🐖 The R2bn Payslip Niche…

Plus: Spy satellites, SA’s new banks, private train networks & how to hire A-players for your startup.
Newsletter
March 19, 2024

Tinfoil hats? Everyone’s super relieved the Voyager 1 space probe suddenly started making sense again. It went insane a while ago and started reporting gibberish back to Earth (NASA kept it under wraps). We’re calling that one, though: s’obviously aliens.

In this Open Letter:

  • Lucrative play: Finding a niche in digital payslips.
  • Spy satellites, SA’s new banks and private train networks.
  • Star quality: 4 Rules for hiring A-players for your startup.
  • What’s so great about space: The results are in.
  • Share this: And get free business tools.

Niching Into SA’s R2bn Payslip Space

The Basic Conditions of Employment Act (BCEA) in South Africa requires employers to provide their employees with detailed breakdowns of payments due to them and made on their behalf.

And wherever there’s regulation enforcing behaviour change, there’s opportunity!

No surprise then that so many have tried to get into the digital payslips space – PaySpace, which recently got acquired by Deel, has been going in the cloud payroll space for nearly 20 years. 

Not to mention time-worn solutions by the likes of Sage.

A sizeable market – that’s hard to crack

If you think about it, there are 16.7 million people formally employed in South Africa. If you’re serving these at R5–R10 per payslip that’s R83.5m–R167m per month (that’s R2bn a year).

Scale up to Africa with 450 million employed individuals, and you’re talking about a R2.2bn–R4.5bn a month market. 

See where we’re going with this?

They in season RN

Peripheral opportunities

Once you’re entrenched and loved by all in a company, there’s a lot of scope for peripherals – you’re talking to all their employees, right? Expand by creating:

  • A channel to distribute company benefits – i.e.remote doctors or mental health practitioners
  • Communication and updates – many large organisations have workers without email; using existing channels like WhatsApp to engage employees could be worth a lot.
  • Distribution of rewards or incentives – vouchers and coupons linked to performance.
  • Access to earned wages – i.e. get paid in advance for hours of work completed in a month.
  • Surveys, timesheet collection, scheduling rosters and other HR-related matters.
SA soaring on its wave of advanced payslip technologies, according to AI.

Specialised angles of attack

But many a failed payroll startup will tell you getting traction is really tough — it’s highly competitive and hard to stand out. That’s why you need an angle of attack.

Now, one thing about the big, established payslip providers, is that they’re considered “mass solutions” – lacking a bit of specialisation and finesse for a niche.

Think about it: When you want a plumber, you call a plumber. Even though a large general home maintenance company probably has plumbing as a service, you naturally look for that specific solution for your specific problem.

Same thing here: If you develop a payslip solution that tackles a specific niche or problem, you could capture that market share from a less-specialised-seeming incumbent — and later expand to other areas if you so wish.

Agrigistics does this for farm workers, whose remuneration is complex – you have seasonal workers, contractors, and permanent employees in the mix; all earning a different wage at a different rate.

Agrigistics measures time spent and simplifies this process, does the calculations and sends out payment details (payslips) to the individuals. Highly specialised.

Indirect value adds

Another angle is to solve a common blue-collar worker issue that indirectly impacts employers. 

Individual cash flow is often a major concern for workers – often cash-strapped, surprise expenses put a huge burden on these employees. But it affects the employer too – because now your workers can’t concentrate or deliver their best work.

So, a cash-flow relief solution can help both employees and employers. 

Jem offers payroll for blue-collar workers, but with salary information locked in, they offer the ability for these workers to claim part of their earned wages for the month as an advance. Add to that password-protected payslips, timesheets and rosters all via WhatsApp and, on the company side, instant multi-format, segmented communications direct with their employees, and you have one powerful blue-collar workforce tool.

Cracking the payroll game is tough. There are big players in this space. But get the right niche and angle of attack, and you might just build a big company. At least R2 billion is up for grabs locally and we’re watching this space.

IN SHORT

🤿 Shaky Internet. A preliminary analysis of the damaged four undersea internet cables supplying the interwebs to Africa reveals they’ve been damaged by seismic activity, and could take at least 5 weeks to repair.

🥸 Spy Craft. SpaceX is building a comprehensive network of satellites for the US’s NRO (National Reconnaissance Office) in a deal reportedly worth $1.8 billion under a classified programme called Starshield.

🏧 New Banks. South Africa is getting some new banks after the South African Reserve Bank’s (SARB’s) Prudential Authority gazetted the official notice of registration for YWBN Mutual Bank, the first of 4 new banks on the horizon.

🛤️ 3rd Party Trains. State logistics company Transnet has published a draft network statement that will open up the 21’000+ kilometres of rail network to the private sector from mid-year in a bid to help the SOE with its massive debt bill and maintenance backlog.

🤖 Live Grok. xAI has launched the open-source base code for the Grok AI model describing it as the “314 billion parameter Mixture-of-Expert model”. It has however not released any of its training code.

BUILDER’S CORNER

How to Hire A-Players for Your Startup

Hiring is arguably the most important task business leaders do. While hiring is a single decision for you, the person you end up hiring will make hundreds or even thousands of decisions for the company… possibly including decisions about who else to hire.

Wouldn’t it now, George…

It’s (painfully) obvious that some employees are more effective than others. However, we tend to underestimate just how big the difference is. Employee effectiveness seems to follow a power law, where top performers can be 10x more impactful than an average worker. 

A top performer is not just more productive but can actually come up with solutions and ideas that a group of average performers could never come up with. After all, giving five average composers 10 years won’t result in music that rivals Mozart.

Once you realise this the logical conclusion is that the quality of your team is the thing that matters most. But how do you build a team with a high concentration of these A players? Let’s dive in.

1. Define what you want

Before you reach out to any candidates, you need to define what you're hiring for. It can be tempting to pull a job spec from the internet and use that. I would strongly warn against this approach.

Job ads are really just that: adverts. They are designed to attract candidates but need to start by defining what you need. A good approach is writing a job scorecard. This scorecard would include the job mission (essence of the job), outcomes (what you want this person to achieve in the next 6—12 months) and a ranked list of the specific competencies you want this person to have.

2. Source candidates

If you don’t have enough candidates in your process you’ll never hire great people. After all, You can only hire from the pool of candidates that you interview.

Here’s a ranked list of the best channels to use when you’re small. 

  1. Personal network
  2. Talent marketplace (platforms like OfferZen save a huge amount of time!) 
  3. Generate Inbound (founder social media, blog etc)
  4. Cold outreach (eg LinkedIn messages)
  5. Recruitment agencies

Sourcing is often boring work but it pays dividends. Remember, your hires can only ever be as good as you are at sourcing.

3. Assess candidates

It’s extremely important for early stage companies to develop an assessment process that disregards credentials as much as possible. If someone has all the obvious signs that they’re good (top university, work experience etc) then competition for them will be intense. As a small startup, you’ll struggle to compete.

Instead, you need to identify undiscovered talent - A players that are about to blossom. 

Principles when assessing candidates:

  • Hire for strengths, not the lack of weakness: The best people tend to be really good on one or two dimensions while having a few big weaknesses. If you aim to hire someone who has no weaknesses you’ll end up rejecting most of the best devs
  • Hire all-round players: When there’s high uncertainty (early-stage startups) hire generalists rather than specialists. 
  • Speed: One of the biggest advantages you have as a startup is the ability to move faster than larger companies. Maximise speed at every stage of the process 
  • Ask all candidates the same questions: Structured interviews are more boring but there is a ton of research that shows they are much more effective because you can benchmark candidates much more easily. Of course, you can ask follow-up questions that are unique to the answers of each candidate, but the bulk of the interview should be standard.

A typical interview process for a developer role would look like this:

  • CV review (2—5min)
  • phone screen (15—3min)
  • Technical phone screen (1hr)
  • Onsite interviews (3—5 hours)

Another great approach is to do real work with the candidate. For example, spending an entire day together coding. This doesn’t scale well but in the early stages, it’s a great way to identify top talent.

4. Close

Great — you’ve found someone you want to hire! Now, you need to convince them to join.

Below are three key approaches:

  • Mission — you want to hire missionaries, not mercenaries. Missionaries will care a huge amount about what your company is setting to do in the world.
  • Learning — we learn fastest when the stakes are real. Startups thrust way more responsibility on employees and junior employees usually get a ton of mentorship.
  • Career progression — joining a fast-growing stage team is the fastest way to grow in your career.  

I would caution against promising things like work-life balance or perks if you’re still early stage. This is a battle you can’t win and you’ll only end up attracting the wrong kinds of people.

For a more in-depth guide on hiring developers specifically, check out our hiring guide.

Today’s Builder’s Corner was written by Philip Joubert who is the co-founder of OfferZen.

You can connect with him on Linkedin right here.

THE RESULTS

We asked what you’re most excited about in space industry, and most of us will stay earthlings…

🟨⬜️⬜️⬜️⬜️⬜️ 🌕 Space tourism! Can’t wait to holiday on the Moon. (11%)

🟨⬜️⬜️⬜️⬜️⬜️ 🔴 Colonisation – got my bag all packed for Mars. (14%)

🟨⬜️⬜️⬜️⬜️⬜️ 🛰 Building cool things & making money for my space startup. (11%)

🟨⬜️⬜️⬜️⬜️⬜️ 👽 Aliens, it’s all about meeting the first aliens. (14%)

⬜️⬜️⬜️⬜️⬜️⬜️ 👩‍🚀 Would love to become an interstellar trucker, y’all. (4%)

🟩🟩🟩🟩🟩🟩 🏞 Nothing, keeping my feet on terra firma, thank you. (46%)

Your 2 cents…

We hear you, B Barclay — wake us up when they start building the Millennium Falcons.

FOR THE MEMES

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