we are now in the process of going through another funding round.”
Khulisa continues to support Smartwage with strategic guidance and input where needed as they grow and scale successfully.
“Smartwage was a good opportunity for investment because they are solving real world problems in a sustainable, ethical way, using technology to ensure consumers have access to their wages when they need them. The team is very strong and capable, and they understand the local context within which they operate while making data-driven decisions to ensure the business is primed to scale”, states Ross Tasker from Khulisa Investment Partners.