Africa becomes crowdfunding hotspot
Crowdfunding is becoming increasingly successful in both Europe and the US – but what about in developing countries?
It seems that Africa may be the next crowdfunding hotspot, where many platforms have sprung up in the last few years.
Africa has a clear market for investment in development projects and startup businesses. A large number of African crowdfunding sites are rewards based, meaning people pledge money towards projects they feel passionate about – often ones that will stimulate the economy and local area. These sites, such as Jumpstart, aim to decrease the involvement of international development organizations in funding start-ups, so that more of the funding comes from Africa itself. More recently, however, equity and debt based crowdfunding sites have begun to surface. Venture Capital for Africa, a debt-based model, focuses on companies with a valuation of less than £1m which have failed to meet targets for venture capital. Most of the sites are relatively new, founded in the last two or three years.
Patrick Schofield is the founder of Zimbabwean crowdfunding platform Thundafund, which is aimed at raising capital for social entrepreneurship. He believes that African sites are about the “democratisation of funding”; in less economically developed countries there are fewer opportunities for startups to gain investment, but through crowdfunding, the opportunities are equalised. Research has proved that crowdfunding as an idea has proved just as popular for investors in Africa as in developed markets. Some sites, such as Homestrings and Lelapafund, aim to capitalise on disapora and encourage Africans living abroad to invest in their home country. Their knowledge of the markets and understanding of their home country makes them the ideal investor.
The concept of raising money from the people around you is not a new one in Africa. There are many well-known groups that do a similar thing; for example, Susu collectors are one of the oldest financial groups in Africa. Based largely in Ghana they provide an informal means for Ghanaians to securely save and access their own money, and gain limited access to credit. Similarly, StokvelSA works by pooling together funds contributed by members and investing it in different investments activities for a set return. These forms of microfinance have always been popular, so it is perhaps unsurprising that Africa has taken to crowdfunding so well. However, online crowdfunding in this sense is entirely new and despite what Schofield calls its “somewhat subdued” success rate, it is ultimately taking off as a viable form of alternative investment in Africa.
UK public borrowing at eight year low
Public finances are starting to benefit from economic growth, as May’s public borrowing falls to eight year low.
Britain’s borrowing fell from £12.350bn in May 2014 to £10.129bn this year.
The drop is attributed to May’s strong growth in income tax receipts, which rose by 5.3% on the year to £10.8bn.
George Osborne’s focus on deficit reduction looks set to continue as the Conservatives move into their second term in office. Osborne is due to make a post-election budget statement on July 8; in March’s statement he aimed to cut this year’s deficit to 75.3 billion pounds, roughly 4 percent of GDP, from an estimated 90.2 billion in 2014/15. Economists say further cuts to public services and welfare are to be expected.
“World’s smallest drone” hits crowdfunding goal in just one day
A company manufacturing the ‘world’s smallest drone’ has raised double its crowdfunding goal in just one day.
The Micro Drone, created by Extreme Fliers raised $150,000 yesterday – twice the amount that they aimed to raise in a month. Over a thousand people have invested in the new project through Indiegogo, a crowdfunding website. Their microdrone is the only small, remote controlled drone that can carry a camera.
The company was founded in 2007 and markets its products as the “next generation of toys”, using the best micro technology. It also recently featured on Dragon’s Den, impressing Theo Paphitis and walking away with his investment.
Fitbit shares surge in market debut
Shares in technology company Fitbit have risen more than 50% on their first day of trading on the NYSE.
The seven-year-old company is known for its smart devices that can be worn on the wrist and track a user’s movements, measuring activity and fitness levels.
Its initial IPO was $20 a share, which rose rose by over 50% to $30.04 in the early hours of trading. The company have raised $732m through the share sale.
Whilst a small rise in first-day trading is generally expected of newly listed companies, a jump as large as this is a trading debut is unusual; the average first-day rise for U.S.listed IPOs so far this year is 14%, according to Dealogic.
Fitbit has been the most highly anticipated IPO of the year, however there are suggestions that its success may be short-lived; similar products such as Mi-band from the Chinese smartphone marker Xiaomi, as well as Apple’s iWatch, will provide strong competition.
“What remains to be seen is how Apple’s arrival will change the landscape,” said
Ramon Llamas from IDC. “The Apple Watch will likely become the device that other wearables will be measured against, fairly or not. This will force the competition to up their game in order to stay on the leading edge of the market.”
China heading for biggest weekly fall since 2009
The Shanghai Composite Index fell 3.7 percent at the close yesterday, making it a drop of 7.4 percent for the week. This will be their largest weekly loss since 2009.
Technology companies led the slump, with the CSI 300 Index falling 4.1 percent and Hong Kong’s Hang Seng China Enterprises Index decreasing by 1.1 percent.
Analysts are increasingly warning that the stock market is in a bubble that llooks set to burst; the market has more than doubled in the past 12 months to reach its highest figures for seven years.
“Stocks have risen too much and valuations have reached critical levels,” Shen Zhengyang, an analyst at Northeast Securities Co. in Shanghai told Bloomberg. “Anything that’s slightly negative can impact the market.”
Yellen says “room for improvement” before interest rates can be raised
Forecasts released by the Fed yesterday showed most officials expect to begin raising short-term interest rates before the end of the year.
However, in their statement Fed policy makers reiterated that they must be “reasonably confident” that inflation will move back to their 2 percent target over the medium term before raising interest rates. Inflation minus food and energy decelerated to 1.2 percent for the year ending April, compared to 1.4 percent the year before.
Chairwoman Janet Yellen said that there was “room for further improvement” in the economy before interest rates would be raised. She cited signs of “cyclical weakness” in the labor market, and noted wage growth remains “subdued.”
Stocks rose after the Fed announcements, with the Standard & Poor’s 500 Index up 0.2 percent to 2,100.44 in New York. The Dow added 31.26 points, or 0.2%, capping a back-and-forth session for stocks. The S&P 500 rose 4.15 points, or 0.2%, and Nasdaq gained 9.33 points, or 0.2%.
EU “impossible” without Britain
A European Union without Britain would be “impossible”, says Italian Prime Minister Matteo Renzi.
This comment comes after Renzi met with David Cameron to discuss his plans to reshape Britain’s relationship with the EU before an in-out referendum.
“For us it is a priority (that) the UK can continue to work inside the European Union because a European Union without the UK is impossible,” Renzi said, after lunch with Cameron in Milan.
Reelected last month, David Cameron pledged to hold the referendum by the end of 2017. He is seeking changes to EU treaties, which it says are needed to achieve reforms to EU migrants’ access to welfare payments.
In the wake of Cameron’s plans, Ireland’s Minister for European Affairs Dara Murphy told BBC Radio on Wednesday that his country had begun contingency planning for a British exit from the EU.
Property crowdfunding: an alternative to equity?
For a crowdfunding investment with a potentially lower risk, property crowdfunding may be worth investigating. As interest in equity crowdfunding continues to rise, it was only a matter of time before the craze spread into the property market; arguably, the most popular area to invest.
There are several platforms online that offer property crowdfunding opportunities, including PropertyMoose, The House Crowd and Property Partner. Essentially, this service allows you to invest in a buy-to-let property without having to take on the additional responsibilities that come with being a landlord. It is popular among investors who want a slice of the property market but lack the capital to create their own portfolio; the Council of Mortgage Lenders show that the value of buy-to-let lending currently stands at £27.4bn.
Andrew Gardiner, chief executive of Property Moose, says “Crowdfunding opens up the market to everyone, so they can invest in property for a much-reduced commitment … Plus, it allows people to diversify across asset types and geographic areas, helping to spread risk and, hopefully, increase returns.”
So what are the benefits?
Compared to equity crowdfunding, where only 10% of the businesses are likely to succeed, putting money into the property market is a comparatively low risk investment. With both house prices and rent continuing to increase, especially in London,
Crowdfunding a property gives you access to a market that would otherwise be out of reach.
With crowdfunding, the properties have no mortgage; this means no exposure to interest rate fluctuation. You also have a legal charge on the property, increasing the safety of the investment should someone along the line go bankrupt.
Equally, for tenants, living in a crowdfunded property could mean more security – if one person wants to sell, there is no change of ownership none of the hassle for the tenant associated with a normal sale. Similarly, as ownership is unlikely to change and the house will always be for renting, there is more certainty as to the rental period.
And the problems…
There is no way to get your money back fast. Investments are for a fixed term, usually 5 years, and if the house needs to be sold, the process usually takes a minimum of three month. If you wish to just sell your share, what you receive for it depends largely on whether there is a secondary market interested in buying it.
Secondly, the fees on this sort of investment are high. The House Crowd will charge 5percent up front nd a profit share for thie manafagement company from the rent, and gains of “around 25 percent”. Property Moose charges you 5 percent up front as a finders’ fee, and then 15 percent of the yeield as well as 15 percent of any final capital gain. These charges all add up – there is the danger of an investment in this way not being value for money.
Whilst one of the advantages of property crowdfunding is easier access to the market, Royal Institution of Chartered Surveyors has expressed concern that such easy access to property investment could exacerbate volatility in the market.
Oil firms ahead of inventories
Oil prices are firmer before Crude Oil inventories that are expected to post the seventh consecutive weekly decline in stockpiles.
The sharp sell off earlier this year caused some producers to reduce output and the trickle down effects are now being felt in both inventories and the price of oil.
The weaker dollar has also supported prices. Prior consensus of a rate hike has been squashed causing the then strong dollar to weaken.
Oil has rallied over 40% from the lows observed in early 2015 but many analysts are still cautious and feel there could be further downside.
“We’re not in the clear as far as the supply-demand balance. In some ways, we think this whole situation is getting worse,” said Vikas Dwivedi, head of oil strategy at Macquarie.
Credit Suisse downgrades Tesco and Sainsbury
Over the first 3 months of the year the UK’s leading supermarkets staged a strong recovering rally from their distressed levels outperforming the FTSE 100 significantly.
Credit Suisse has today initiated coverage of UK food retailers with a negative stance rating both Tesco and Sainsbury’s at “Underperform” with aggressive price targets of 169p and 219p respectively – indicating the potential for a 20% collapse in Tesco’s share price and 15% pull back in Sainsbury’s taking them back to levels they were trading at 6 months ago.
Whilst Credit Suisse highlighted the continuing decline in like-for-like sales, the rate of decline in margins is even quicker as the price war continues saying “We see no obvious path back to recent margin levels”. In the note CS confirmed Tesco and Sainsburys had born the brunt of the price war.