“Crowdfunding is coming to Africa, it is just a matter of time and we are so happy to have started the conversation with the authorities to ensure it is done safely and sustainably,” says Scott Picken, Founder and CEO of Wealth Migrate and one of the founding members of the African Crowdfunding Association. “Fundraising in Africa is part of our culture. From Harambee in Kenya and TZ, to Agacira in Rwanda, Susu in Ghana and Nigeria to Ubuntu in South Africa coming together to help each other is what we do”, Kyai Mullei.
It is a global phenomenon and in 2014, KPMG, Deloitte, Accenture and Ernst & Young named it in the Top 10 Trends for 2015 as ‘key transformational and disruptive new technologies and business models’. One of the top four African banks (didn’t want to be named) recently verified it as their number one threat in 2016, if they do not adapt to the technological advancements.
According to Massolution (2015CF The Crowdfunding Industry Report), the global leader on research in crowdfunding, “Crowdfunding is being embraced by nations around the world to frame economic development programs. In 2014, the worldwide volume reached $16.2 billion, reflecting an annual growth percentage of 167%, which is an acceleration on the 125% growth experienced in 2013 on a funding of $6.1 billion. As the number of platforms increase and the size of campaigns and the diversity of asset classes becomes greater, we expect high growth to continue through 2015.”
This has enabled projects and businesses to be started, jobs to be created and most importantly driven economies forward. A company like Kickstarter in the USA has been the catalyst for more companies to be started in 2014 than anything else. There was over $500 million invested, from 3.3 million people, bringing 22 252 projects to life. Just imagine the economic impact!
In 2015, Massolution is forecasting $34.4 billion will be raised via crowdfunding platforms, a 112% increase on 2014. North America will remain the largest market, but with continued explosive growth in Asia, Asia will remain the second largest market.
Different countries have handled it differently. China, has a policy on Internet + where they are actively encouraging economic development through e-commerce and see this as the way to adapt from a manufacturing economy to a knowledge economy. This is why there has been explosive growth in China, with strong government support. Malaysia has gone even further and on the 12th of February 2015 dropped all accreditation for crowdfunding. They are the most progressive country globally in crowdfunding, allowing anyone to invest in anything through accredited platforms. They have been working with Massolution to formalize all their policies and have a focused campaign to create 1 million new jobs through crowdsourcing over the coming years. Hopefully the presidents and authorities in Africa can take note of how countries are creating real jobs in the 21st century.
Other countries have been slower on the up-take with America having been through a very thorough process over the last 3 years where really crowdfunding has only been available to accredited (wealthy) investors. On the 30th October 2015 they passed a Title III to remove these restrictions and allow unaccredited investors to also participate. Australia has been actively working through it’s legislation as to how to implement crowdfunding and protect their citizens. They have given clear guidelines as to what is legal and what is illegal and also when the legislation will be finalized. Unfortunately in South Africa and Africa at large we have not even started the conversation.
What is fundamental is that in every jurisdiction in the world, the regulators have worked with the industry advocates and stalwarts to ensure that the legislation is implemented safely and sustainability. Scott Picken is passionate about the intersection of technology, property and investment. Born in Durban, he did his honour’s dissertation at UCT in 1998 and Masters in London in 2001, on this topic, and has basically been working for 17 years on how technology could enhance the property and investment industry. He said, “It has been an extremely frustrating process as compliance is essential, but for more than 6 years it is like being a ping pong ball when trying to legally comply and bring this incredible technology to the people of South Africa. With Wealth Migrate, we are a global platform, the 10th biggest in the world according to 2015 Massolution Report, and yet we continue to find stumbling blocks in implementing it legally in South Africa. We decided to ensure we start the conversation in South Africa and Africa. The Wealth Movement was held on the 8th and 9th of October 2015 and was the first African Crowdfunding event ever! We did get the authorities attention, with the FSB sending out a press release saying “Crowd funding is an activity that falls outside of the regulatory net of the FSB.” The African Crowdfunding Association (ACfA) founding members, Thundafund and Wealth Migrate, have together approached the FSB in order to work together to look at the regulatory frameworks.“The Crowdfunding formula has proven to be highly successful and will open up new ways of attracting investment on one hand while providing access to funds on the other in Africa. This will generate liquidity, inspire creativity and boost innovation on the continent”, Patrick Chella, Co-founder & CEO, Realty Africa. The ACfA said, “It is our duty to ensure these technological gains come to our continent.”
As a founding member of the ACfA, Scott Picken hopes that they will be able to follow in the footsteps of all the other crowdfunding associations around the world to bring this technology to South Africa and continent as quickly as possible. He says, “It should be easier than anywhere else in the world as South African’s have had Stokvel’s for a very long time. It is estimated that one in every two black adult South Africans is a member of at least one of 89 000 stokvels. Black adult South Africans invest approximately R12 billion in stokvels a year. All crowdfunding is, is a stokvel with technology.”
Stokvel’s or the ancient chinese tradition of Biau-whey have been used culturally for centuries and are based on three fundamentals; trust, transparency and alignment. Crowdfunding is exactly the same and it is just enhanced with technology. However, similar to Uber, it cuts out all the middlemen, reduces the costs dramatically, increases the efficiency and the accessibility.
Overall it enhances the overall experience. When you look at property investment, most investors never generate the wealth or returns the top 1% do and this is because they go through investment vehicles with multiple middlemen. In fact the average investment vehicle has 16 middlemen who are vastly diluting the returns with fees.
Real Estate Crowdfunding and companies like Wealth Migrate, RealtyAfrica or RealtyWealth, use technology, just like Uber, to vastly enhance the experience and reduce the fees, ultimately allowing investors far better returns in the long term. And as for safety, just like with Uber, AirBnB, TripAdvisor, E-Bay or any other technology platform, social proofing or the crowd gives investors far more insight into the digital track record of the provider, which will provide better safety in the long term.
On top of this, companies like Wealth Migrate use their extensive property experience of facilitating investments of more than $1.34 billion on 5 continents over the last few decades. As Scott Picken says, “It is not only about technology, it is about understanding the fundamentals of property investment. Technology enhances the process but the fundamentals of investment remain the same.”This is not just for individuals, investors or government’s, this is also for big business! As Massolution says, “No financial institution can be misinformed about crowdfunding, as it now provides both competitive and promising new opportunities to banks, investment houses, and financial intermediaries.
Large corporations have also got involved like, CocaCola, Nike, ABN Amro, P&G, General Mills, and Crysler, to name a few, have deployed crowdfunding and crowdsourcing strategies to garner closer relationships, leverage their R&D portfolios, and capture intelligence from their users. This is considered ‘co-creation’ or ‘bottom-up economy’ corporations which will enhance crowd engagement as a fundamental strategy.
Scott Picken who has been invited to speak about crowdfunding all over the world, was recently invited by a representitive of the World Bank to speak at the first crowdfunding event in China. He said, “What is truly amazing is that in the first world crowdfunding is a ‘nice to have’ whereas in the emerging world it is a ‘necessity’.”
This is why in the 2014 Massolution Crowdfunding report they predicted that the greatest growth globally in crowdfunding would come from the emerging economies. Patrick Schofield, CEO and co-founder of Thundafund said, “We see crowdfunding as the democratisation of financing for entrepreneurs”. “Thus far we have been thrilled to see the outpouring of African and global support for African entrepreneurs that have had the courage to launch new ideas into the world. There are so many inspiring entrepreneurs in Africa who could do so much to change the world with access to capital. Crowdfunding is the next-gen solution to Africa’s development agenda.”
Scott Picken and the team at Wealth Migrate are also some of the leaders driving the Wealth Movement, whose mission it is to empower a billion people by 2020.
“Most people think we are stark staring mad, but when you consider there are 579 million people on WeChat alone, 1.3 billion in China, a billion in India and a billion in Africa, why can we not provide education and opportunities to these people through their cell phones, greatly enhancing their lives. According to the World Economic Forum, Davos, Switzerland 2014, The Wealth Gap is our greatest challenge. According to Credit Suisse report, October 2015, half of all global wealth now rests in the hands of 1 per cent of the world’s population as inequality between the rich and poor continues to grow. At the Wealth Movement, and with companies like Wealth Migrate and Wealth Create, we plan on solving this global challenge. Please support us and let’s create a better and more sustainable planet for all.”
“I truly believe this is no different from what happened to Henry Ford in the early 1900’s. He was consistently impeded in bringing cars to the common man, rather than only being accessible to the ultra wealthy, but he stuck to his belief that it was their right and a necessity. Not only did he achieve it, empowering an entire middle class, he also changed the face of American history and revolutionized transportation as we know it. Why can we not do the same for property investment, investment at large and wealth?”
In closing, Scott Picken, urges all crowdfunders and the regulators to get engaged in the conversation as it is essential for the citizens of South Africa and Africa. “My belief is that as long as you put the investors interests first, then technology will be able to facilitate a safe and trusted solution, which will be sustainable for the future. Crowdfunding will change the world as we know it, just like electricity, petrol or cars. We ask you to support us in the African Crowdfunding Association and make this technology a reality on a continent which arguably needs it the most!”