The impact of COVID-19 on HAVAÍC investments - Opportunity in crisis
As Africa braces itself and prepares for the spread of the Coronavirus, we have pre-emptively been spending the last few weeks working with our portfolio companies to ensure that they are “ready” for the human and economic impact that is likely to ensue. Fortunately, many of our companies have recently concluded capital raises so as far as small businesses go they have relatively strong balance sheets. Additionally, being heavily tech enabled, they are light and nimble and have been able to shift operations to ‘work from home’ in most cases. Whilst big, small and individually owned businesses will all feel economic impact, most of our South African portfolio companies service blue chip corporates and thus non-payment for our services is less likely. In East Africa, our portfolio services sectors of the market that are already under strain and will only face more demand pressure (namely logistics, postal delivery and localised access to financial services including cash) which inadvertently is a positive for us. All that being said, we are under no illusion that this will still impact our companies and we are constantly engaging and supporting them. As you are well aware, in every crisis, opportunities present themselves, and the resilience of our portfolio is already evident.
For instance, RecoMed has seen a material surge in online bookings in the last week, is working with health insurers to enable as many non-physical bookings as possible, and with doctors and medical practitioners moving towards video conferencing to reduce reliance on front of house staff, medical practices are investigating how they can integrate booking functionality into their now remote practices. AURA is also seeing a surge in interest, as people become increasingly concerned about unrest, spending more time at home and a desire to increase access to security. Thus they too are well placed to support increased demand with sole access to the largest private security fleet in Africa. In our local stock exchange, the JSE, there is strong pressure for remote AGM’s and shareholder meetings to take place, and Digital Cabinet has already been engaged by the JSE to facilitate the management of this. And finally, our remote telemedicine and medical communication platform portfolio company, Vula Mobile, has been appointed by the National Institute of Communicable Diseases to assist health workers to communicate with specialists in testing and treating Covid-19 patients. Our deal flow of opportunities remains strong and topical. To give examples of this, we are in the process of investing in a smart messaging platform that delivers data rich campaigns, and since agreeing terms have surpassed revenue forecasts and are seeing a spike in customer demand as they ramp up SmartSMS customer engagements particularly those around Coronavirus comms. We are in the process of finalising terms with a company that provides an interoperable network of true contactless payment solutions for sole traders and micro retailers . We anticipate that the handling of cash will become more of a health risk, and in the expected downturn, and probable increase in unemployment, more ad-hoc workers and informal businesses will arise, driving micropayments volumes, shifting away from physical cash transactions. Further to this we have been working closely with a highly successful entrepreneur with a scalable tech product that empowers mid-level developers to produce high-level dev work remotely and to up-skill with self-learning modules.
While we cannot claim exact foresight and vision here, it is certainly clear from the above portfolio company and prospective investment examples, of which there are many more, that there are resilient and market appropriate early stage high growth investment opportunities in our ecosystem, and while we will of course need to remain cautious and highly selective in all of our investment decisions, are well placed to respond and maximise our position in the current environment. Wishing you and your family well over this uncertain period.