What to invest in in 2012.

**Miro Bagrov** · 05-Jan-12, 01:54 PM

Originally Posted by Dave A

However, there is a pretty well known fund which is ploughing into African Bank like crazy.

.

Shame. Hope no one's pension is there: Of course this will increase their Share price (but that does not make it a good share)
There is a 40% - 50% chance of a recessionary dip over the next year or two. Banks shares will get devalued (well, most shares will).
Secondly, the nett profit margin of a spaza shop is better than that of banks. Worst of all is that banks measure their profit in accounting profit while a spaza shop in cash. A lot of the profits are still to be realised.
Banks have another problem: They keep a large bulk of their Current Assets in Trading Accounts. The value of which is susceptible to international markets. Another problem is that I expect the interest rates to increase within the medium term. Now if this happens, the bank will have larger defaults on their lending and it would have been better to buy a spaza shop than bank shares...

Well - I'll say it

The best investment for 2012 is a spaza shop which sells pies and airtime

**Dave A** · 05-Jan-12, 02:59 PM

Originally Posted by Miro Bagrov

Well - I'll say it

The best investment for 2012 is a spaza shop which sells pies and airtime

Hard to argue against you there

**Justloadit** · 06-Jan-12, 07:22 AM

Also there is a very strong undercurrent in mobile payment systems which are not bank owned, this will plough deep into current bank income from transactional charges. Keep a look out for this one, as it will reach critical mass overnight.

**Miro Bagrov** · 06-Jan-12, 02:57 PM

Originally Posted by Justloadit

Also there is a very strong undercurrent in mobile payment systems which are not bank owned, this will plough deep into current bank income from transactional charges. Keep a look out for this one, as it will reach critical mass overnight.

I remember we were talking about Airtime.
I actually found the wholesalers of physical Airtime. They give between 8%-6% discount. No need to deposit money, it's cash & run away. I will only move to a digital airtime vendor if they give me 10% discount: Then I'll print the slip myself.
The problem is, that an EFT costs R3-4 to the sender. And a cash deposit costs 1-2% of the deposit value to the Vendor (because vendors use expensive banks) -- With airtime this just means that you can not get good prices from Bank related purchases.

**Justloadit** · 06-Jan-12, 06:53 PM

Hi Miro,

You will never ever get 10% discount from any of the wholesalers for Cell C, MTN, Vodacom, virgin, yes for Telkom and World Call on some values, as no one gets this discount from the service providers. If any one does give you this type of discount, for the main 3, they are money laundering, and using the high volume turn over of the airtime to mask the activity.

I know what the discounts that are given to wholesalers.

In some instances on very large orders, they may give away 0.5% more than what they get, and this is simply done to reach monthly targets, else they lose their volume discount and SIM card rebates.

This is a very very very competitive market, and you have to diligently watch each sale to make sure that all is correct, one slip up and you are bust. Wholesalers live on 0.5% margins, and go for the turn overs. That is one of the reasons of you having to pay up front before you get your stock, they use your money to purchase from the service providers, in this way they make 0.5% with no investment. It does not sound like much, but when you churn R60 to R100million a month, this becomes serious money.

**Miro Bagrov** · 08-Jan-12, 02:26 PM

So, what discount to wholesalers get?

I just go an offer 10.9 for R12 Vodacom
12/10.9 = 1.100 = 10%...

I am not a believer in high volumes and small margins.

The psychology of businesspeople does not work like that. I'm being serious, they get good profits. Cause some of them drive around to deliver. And 0.5% won't pay for you to even call a person. Some drive from Jhb, to Pretoria and they drive to their suppliers too.

Now then an airtime voucher is three things combined:
1. Aitime Number
2. Printed Paper
3. Advert Space
....Total = 8% disc.

So, I am not wrong to say if I take away the printed paper, I should a bigger discount.
Virtual airtime should be cheaper not more expensive. The wholesalers buy airtime either in virtual, then print it, or they buy it printed. They are either selling airtime space or they are not. They are not using banks, so they probably pay no transaction fees.

**Justloadit** · 08-Jan-12, 05:09 PM

Hi Miro,

Firstly your calculation is incorrect.
1-(10.9/12) = 9.16% or alternatively 12 - 10.9 = 1.1 then 1.1/12 = 9.1%

Secondly in some instances the Service providers (MTN and Vodacom) undermine the wholesalers by giving a 1% better discount on the actual scratch cards and delivering it. The reason for this is that they offset the 1% against the advertising of the scratch card itself to push the corporate identity.

The wholesalers get this same discount as been offered, but as you can see it cost the wholesaler to now deliver on, so wholesalers don't bother with this medium.

If you feel you get better results this way, then go for it, in the end you will see that it is not sustainable, as there is a minimum you have to buy, and if you sell on, even to street vendors you need to pay for your costs, then go for it.

Many of the franchises like Trueworths and Edgars, etc sell certain denominations at cost, purely to bring feet into their door, since they make more than 150 to 200% markup on the other goods they sell. Ever wondered how they can give 50% discounts at 'On Sale' campaigns.

Good luck. Many have come and gone over the years, the secret is to o make this necessary evil be the least burden to you in your sales centre, because if you do not supply airtime in all the denominations, then you will not get the feet in the door to vend your other products that sell well and give you the decent profit.

P.S. Can you pass on the lead where you are getting this discount, so that I can make some enquiries.

**Miro Bagrov** · 09-Jan-12, 10:51 AM

Originally Posted by Justloadit

Hi Miro,
Firstly your calculation is incorrect.

You're right.

I am working on developing this guy as a supplier. Since he wants to sell R20 000 a pop, then I must use another shop to buy it. I only need R1000 - R2000 because my business can not sell more. I will buy it with my friend for his shop and we'll split it up. He wants to come to my shop and show me his stuff.
I can recommend you - are you in Pta or Jhb?

Ok, R10.90 ... I still think then they must be getting a R12 Voda for about R6.

**Justloadit** · 09-Jan-12, 05:24 PM

Hi Miro,

I am in Jhb.

Been in this business for 9 years. My one supplier has been in it for some 15 years, and is the 4th largest MTN buyer in RSA, and my other supplier is the largest buyer of MTN. Been round the block a number of times, and seen many come and go. As I said before, this is a very competitive place, and we are completely at the mercy of the service providers. They change discounts at a drop of a hat, and could not be bothered with the impact it has on the supply chain. People need airtime, and will find it somewhere, who is willing to give away his bottom line. Customers change for 0.1% in the discount, so you can land up being high and dry with out even knowing it, until you notice the numbers changed.

R20K sounds like a lot, but I can churn this in a couple of hours. The big wholesales churn R1m plus a day.

**Miro Bagrov** · 10-Jan-12, 11:13 AM

Tell me, how do you feel about airtime vending? as in static unmanned machines?

Another Question:
I am busy organising a small business for 1 employee to
I am looking for the cheapest possible pre-paid option - in other words I am looking to avoid fixed monthly fees, so that I can close the business any time without contractual obligations.
Among other options I am considering:
Vodacom, MTN .. etc..
Skype,
Telkom

I would actually like to know what's the cheapest option. Where can I find good pre-paid phones?