Patrice Motsepe’s ARC reaping the rewards

African Rainbow Capital (ARC) saw its intrinsic net asset value grow by over 20% in its 2024 financial year as several of its early-stage assets matured.

ARC – which was founded by billionaire Patrice Motsepe – released its results for the year through June 2024 on Monday, which revealed strong results for the company.

Its intrinsic net asset value (INAV) increased by 21.5% to R18.62 billion. This comprises essentially an increase in equity through a rights issue of R750 million and a net gain of R2.67 billion.

INAV per share increased by 8.5% to R12.38, up from R11.41 in 2023. ARC said this was achieved despite South Africa’s sluggish economy.

Debt in ARC’s fund increased by 17.1% to R1.73 billion, up from R1.47 billion the year prior.

The company explained that significant advances in several early-stage assets led to a maturing portfolio, and over 80% of the portfolio is now contributed by mature and high-growth investments.

Notably, TymeBank achieved break-even in December 2023, and now sustained profitability is expected in the coming months. This business generated fair value gains of R1.18 billion.

Linebooker achieved break-even and generated fair value gains of R79 million.

Rain met its economic and customer service-related targets, generating R2.5 billion EBITDA, resulting in a fair value gain of R598 million.

ARC said considerable “synergy realisation” through collaboration within the financial services ecosystem resulted in substantial scale benefits and cost savings.

This includes the integration of the Sanlam Third Party Asset Management and Absa Asset Management, Sanlam and Alexforbes collaborations, Sanlam and Capital Legacy transactions, and the successful integration of Retail Capital into TymeBank

ARC said these partnerships led to a substantial reduction in cost per member, improved client experience and capital management, and drove value by leveraging off a strong balance sheet and an enhanced distribution capacity.

In the reporting period, ARC noted a pivot in its portfolio towards high-growth technological innovation, with its high growth businesses contributing 54% of the portfolio.

TymeBank saw 11.8% growth to 9.5 million customers and increased activity levels per customer. Tyme Global grew its customer base to 3.6 million within 18 months of launching GOtyme in the Philippines.

In 2024, ARC also made additional investments in Rain and Tyme Group of R126 million and R169 million, respectively.

Currently, ARC Investments has a diverse portfolio of listed and unlisted assets valued at R20.2 billion. 

The company’s total comprehensive income for the year was up significantly from R1.99 billion in 2023 to R2.29 billion.

The company said several key factors impacted its ARC Fund portfolio during the period under review, both positive and negative. 

“The national election and establishment of the Government of National Unit (GNU), lower inflationary pressures and reduced levels of load-shedding have provided some reprieve and diminished the uncertainty faced in June 2023,” ARC said.

“However, the prevailing high interest rate, high unemployment rate, falling levels of consumer spending and volatile foreign exchange environment created challenging trading conditions for some of our portfolio companies.” 

“The diverse investment portfolio of ARCI has, however, shown remarkable resilience against this challenging macroeconomic environment.”

ARC Fund invested a further R1.38 billion in its current portfolio and disposed of R229 million of investments during the year. 

As a result of these transactions, Financial Services exposure has increased to 33% of the portfolio, and the unlisted portion of the Fund, which is only accessible through ARC Investments, has grown to 88% of the portfolio.

The company’s intrinsic investment value in the ARC Fund increased by 21.5% from R15.33 billion on 30 June 2023 to R18.62 billion on 30 June 2024.

The IFRS Net Asset Value (NAV) per share increased by 7.9% from R11.44 on 30 June 2023 to R12.34 on 30 June 2024. 

The lower increase in NAV per share was a result of the increase in the number of shares through the right issue and performance participation.

Below is an overview of the top investments in the ARC Fund.