Lo­co­mute eyes $5m boost

Start-up is off to Sil­i­con Val­ley to court ven­ture cap­i­tal­ists to fund its dream of ex­pand­ing the busi­ness Pa­tel makes mo­nop­oly cap­i­tal crim­i­nal

CityPress - - Business - JUSTIN BROWN justin.brown@city­press.co.za DEWALD VAN RENSBURG dewald.vrens­burg@city­press.co.za

South African mo­bil­ity start-up Lo­co­mute would this month visit Sil­i­con Val­ley in Cal­i­for­nia in an at­tempt raise $5 mil­lion (R75 mil­lion) in eq­uity to al­low the com­pany to ex­pand, said Lo­co­mute chief fi­nan­cial of­fi­cer Ntando Kub­heka.

Lo­co­mute, which em­ploys 18 per­ma­nent staff, op­er­ated from a house in Centurion and was a “garage start-up”, Kub­heka said dur­ing an in­ter­view.

“We are a tech­nol­ogy in­no­va­tion busi­ness. We are African pi­o­neers in this space. Our cus­tomers live in­no­va­tion,” he said.

Lo­co­mute will be part of a Cal­i­for­nia trip or­gan­ised by In­vestec’s En-no­vate, to­gether with about 20 South African en­trepreneurs.

Kub­heka said that Lo­co­mute was go­ing to Sil­i­con Val­ley be­cause there was no ap­petite for ven­ture cap­i­tal in South Africa.

In­vestec con­firmed that Lo­co­mute was part of a one-week ex­ploratory busi­ness trip to Sil­i­con Val­ley later this month.

“The tech en­trepreneurs will meet with ven­ture cap­i­tal funds, an­gel in­vestors, in­tel­lec­tual prop­erty lawyers and Stan­ford Univer­sity aca­demics,” In­vestec said.

Lo­co­mute started in June 2015 and had its ge­n­e­sis as an MBA as­sign­ment that Kub­heka and Tu­misang Marope, Lo­co­mute CEO, worked on in 2014 as part of their course at the Nel­son Man­dela Met­ro­pol­i­tan Univer­sity in Port El­iz­a­beth.

The com­pany is owned by the four di­rec­tors of the com­pany, Kub­heka, Marope, Lo­co­mute ex­ec­u­tive chair­man Sibu­siso Xaba and Vuy­isile Majola, the com­pany’s chief op­er­a­tions of­fi­cer.

When Lo­co­mute started, the com­pany had six ve­hi­cles. To­day it has 364, mainly Fi­ats.

Lo­co­mute chose Fiat be­cause it gave the com­pany a dis­count and Fiat cars are less prone to be­ing hi­jacked. Since the com­pany started, it has had three break-ins in their cars, but none was stolen.

Lo­co­mute sub­scribed to Ap­ple founder Steve Jobs’ mantra that “hu­man be­ings are in­her­ently good”, Kub­heka said.

The busi­ness con­sists of car rentals ei­ther on a daily or hourly ba­sis, which the com­pany calls “car-shar­ing” and they can be booked via the com­pany’s in­ter­net app.

Of 364 cars in Lo­co­mute’s sta­ble, 70% are ren­tal cars and 30% are used for car-share.

Up­front costs in­clude a one-off R199 that pro­vides a life­time mem­ber­ship. Us­ing the car-share op­tion, Lo­co­mute charges R1.80 a minute and R3 a kilo­me­tre, if you hire a car for up to four hours, and the first 20km trav­elled ev­ery hour is free.

When you book cars with Lo­co­mute us­ing the car-shar­ing op­tion, you don’t pay for petrol, in­sur­ance, e-toll or park­ing costs.

Lo­co­mute’s cars are parked all over the cities where the com­pany op­er­ates so, if you are a reg­is­tered mem­ber, you can use those cars as long as you make your way to where the cars are lo­cated. If you want a car de­liv­ered to you, there is an ex­tra charge.

You lo­cate the cars us­ing Lo­co­mute’s in­ter­net app. Once you are done with the car, you park it, lock the car and leave it.

Lo­co­mute op­er­ates in Jo­han­nes­burg, Cape Town, Pre­to­ria, Durban and Ekurhu­leni, and is look­ing to ex­pand into Port El­iz­a­beth and East Lon­don. The com­pany is also look­ing to ex­pand into Kenya, Nige­ria and Ghana.

In­ter­na­tional ex­am­ples of com­pa­nies like Lo­co­mute in­clude Euro­pean care-shar­ing com­pany DriveNow, which is partly owned by BMW, Car2Go, which is owned by Daim­ler, and Zip­Car, which is owned by Avis Bud­get in the US.

Kub­heka said Lo­co­mute was largely grow­ing via the ex­po­sure the com­pany is get­ting via its part­ners like Din­ers Club and AA. Lo­co­mute has 15 000 reg­is­tered mem­bers.

The founders of Lo­co­mute are also work­ing on set­ting up a food app called Con­vivial. This app would turn ev­ery ta­ble into a diner and ev­ery­one’s home could be­come a restau­rant, Kub­heka said.

“Con­vivial will be to cook­ing what Airbnb is to ac­com­mo­da­tion. You can of­fer meals in your home or set up a pop-up restau­rant in a park­ing lot,” Kub­heka said.

Airbnb is a US start-up that con­sists of a web­site for peo­ple to list, find and rent lodg­ing.

The Con­vivial food app would al­low peo­ple to earn ex­tra money by cre­at­ing an event, be­com­ing a host and then invit­ing peo­ple to book, Kub­heka said.

in­no­va­tion

As of this month, it is a crim­i­nal of­fence to en­gage in car­tel con­duct, leav­ing cor­po­rate ex­ec­u­tives and man­agers open to per­sonal fines and even prison sen­tences for fix­ing prices, di­vid­ing mar­kets or col­lud­ing on ten­ders.

This is a mas­sive de­par­ture from the old sit­u­a­tion, where it was only the com­pany that got fined or slapped with an ad­min­is­tra­tive penalty.

The max­i­mum penalty that bosses could now face is, how­ever, un­clear.

It could be a rel­a­tively pal­try fine of up to R2 000 or six months in jail.

Or it could be com­pletely up to the Na­tional Prose­cut­ing Author­ity to take on th­ese pros­e­cu­tions.

Pres­i­dent Ja­cob Zuma signed a procla­ma­tion last month that brings into ef­fect parts of the 2009 Com­pe­ti­tion Amend­ment Act that have been ly­ing dor­mant.

The 2009 amend­ment al­lowed for in­di­vid­ual penal­ties to shoot up to 10 years in jail or a fine up to R500 000, but that part is still be­ing kept in­ac­tive, caus­ing the un­cer­tainty.

Be­fore now, the Com­pe­ti­tion Act did pro­vide for im­pris­on­ment, but mostly for of­fences re­lated to un­der­min­ing the com­pe­ti­tion au­thor­i­ties, not for ac­tual com­pe­ti­tion of­fences.

The ex­treme 10-year sen­tence and/or R500 000 fine was al­ready in place, but only for peo­ple who ig­nored the or­ders of the com­mis­sion or tri­bunal – a mech­a­nism to en­sure en­force­ment of penal­ties against com­pa­nies.

Ac­cord­ing to the sta­tis­tics pro­vided by the Com­pe­ti­tion Tri­bunal, there have been just more than 200 con­sent or­ders and set­tle­ments for car­tel con­duct at the com­pe­ti­tion au­thor­i­ties since 2004.

Min­is­ter of Eco­nomic Devel­op­ment Ebrahim Pa­tel an­nounced the crim­i­nal­i­sa­tion dur­ing his de­part­men­tal bud­get vote in Par­lia­ment last month.

Ac­cord­ing to him, the time is right be­cause the com­pe­ti­tion au­thor­i­ties have pros­e­cuted enough car­tels to make it cer­tain what is, and what isn’t, il­le­gal. Some ma­jor law firms dis­agree. Tamara Dini, a part­ner at Bow­man Gil­fil­lan Africa Group, said that the move “seems to be pre­ma­ture”.

Ac­cord­ing to her, there were still as­pects of the com­pe­ti­tion law that have not been fully in­ter­preted by the com­pe­ti­tion au­thor­i­ties.

This left com­pa­nies at risk of ac­ci­den­tally com­mit­ting an of­fence, said Dini.

Web­ber Wentzel put out a no­tice say­ing other parts of the amend­ment that were still dor­mant would cause con­sti­tu­tional is­sues.

Zuma’s procla­ma­tion also left out a con­tro­ver­sial rule that find­ing a com­pany guilty of car­tel con­duct au­to­mat­i­cally pro­vides prima fa­cie ev­i­dence that man­agers are guilty.

This cre­ates a “re­verse onus” when that man­ager ends up in a crim­i­nal court – un­der­min­ing the pre­sump­tion that peo­ple are in­no­cent un­til proven guilty.

The new crim­i­nal­i­sa­tion could also po­ten­tially cause a headache for the Com­pe­ti­tion Com­mis­sion by neu­ter­ing one of its best weapons.

Jen­nifer Fin­ni­gan, part­ner at Shep­stone & Wylie At­tor­neys, warned it could have a chill­ing ef­fect on com­pa­nies com­ing for­ward and con­fess­ing to get le­niency.

That le­niency wouldn’t nec­es­sar­ily help bosses in crim­i­nal court.

“The bot­tom line in any firm which ap­plies for le­niency ex­poses its di­rec­tors and man­agers to crim­i­nal charges for car­tel con­duct,” she wrote in a note for law web­site Lex­ol­ogy.

The higher stakes are, how­ever, hav­ing an ef­fect on cor­po­rate con­duct.

Me­dia24, owner of City Press, re­sponded this week by can­ning its “early set­tle­ment dis­count or agency com­mis­sion” – a long-stand­ing prac­tice that in essence amounted to a 16.5% pay­ment to me­dia agen­cies that bring clients’ ads to Me­dia24 ti­tles.

Ac­cord­ing to the com­pany, this is stan­dard in­dus­try prac­tice.

“Hav­ing as­sessed its ex­po­sure, and with­out ac­knowl­edg­ing any wrong­do­ing, Me­dia24 has de­cided to take th­ese pre­cau­tion­ary mea­sures to cre­ate cer­tainty, and avoid any reg­u­la­tory and le­gal risk,” the com­pany said in a no­tice to clients.

PHOTO: JABU KUMALO

PRO­POSED PRIN­CI­PLES For­mer Cosatu gen­eral sec­re­tary Zwelinz­ima Vavi

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