“South Africa is a nation of well known promise and peril. One way to improve the well-being of South Africa’s population is through financial inclusion – the adoption, usage and sustainability of financial services” [1]
The majority of people who are working full time in South Africa do not earn a living wage, which is the amount needed for an individual or family to live a decent, dignified life. A living wage includes expenses such as food, healthcare, education, transport, electricity, and other essential needs. The living wage for a typical family in Gauteng is estimated to be R8,594. Most employers pay the legal minimum wage set by government, which is approximately R6,300 per month.
Albimix is a KFC franchisee operating 9 KFC stores and employing ~310 people in the Gauteng region. One of the stated objectives of management and the board of Albimix is improving the lives of our employees, and consequently their dependents.
Fitech Ventures Home | FiTech Ventures , a sister company, is involved in driving financial inclusion in South Africa, and has invested in and developed affordable, sustainable financial solutions to improve the well being of South Africans. These solutions, together with a number of additional benefits, have been and are in the process of being implemented at Albimix to ensure that employees earn a living wage. The average employee’s monthly salary and additional benefits are shown hereunder and explained below:
1. The average salary is R6 597,00
2. In 2022, after Covid and with the increase in inflation, Albimix introduced a cost of living incentive, evaluated and paid quarterly, to provide employees with some relief for the increased cost of living. Despite increasing salaries by CPI in 2023 and 2024, Albimix have continued with the cost of living incentive
3. Albimix also provide employees with meals, transport and uniforms amounting to nearly R1,000 per month
The majority of employees in South Africa, and worldwide, are deskless and remote, e.g. security guards, QSR and retail employees, and largely excluded and exploited, as a result of the following:
Exploitation by financial service providers, such as payday lenders, insurers, unsecured lenders, etc.
enterprise HR solutions generally only cater for employees who have access to computers and
lack of financial literacy
In addition to the benefits set out in the table above and to mitigate the exploitation and exclusion, Albimix is providing some additional benefits to its employees, as described in more detail below.
Albimix employee benefits fund
In 2021, in the middle of Covid, Albimix was required by the industry bargaining council to implement a provident fund for its employees. Albimix obtained a proposal for a provident fund from an EB service provider proposed by the bargaining council. This proposal required the employer and the employee to each contribute 5% of the employees monthly salary. The employers contribution would go to pay for the risk benefits, i.e. life and funeral cover, administration and brokerage fees and the employees contribution would go to savings/investment.
The full 5% employer contribution going to cover costs seemed inordinately high, bordering on exploitation of the employees. As a result, we created our own employee benefits fund as follows:
risk cover, administration and brokerage costs –
Simply, a disruptive digital life insurance company, provide life, disability and funeral cover at a fraction of the cost
Albimix administers the fund
There is no brokerage fee
Savings/Investment – the savings element is invested with Franc Franc - Home. Franc, like Simply, is a simple, online platform that provides low cost access to the following funds:
Allan Grey money market fund
Satrix Top 40 ETF
Sygnia Itrix S&P 500 ETF
The table below shows the contributions that the average Albimix employee would make, based on the average salary of R6,597 and the benefit per month of R271.
For the average Albimix employee, even a seemingly small increase of R271 per month can make a significant difference, as it represents a 91% boost to their savings over 5 years.
Jem earned wage access (EWA)
“Flexibility and speed are keys to unlocking credit.” [2] “One third of consumers with whom we conducted interviews, used mashonisas accepting their usurious rates because they are responsive.” One person” borrowed R200 to get to work one day and was forced to payback R300 a week later.”
The scourge of this credit market are payday lenders and mashonisas. The majority of Albimix staff were using payday loans to make ends meet during the month. Albimix started using Jem in January 2021 to enable employees to take an advance against their monthly salaries to prevent them from having to take payday loans at usurious rates. The graph below shows the amount saved by Albimix employees over the past 6 months (the saving in June was ~R99,042). The number of employees using Jem EWA is between 180 and 210 employees per month, which means that the average saving per month is R460 per employee.
In addition, Jem uses WhatsApp as its primary channel, which enables Albimix to simplify some of HR processes, reduce costs and empower our workforce.
Funeral policies
“Many South Africans devote a large and unsustainable share of the disposable income to life funeral and burial policies. Rarely were consumers better off having funeral cover than saving their money”. “Despite a strong knowledge of financial services, Felicity, a 53 year old caterer has purchased three funeral policies because she lacks confidence that any one will pay out”. [3]
Based on our discussions with management at Albimix and anecdotal evidence from Jem, it seems clear that most employees have multiple funeral policies. Research conducted by Jem at one of their customers revealed the following:
• Every employee we spoke to had multiple funeral insurance policies.
• Despite the average gross salary ranging between R5,000 and R9,000 per month, these employees were heavily invested in funeral insurance.
• This seems to be a strong cultural thing, and every person had between 4 and sometimes up to 13 dependants on the policy.
• The total cost per month of these policies ranged from R520 to R1,050 per month, which is between 5% and 10% of gross income, and represents a significant portion of their monthly income.
There is no doubt that the cost of group life, disability and funeral cover is far cheaper than individual cover for a number of reasons:
• The cost risk of death, disability, etc. cover is lower as it is spread over 300 employees
• The cost of administration per person is much lower for 300 people than for 1 person
• There is no cost of brokerage in our case
• There is no cost of collection, because Albimix pays a lump sum monthly, as opposed to individual debit orders and non payment in the case individual policies
As a result, we are increasing the amount of life and funeral cover provided by our EB fund (as set out above). The table below shows the increased life and disability cover and the increased premiums
As can be seen, the employees will get double the amount of life cover and 66% more funeral cover, for an additional cost to each employee of R9,32. In addition, Albimix contributes an amount to the bargaining council each month, which includes funeral cover of R18,500 per person. Therefor, each employee will have total funeral cover of R43,500, which will cover themselves, their spouse and their minor children.
One of the Albimix staff members pays R201 p.m. for R20,000 funeral cover for him, his wife and kids, compared to R38,43 p.m. that he pays for R25,000 funeral cover in terms of the EB Fund. In addition, he pays R298 for funeral cover for his parents and R98 for his child who is a major. The total is ~R600, which is approximately 5% of his monthly salary and corroborates the research done by Jem. Simply is “aiming to start offering extended family cover on group policies in Q4. The premiums will be significantly better than the retail cover offered by traditional players but more expensive than compulsory group cover.” (CEO of Simply)
The increase in the funeral cover under the EB Fund and the extended family cover should enable the employees to cancel existing funeral policies. If the average employee is spending between 5% and 10% on funeral policies, this should save them 7,5% on average, which is ~R500 on an average salary of R6,597.
Unsecured Lending
“The unrestricted power of unsecured lenders is burying lower classes into the same inescapable poverty they’ve been fighting for generations.”
“It is a dysfunctional industry where lenders compete on the largest loan size, not on customer value, preying on financial illiteracy and consumer demand for credit. Aggressive collection practices and extortionate pricing have ensured that even though around one-half of all unsecured lending consumers are in default, the lending industry remains highly profitable.”
“The all in cost of some of these loans can be as high as 225%.” [4]
Albimix uses Jem to distribute paylips to its employees. One of the features of Jem is that it enables employees to obtain the past 3 months payslips via the Whattsapp channel. This is required by employees as pre cursor to applying for unsecured loans – 3 months payslips and 3 months bank statements are required, as is an affordability assessment. Our monthly reports from Jem indicate that employees are requesting on average 2 sets of payslips per month. This implies that they are desperately in need of unsecured lending.
Just as we established our own provident fund, we are establishing an unsecured lending capability, with similarly significant benefits. We will ensure that we comply with the National Credit Act, but particularly with regard to ensuring that the loan is affordable and sustainable. This affordability assessment will be part of our financial literacy training, to ensure that staff are educated and aware of the pitfalls. There is little doubt that “it is a dysfunctional industry” because the lenders do not perform proper affordability assessments and borrowers get caught in a debt trap.
Our analysis reveals that the effective cost of a R10,000, 12 month unsecured loan from Capitec cost is 103% and the monthly repayments are ~R1,200. This is as a result of the following :
• An upfront fee of R1,207
• A monthly administration fee of R69
• Credit life cover of least R40 p.m.
• An interest rate of 29,5%
We will charge 15% interest on the unsecured loan and will not charge any initial or monthly fees. This will give rise to a monthly repayment of R900, which implies a saving of R300 p.m. (R3,600 over the term of the loan)
Conclusion
As set out in the table below, this will mean that the average employees’ disposable income will increase to R9,453, as a result of the existing initiatives and those that are in the process of being implemented.
Research shows that:
84% of employees worry about finance at work, impacting their productivity and health
68% believe personal financial issues are affecting their health
95% expressed interest in working for an employer that provides EWA
People may ask, why are we doing this? The reasons are as follows:
Our view is that in order to make South Africa a more sustainable place for all of us, we need to make a social impact by improving the lives of the majority of people.
Having seen how poor people get into financial distress as a result of the unscrupulous practices referred to above, it is our purpose to see how we can improve the lives of these people by offering affordable, sustainable financial services
By all accounts the staff are happy as a result of these interventions. Happy staff = happy customers = happy business. This evidenced by the following metrics:
staff turnover is ~23%, whereas the majority of the other KFC other franchisees experience staff turnover of between 35% and 40%.
turnover has increased by 150% between 2021 and 2024, albeit off a low base after Covid and helped by loadshedding, which has a positive impact on our business
EBITDA has increased by 2,400% over the same period
We sincerely hope that other businesses will adopt a similar purpose so that we can continue to improve the lives of marginalised majority, without a significant increase in cost to the employer.
[1] BCG – Improving Financial Inclusion in South Africa
[2][2] BCG – Improving Financial Inclusion in South Africa
[3] BCG – Improving Financial Inclusion in South Africa
[4] Differential Capital – Unsecured lending has consumers sliding towards financial ruin (2019)
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