Operational overview - South African distribution

The South African Distribution segment is the largest distributor of prepaid products and transactional services in South Africa, covering both the wholesale and retail markets. The product range includes prepaid airtime, data, starter packs, hardware, electricity, water, all forms of ticketing and financial services. These products are supplied across a diverse distribution footprint reaching all South Africans, thereby achieving the strategic objective of having core products and services within arm’s reach of urban and rural communities.

The South African Distribution segment is the predominant contributor to the Group’s revenue and profitability. The principal operating companies in this segment are The Prepaid Company, Blue Label Connect, Blue Label Distribution, TicketPro, Cigicell, Edgars Connect and Transaction Junction.


Overview
As the leading distributor of prepaid airtime and electricity in South Africa, augmented by an expanding suite of products and services, this segment is well positioned to supply its products and services through its widespread distribution footprint of approximately 150 000 devices. Distribution channels range from Mom & Pop stores, spaza shops, independent stores, wholesalers, petroleum forecourts to multi-channel retail and corporate banking partners.

SA Distribution’s unique ability to deliver both virtual and physical product to an extensive distribution footprint through a single company with a proven platform across different channels to market, differentiates it as the market leader in South Africa.

Products include but are not limited to, physical products such as hardware (POS terminals, handsets, tablets and accessories), prepaid starter packs and hybrid packages and virtual products such as prepaid airtime, prepaid data, prepaid electricity, prepaid water, bill payments, voucher products, gaming, money transfers and ticketing.

The informal sector contributes approximately 89% to SA Distribution’s revenue, with the remaining 11% derived from the corporate and formal retail sectors.

In a drive to reach into and uplift rural communities, SA Distribution utilises a unique and diverse route to market strategies. Solutions are facilitated by a fleet of trucks accompanied by footsoldiers, with further opportunities available through Start your own Business initiatives, which include bicycle trader, gazebo & umbrella table or the option of purchasing Business in a Box from sales agents or retail partners. In addition, innovative incentives are offered to retain merchants and reward growth, which in turn, gives SA Distribution further opportunities to cross- and up-sell.

The trend in consumers opting for “PINless or direct top-up” as an alternative redemption method for prepaid airtime, continues to escalate, with sales increasing 52% to R4.1 billion during the past year.

The majority of SA Distribution’s revenue continues to be derived from the sales and distribution of prepaid airtime, data and starter packs.

Growth in sales is driven primarily through the expansion of the distribution footprint, complemented by the increasing range of products and value-added services.

SA Distribution’s prepaid starter pack offers differentiation through community driven SIM packs pre-commissioned with community-related added value and content.

All starter pack sales are tracked via state-of-the-art tracking software and systems to ensure effective and accurate reporting. Flexible RICA registration solutions allow merchants to RICA SIM cards via a terminal, USSD and online from a mobile application.

SA Distribution’s prepaid airtime sales are predominantly voucher based and utilised for redeeming voice/data top-ups. Growth in prepaid airtime sales has been further driven by PINless/direct top-ups. The chat 4 change product continues to gain momentum and has further differentiated prepaid offerings in the market.

The Prepaid Company (TPC)

The Prepaid Company (TPC)

The Prepaid Company is the leading distributor of prepaid products for all the major network operators. It facilitates, manages and maintains the distribution of all airtime and data, including the distribution of approximately 80 million bulk print vouchers per month. In addition, TPC activates approximately 700 000 starter packs monthly. Services are supported by proprietary technology, which ensures purchasing efficiency and inventory control.

TPC is responsible for supplier agreements and procurement on behalf of the Group, including wholesale and community sales, starter packs, handsets, tablets and bulk airtime printing. Group treasury falls under its ambit.

Blue Label Distribution

Blue Label Distribution

Blue Label Distribution is the largest distributor of virtual vouchers, with over 150 000 distribution points. It offers tailormade and specialised solutions enabling virtual products and services to reach a diverse distribution footprint.

Distribution expands across all segments of the market and includes corporates (insurance, banking), retail (food and non-food retailers), petroleum forecourts, independent/informal channels (Moms & Pops/spaza shops), store-in-store and standalone stores (Edgars Connect).

Products and services are enabled in several ways, which include connectivity to terminals, touch screens, vending machines, self-service terminals, mobile platforms and third-party integration into existing POS software and mobile channels.

Business is supported by eight regional offices located in Johannesburg, Polokwane, Mbombela, Bloemfontein, Durban, Port Elizabeth, East London and Cape Town. Regional offices ensure that customer support teams are in close proximity to merchants in providing them with service and field support.

Blue Label Connect

Blue Label Connect distributes tailormade hybrid top-up airtime and data contracts on behalf of all major South African cellular networks. These may be purchased as a SIM only package or alternatively bundled with mobile phones, tablets and accessories.

Blue Label Connect, through its over the air mobile platform, enables retailers to extend their customers’ offerings into the digital space in order to maximise convenience for customers. Its cost-effective mobile platforms allow customers to purchase products and services utilising their mobile phones.

Edgars Connect

Edgars Connect

Blue Label in partnership with the Edcon Group, has rolled out 53 Edgars Connect standalone stores, with a view to expanding this concept nationally.

Edgars Connect is a specialty store in which customers are able to access a variety of products, including various types of handsets, tablets, prepaid, hybrid top-up and post-paid options, telephony accessories, the full product offering under the Blu Approved brand, as well as the TicketPro range of tickets.

Prepaid electricity and water

The supply of prepaid electricity tokens on behalf of the utilities is based on the same model as that of prepaid airtime. Blue Label has been vending prepaid electricity for the past 12 years and is a leading distributor in its field.

Prepaid electricity and water

The commission earned thereon equated to R197 million (2015: R165 million). The Group acts as an agent and not as a principal in respect of electricity and water sales, resulting in only the commissions earned thereon, and not the face value of sales, being accounted for in revenue. In the current year turnover generated on behalf of the utilities increased to R12.1 billion (2015: R10.4 billion).

Recently, the Group acquired a controlling equity interest in Prepaid 24, an online vendor of prepaid products and payment services via the web, as well as a 25.1% stake in Utilities World, a provider of revenue management software and services to municipalities. Through these partnerships the Group expects to expand its customer base and product offerings to municipalities, as well as broaden its model into the rest of Africa.

Eskom’s campaigns informing consumers of the benefits of converting to prepaid electricity has resulted in a continued increase in demand.

TicketPro

TicketPro

TicketPro’s ticketing platform is one of the most innovative in South Africa, offering promoters, event organisers, stadiums, transport and travel companies a single turnkey ticketing system. It offers flexible payment options, CRM functionality with extensive and customisable reporting, complimentary ticket management, tailormade accreditation systems and state-of-the-art access control, including NFC and season ticket functionality.

TicketPro is South Africa’s second largest ticketing company. Its ecosystem continually expands as it reaches deeper into sports, events, exhibitions, transport and travel ticketing sectors. All ticket types are administered, including 1D, 2D, NFC, secure print, home print and till slip ticketing.

Distribution channels include Edgars, Edgars Active, Edgars Connect, Jet, Jet Mart, CNA, Samsung and Choppies. Direct ticket sales and collections are also available at PostNet branches.

During the year, TicketPro sold over 2 million event tickets at 63 different venues, almost double the number to that achieved in the comparative year.

Financial services

Financial services

In support of financial inclusion of unbanked and underbanked communities, Blue Label offers a comprehensive suite of financial services products, including bill payments, merchant acquiring and money transfers.

This year, revenue from bill payments increased, due to an incline in transaction volumes and the expansion of the bill payments’ footprint.

Currently there are in excess of 250 bill issuers on the bill payment platform, covering products and services such as TV licences, satellite TV subscriptions, telephone landlines, traffic fines, municipal rates and taxes, electricity accounts, funeral policies, school fees and furniture accounts.

Current growth is expected to perpetuate as the bill payments solution is rolled out into additional independent and retail channels.

Blue Label, in partnership with Edcon, recently launched Moova Money, a mobile money transfer solution. This enables consumers to transfer money and cash out from Edcon outlets or transfer money to the Moova Money mobile wallet, thereby facilitating the purchase of products and services via the Edcon USSD application.

Transaction Junction (TJ)

Technology The South African Distribution segment houses Blue Label’s Technology division. The segment’s dependency on back-end system management, up-time and product and service delivery is crucial to ensuring the continual expansion of the distribution footprint and products and services offered.

The proprietary AEON and AMS systems, as well as Transaction Junction’s Postilion switch, entrenches the Group’s capability as a neutral aggregator in connecting to multiple service and product providers and distribution channels, regardless of the channel’s technology requirements.

Transaction Junction (TJ) is the foremost bank independent payment services provider in southern Africa. It processes volumes in excess of 1.2 billion transactions per annum. TJ plays a vital role in the payment ecosystem, as it consistently delivers quality solutions to customers. It serves multiple industries, including major retailers, financial institutions, petroleum companies and companies seeking to extend their payment services requirements securely and on time.

The South African Distribution segment’s contribution to core net profit equated to R751 million (2015: R685 million).

Blu Approved

Blu Approved

Blu Approved is the Group’s brand that is displayed at its points of presence.

Blu Approved serves as a stamp of approval and authenticity, duly endorsed and acknowledged by Blue Label.