Leadership and Democracy LabWestern Social Science

Crowdfunding and Fintech in South Africa

Primary Contributor: Brandon Robinson

Team Leader: Jake MacDonnell

01/01/2017

Wealth Migrate is a real estate investing company specializing in International Property Solutions (IPS.)  The company was founded by CEO Scott Picken, who incorporated crowdfunding technology into his real estate business to offset the problems of safety and securely sourcingForbes defines crowdfunding as, “the the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet.”  Picken has opened nine offices worldwide, two of which are located in Cape Town and Johannesburg.  These offices offer investment opportunities to the global market who, without the technology of crowdfunding, wouldn’t have the financial means to pursue such investments.   Customers of Wealth Migrate collaborate together to purchase large real estate projects, spreading the risks (and rewards) among many investors.  

Kevin Allen, Chief of Staff to the Wealth Migrates Cape Town office released to the Leadership and Democracy Lab that currently their primary concern is how Fintech crowdfunding technology is largely unregulated within South Africa.  With no regulation specifically related to crowdfunding, Allen believes that there are several current pieces of legislation that may end up being relevant to Wealth Migrate.   Three of the more important pieces of legislation that were discussed were: The Collective Schemes Act, The Banks Act, and Companies Act.  

The Collective Schemes Act pertains to the collection of charges by a company on behalf of clients. The Banks Act is a 100-page piece of legislation that encompasses many different transactions that banks have with clients.  The Companies Act is also a rather all-encompassing piece of legislation that deals with information on incorporation, registration, organization and management of companies, the capitalization of profit companies, and the registration of offices of foreign companies carrying on business within the Republic.   All three pieces of legislation are going to affect how a real estate company that uses crowdfunding technology operates within South Africa. 

Wealth Migrate has grown very fast in the six years since opening.  The real estate business turned to the Fintech industry to expand their customer base.  With crowdfunding technology, investors who normally would not have access to the international real estate market are now able to collaborate with other investors via the internet from anywhere in the world.  This world-wide business has seen great success in just a short period of time; in 2013, Wealth Migrate had a USD $2.5 million valuation, two years after the company has drastically increased its’ valuation to USD $25 million.  This success story showcases the Fintech’s ability to be incorporated into any industry and further grow the business.  For Wealth Migrate, financial technology has been used to bring real estate investing to a larger population, a group that has never had the ability or money to invest in such projects before.  Now, the middle class can collectively invest in such projects that was once only available to the wealthiest of the worlds’ population.