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BUSINESS PLAN

OF

OKONE STOCKS PTY LTD

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OWNER AND COMPANY DETAILS

Owner name % of ownership

Dominic Mothapo 100

LEGAL STRUCTURE

Private company

COMPANY DETAILS

OKONE STOCKS LTD PTY

Also trading as Spaza Inc

REGISTRATIONNUMBER

2017/191139/07

CONTACT DETAILS

Telephone: 067 004 9404

Email: Spazainc@gmail.com

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TABLE OF CONTENT

EXECUTIVE SUMMARY 4

PUPOSE OF THE REQUIRED FUNDING 5

PRODUCT DESCRIPTION 5

INDUSTRY ANALYSIS 8

TARGET MARKET ANALYSIS 22

COMPETITOR ANALYSIS 30

SUPPLIER ANALYSIS 35

OPERATIONAL ANALYSIS 35

MANAGEMENT AND HUMAN RESOURCE 41

SUMMARY OF INTERNAL AND EXTERNAL RISKS 48

SOCIO ECONOMIC BENEFITS 50

FINANCIAL AND CASH FLOW ANALYSIS 53

ANNEXURE

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EXECUTIVE SUMMARY

Okone Stocks Pty Ltd is a 100% black owned and managed start – up eCommerce

Company that specialises in providing micro retailers (Spaza shops, Fast food

outlets and Liquor outlets) and consumers platforms to procure grocery and/or stock

in bulk directly from manufacturers. Okone Stocks pricing strategy is a true

differentiator and enables client to truly benefit from buying directly from

manufacturers. The company’s main objective is to enable clients to maximise profits

and utility, achieve economies of scale, reduce business and/or household costs and

be a cost saving enabler.

To effectively execute Okone Stocks business plan and achieve objectives the

company will require a cash injection of R2 million in the form of a loan. Requested

funds will be utilised to fund asset acquisition R 421,169 and operational expenses

R1, 578,831.

Okone Stocks was conceptualised by a dynamic and creative entrepreneur (Dominic

Mothapo) supported by a team of committed professionals with wealth of experience

in retail, logistics and customer service. The company’s promoters envisioned Okone

Stocks to challenge the status quo within the retail sector and be a cost saving

enabler for its clients.

Okone Stocks core objective is to have a positive impact in the township economy

and the country at large. This objective will be achieve through recruitment strategies

that give first preference to candidates from previously disadvantaged groups which

includes women, Africans and people with disabilities. Through recruitment process

and cost saving enablers Okone Stocks aims to play a part in fighting poverty within

townships and the inner city.

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PURPOSE OF THE REQUIRED FUNDING

Accessing adequate financial resources is critical to ensuring that the

management of Okone Stocks are able to deliver on the company’s

objectives. Required funding will be utilised to finance asset

acquisition/development and operational expenses

Funds will be applied as outlined below

(1,346,203)

Amounts

Asset acquisition 421,169

Working capital 1,578,831

Total 2,000,000

PRODUCT/SERVICE DESCRIPTION

Okone Stocks’ flagship product, O.Stocks is an eCommerce platform that

enables micro retailers (Spaza shops, Kota outlets and Liquor outlets) and

end consumer to leverage Okone Stocks’ network of sales agents, logistics

providers and manufacturing partners to purchase stock and/or groceries in

bulk directly from manufacturers at significantly low prices. This solution

enables clients to maximising profits and utility through collaboration and

consolidation of purchase orders with buyers of similar characteristics and

taste. Okone Stocks acknowledges that internet penetration levels are low

within the micro retail market sub – segment and has responded to this

constraint by providing this solution in a manual format in order to enhance

client reach and maximise cost reduction benefits for clients.

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BENEFIT TO THE CLIENT

Reduction in stock and/or grocery costs.

Achievement of economies of scale through collaboration with

consumers of the same preferences.

Zero mark – up added on stock and/or groceries prices

Fixed monthly fees

Maximisation of profits and/or utility.

Digital procurement channels

Manual services to accommodate different market sub segment

Seamless operational processes to the client

Predictable delivery times

Freeing up more time for micro retailers to concentrate on profit

maximising activities and end consumers to enjoy leisure time

Encouraging collaboration and sharing of ideas between local micro

retail operators.

PRODUCT SPECIFICATIONS

O.Stocks is an end to end eCommerce website that will meet client’s

requirements.

Compatibility

Clients will be able to access O.Stocks via web, Android and Apple smart

phone/computers.

Payment modes

Credit cards

Debit cards

Physical cash deposit

Electronic payments (EFTs)

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Okone Stocks has partnered with Altivex to bring the eCommerce website to

live in accordance with Okone Stocks objectives (please see quote attached in

the annexure section).

UNIQUE SELLING PROPOSITION

O.Stocks’ unique selling point is that is convenient and cost effective way of

purchasing stock and/or groceries with an added benefit of zero mark – up on

food prices. The company’s client centric approach will enable clients to

experience value adding services through its channels and customer service

team.

SOURCES OF REVENUE/CONTRACTUAL REVENUE

Okone Stocks pricing strategy is guided by its objective to be a cost saving

enabler. The company generates revenue from charging clients mandatory

one off fee upon registration and a monthly fee for providing services to clients

with fees remaining fixed for a duration of 12 months after registration.

PRODUCT CYCLE

eCommerce sector has been on a growth path since the turn of the century

with18.45 million users in 2017 and projected growth of 6.36 million users by

2021. Online food retailers have lagged other product categories with a few

providers operating in the food eCommerce sub - market. It is estimated that

online food retail represent circa 9% of eCommerce sales in South Africa.

Outlook for this market sub - segment and eCommerce in general is bullish

with a high growth outlook underpinned by increasing careers demands,

foreign direct investment, infrastructure investment, increasing purchasing

power amongst millennials and consumer sophistication. This outlook is

further supported by change in lifestyle, as more woman enter the labour

market, family and career responsibilities increases and consumers are

responding by doing more of their shopping activities online in order to utilise

time effectively.

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POTENTIAL AND PROPOSED NEW PRODUCT DEVELOPMENTS

Okone Stocks’s long term objective is to play a bigger role in the eCommerce

sector in South Africa through product expansion and market diversification.

Potential product offering

Agricultural supplies

Electronics and media (music & movies)

Organic food

INDUSTRY ANALYSIS

SUMMARY OF INDUSTRY

There are currently 18.43 million eCommerce users in South Africa, with an

additional 6.36 million users expected to be shopping online by 2021. Total

South African eCommerce revenue across all product categories is R 38

billion, and is expected to grow to R 66 billion by 2021. Electronics & Media is

currently the leading product category in South Africa, accounting for R 13.2

billion market share, followed by Furniture & Appliances, which generates R

7.8 billion in sales. By 2021, Electronics & Media will still be the most

purchased online category, with an estimated value of R19 billion , and

second favourite, Furniture & Appliances, will have an expected worth of R15

billion.

Grocery eCommerce has long been thought of as the holy grail of eCommerce

however online giants are still trying to capture this lucrative market that

currently account for circa 9% of eCommerce sales. Online food eCommerce

is expected to be a catalyst for future eCommerce growth underpinned by

consumer sophistication. A recent study carried out by Nielsen indicates that

40 % of online consumers who are not currently buying stock and/or groceries

online are open to doing so.

(Please note digits have been convert to Rands at a rate of 14.00 to the USD)

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VALUE DRIVERS AND INDUSTRY PRICE STRUCTURES

eCommerce growth has been significant since the turn of the century and

currently accounts for more than 1 % of total retail sales in South Africa.

Key drivers

Significant investment in network upgrades

Increasing internet penetration and smartphone accessibility

Increasing purchase power by millennials

Variety of payment modes and increase confidence in transacting online

underpinned by sophisticated security tools

Increase in participantation of traditional retailers within the ecommerce

space

Discounts combined with convenience and access to a large array of

goods by online shopping.

Foreign investments in eCommerce

Change in lifestyle and urbanisation

Streamlined eCommerce websites.

Companies that currently operate within the eCommerce space have adopted

a mark – up based pricing structure which is similar to traditional retailers.

HISTORICAL GROWTH RATE

According to the Online Retail in South Africa 2016 report, released in early

2016 by technology consultant company World Wide Worx indicates that

online retail continues to grow at a rapid rate in South Africa, having

maintained a growth rate of above 20% since the turn of the century. In 2015

the rate of growth was 26 % taking online retail to the R38billion mark.2016

and 2017 saw another bullish year of growth in eCommerce which was

recorded at above 20 %.

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TRENDS AND PROBLEMS THE INDUSTRY IS FACING

Trends in eCommerce

Crypto Currency – block chain technology is the new buzz word in

commerce. eCommerce companies especially in the USA are responding by

including crypto – currency as a payment option.

Immediate delivery – now more than ever consumers want immediate

gratification, with the knock on effect being that consumers want their

purchases to be delivered immediately after making a purchase.

Advancement in drone technology and cost effective delivery will enable

eCommerce retailers to meet clients ‘delivery expectations going forward

Mobile shopping – a significant portion of South Africa access the internet

through mobile devices, this behaviour has and will prompt eCommerce

companies to make their website more mobile friendly.

Basket offering – grocery retailers are making their online shopping

experience more convenient and seamless for clients by enabling clients to

choose grocery baskets instead of shopping for grocery items one by one.

Image and Voice shopping - Google Images and image-based apps will play

a bigger role in product searches. Visual shopping – together with voice

search – is demanding a bigger segment of the market. Now that image

analysis automation is a fundamental feature of mobile devices, customers

have the ability to take a picture of a product and conduct a reverse image

search on Google or receive product information via visual search apps.

Online merchants need to consider optimising their products for image search

as well as establishing a stronger presence on image-based networks such as

Instagram, Pinterest and Snapchat.

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More than products – online retailers are now more than just trading in

goods, grocery retailers are proving clients with healthy meal suggestions.

Problems in eCommerce

Finding the right products to sell - Shopping cart platforms like Shopify

have eliminated many barriers of entry. Anyone can launch an online store

within days and start selling all sorts of products however finding the right

products at the right prices remains a challenge.

Security – credit cards scams have continued to stain the eCommerce

industry leaving potential consumers reluctant to shop online.

Integration – operating an eCommerce business requires multiple of

systems, software and technology, with this technological requirements

eCommerce companies find it hard to integrate varies systems and streamline

their operations.

Attracting the perfect customer - Online shoppers don’t shop the same way

as they used to back in the day. They use Amazon to search for products (not

just Google). They ask for recommendations on Social Media. They use their

smartphones to read product reviews while in-store and pay for purchases

using all sorts of payment methods. A lot has changed including the way they

consume content and communicate online. They get easily distracted with

technology and social media. Online retailers must figure out where their

audience is and how to attract them efficiently without killing their marketing

budget.

Capturing quality leads - Online retailers are spending a significant amount

of money driving traffic to their online store. With conversion rates ranging

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between 1% to 3%, they must put a lot of effort in generating quality leads in

order to get the most out of their marketing efforts.

Converting shoppers into paying customers - Driving quality traffic and

nurturing leads is key to closing sales. At a certain point, one needs to convert

leads in order to pay for your marketing campaigns.

Retailers must constantly optimize their efforts in converting both email leads

as well as website visitors into customers. Conversion optimization is a

continuous process.

Retaining customers - Attracting new customers is more expensive than

retaining the current ones you already have. Retailers must implement tactics

to help them get the most out of their customer base in increase customer

lifetime value.

Achieving profitable long term growth – increasing sales is one way to

grow the business and be profitable in the long run. Online retailers must find

a way to cut inventory cost, improve marketing efficiency, reduce overhead

cost, reduce shipping costs and control returns.

Choosing the right technology partner – online retailers face growth

challenges due to technological limitations resulting from using inefficient

systems and partnering with the wrong technology partner.

Attracting and recruiting the right people – online retailers struggle to

attract and hire people with the right skills and experience to enable online

retailers to achieve its objectives

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RECENT DEVELOPMENTS

Image and Voice shopping - Google Images and image-based apps will play

a bigger role in product searches. Visual shopping – together with voice

search – is demanding a bigger segment of the market. Now that image

analysis automation is a fundamental feature of mobile devices, customers

have the ability to take a picture of a product and conduct a reverse image

search on Google or receive product information via visual search apps.

Online merchants need to consider optimising their products for image search

as well as establishing a stronger presence on image-based networks such as

Instagram, Pinterest and Snapchat.

Immediate deliveries - with major international retailers such as Amazon,

Walmart and eBay having already introduced same-day delivery to the

mainstream, consumers will expect nothing less than seeing their package on

their doorstep within 24-hours. Drone delivery is inching closer to reality, but

for now, these companies are relying on local delivery companies to ensure

orders are delivered faster than ever.

Payment options - while EFT payments and the ability to process card

payments online remain popular, payment gateway providers this year will

look to expand their offerings. Online merchants are finding themselves

uniquely positioned to take advantage of diversified payment methods such as

crypto currencies, one-click payments, subscription payments, and even a

buy-now-pay-later option. It's expected more eCommerce stores will start

embracing these systems as consumers seek the convenience of alternative

payments. Business owners should consult their online payment solution in

South Africa to find out if they will be offering any additional payment methods

this year.

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Automation - automation software carry out processes with little to no input

from employees, helping business save time, money and increase efficiency.

Automation is particularly effective for mundane tasks, such as changing

profile pictures on all social channels that may interfere with your daily

productivity. But, it can also streamline complex process such as customer

support, website analytics, and inventory management. While automation has

been a trend for several years now, what sets 2018 apart is that this year,

online businesses will fully embrace them as the next revolution in

eCommerce.

HOW IS THE MARKET SEGMENTED AND WHY?

The eCommerce market is segmented in groups with similar preferences and

behaviours, below are the different market segments in eCommerce.

Engaged and Unengaged

The only guarantee about clients and potential clients is that their habits will

be unpredictable. A few might faithfully open every email news latter the

company send and other might consistently open every email the company

sends while other will fall in between the wide spectrum of user consumption

habit.

One off versus repeat customers

The company can track frequency with which customers shop on the platform,

customers can be segmented into one off, repeat or loyal customers as well

as non -customers.

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Product versus product

Companies sell different products and want to appeal to different target

market. The company can create groups of people based on their product

interest and tailor marketing efforts.

Market versus market

Different market segments view value proposition according to their

requirements. The company can create market sub groups to ensure the right

message is communicated to the right market.

Bottom line is that market segmentation enables the company to personalize

marketing message, channel design and value proposition to the appropriate

market segment.

LEGAL AND REGULATORY ENVIRONMENT

Like all business eCommerce enterprises have to conduct business activities

within parameters of applicable legal frameworks.

The electronic Communications and Transactions ACT (ECT)

Requirements under this act mandates the company to provide consumers

with the full name and legal status of its website and clearly display the

company’s e mail address, telephone number, product prices, payment

methods and return policies in the website. Okone Stocks website/app will

enable clients to review their transaction, make changes or chancel purchase

onsite. Clients have the option to cancel purchases within seven days post

purchase; cost associated with returning goods will be borne by the client.

Okone Stocks will only send emails to clients who have signed up for

newsletters. The company will only collect, use and distribute data for reasons

that clients have agreed to.

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Protection of Personal Information Act (POPIA)

Clients personal details will be treated in a legitimate, respectful way and used

for explicitly defined and lawful purposes related to the functions or activities

of the company’s business. Risk measures will be implemented to ensure

clients’ personal information is adequately protected.

eCommerce VAT laws

Prices of goods charged, advertised or quoted by Okone Stocks will include

VAT (15%)

ECONOMIC OUTLOOK

The South African economy appears to have turned a corner with sentiments

largely buoyed by the appointment of Cyril Ramaphosa to the presidency of

the African National Congress and the Republic. With an improvement in most

economic indicators, The latest data suggests that the South African economy

has turned a corner, National account data for the fourth quarter data of 2017

surprised on the upside with sharp quarter on quarter expansion driven by

private consumption and fixed investments. In January of 2018 manufacturing

output expanded for the fourth consecutive month, recording its sharpest

increase since June 2016. Survey based data for February was equally

positive, with a notable jump in Standard Bank PMI. Unemployment rates still

remains high and is expected to decline at a subdued rate thus continuing to

strain spending in the economy. Overall outlook for the economy remains

positive.

Economic indicator 2018 2019 2020 2021 2022

GDP (real %) 2.1 2.3 2.6 2.7 2.9

Consumer inflation % 4.9 5.2 5.0 5.4 5.5

Salaries & Wages % 6.5 6.9 6.9 6.9 7.2

Consumer expenditure (real %) 2.4 2.5 2.7 2.9 3.0

Employment growth rate % 2.5 1.8 1.1 1.6 1.3

Fixed Capital Formation % 1.4 2.4 3.7 4.1 4.4

Repo Rate 6.5 6.5 6.5 6.5 6.5

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GROWTH CONSTRANTS

South Africa economy is characterised by long standing growth constraints

which have results in the economy’s inability to grow at its potential rate.

Low capital Investment

Capital investment in South Africa has been failing measures as a share

of the GDP

Many South Africa companies investment abroad rather than focus on

the domestic economy

Wage prices

South Africa has a powerful trade union movement that is part of the

ruling party

The annual increase in wages has been robust – boosting purchasing

power for those in work but increasing wage costs and thus affecting

global competitiveness

Deep inequality

South Africa has very high levels of income and wealth inequality

There is plenty of private sector wealth but the Gini coefficient is around

0.6

Millions of people inactive in the labour market depend on public cash

transfers

Electricity supply

The country’s infrastructure supports a relatively distribution of goods to major

urban canters throughout the region however unstable electricity supplies

retard growth.

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Skills shortage and strikes

South Africa’s economic policy has focused on controlling inflation however

the country faces structural constraints that limit economic growth, such as

skills shortage, declining global competiveness and frequent work stoppage

due to industrial action (strikes)

Political and exchange rate volatility

Political infighting within the African National Congress and the volatility of the

Rand further constrain economic growth.

Fiscal deficit

South Africa bloated fiscal deficit has led to the government imposing tax

hikes that will erode end consumer’s disposable income and increase the cost

of basic products.

Corruption

The presidency of Jacob Zuma was laden with corruption at national,

provincial and local government level which impacted negatively sentiments,

investor and business confidence in the country as the number destination for

foreign direct investment in Africa.

Land redistribution without compensation

The recent motion passed by parliament to redistribute land without

compensation has not been received well by the international investor

community; this will put further downward pressure on foreign direct

investment.

The above mentioned negatively impacts consumers and businesses alike

and reduce current and future spending activities thus negatively impacting

ecommerce revenue growth

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GROWTH OPPORTUNITIES

South Africa is regarded as an emerging market with tremendous

opportunities for growth.

Service exports

South Africa has a highly developed service industries, yet it captures only 2

% of the rest of Sub – Saharan Africa’s market for service imports. With the

right invests, service businesses can ramp up exports to the region and

government can help by promoting regional trade

Natural gas

South Africa’s electricity shortage has constrained growth and despite new

capacity another shortfall is expected between 2025 and 2030. Natural gas

plants, which are fast to build, entail low capital costs, and have a small

carbon print can provide an alternative to diversify the power supply.

Infrastructure productivity

While the country is investing heavily in infrastructure, big gaps remain in

electricity, water and sanitation. A true partnership between the public and

private sector could make infrastructure spending up to 40 % more productive

by maximising the use of existing assets and increasing maintenance

prioritising projects with greatest impact and strengthen management

practices to streamline delivery.

State owned enterprise efficiency

South Africa state owned enterprises have been performing poorly since the

turn of the century, further increasing the burden on the public. Privatisation or

restructuring of these enterprises can lessen the burden on the public and add

value to the economy.

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Eradication of corruption

Under the Zuma administration the South Africa government and state owned

enterprises were characteristed by corruption and unethical practises, which

were not well received by the investor community and led to inefficient

allocation of resources. Ensuring public organisation are corruption free will

led to a positive image for the country and lead to efficient and value adding

practices.

Inclusive growth

The legacy of the apartheid regime is still visible especially within the private

sector. Inclusive growth can provide cooperates with untapped talent from

varies groups which can lead to productivity, innovation and efficiencies.

INDUSTRY SPECIFICS RISK

The internet continues to revolutionised the retail sector however this has also

increased risk in the sector. It is imperative that Okone Stocks identifies,

understand and put measures in place to adequately deal with risks with the

following ecommerce risks.

Fraud – ecommerce fraud can take several shapes

Use of a stolen card number to fraudulently purchase products or

services

A family member uses a card without the owner’s consent

A client falsely claims non receipt of shipments

Account information theft by hackers

Intercepting client account data during transmission to or from the

merchant

Accessing inadequately protected systems and stealing data from

them

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Account information from a physical site

Stealing cardholder data by an outsider from a merchant’s site and

using it or selling it for unauthorised use.

Stealing cardholder by a merchant’s employee

Stealing unshredded cardholder data by a dumpster – by truck driver.

Customer disputes and charge backs – there are many reasons

why a client will dispute a transaction but the most common are

The product is not the same as descried in the promotional material

or website.

There is a misunderstanding about the cancellation of an order or

return and refund of a product.

The customer is billed twice for the same order or the transaction

amount is incorrect.

The customer does not recognise the merchant’s name on his or her

credit card statement.

The customer’s card is charged without his or her approval.

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TARGET MARKET ANALYSIS

MARKET ANALYSIS

The eCommerce sector has grown in leaps and bounds since the turn of the

century and currentlyaccounts for more than 1 % of retail sales. There are

currently 18.43 million eCommerce consumers in South Africa, with an

additional 6.36 million users expected to be shopping online by 2021.

Total South African eCommerce revenue across all products categories is

R38 billion USD and is expected to grow to 65 billion USD by 2021. Electronic

is currently the leading product category in South Africa, accounting for R13.2

billion market share, followed by Furniture & Appliances which generates R7.7

billion in sales. Food and drinks online transactions account for 9% (R25

million) of online transactions.

TARGET MARKET AND GEOGRAPHIC COVERAGE

Okone Stocks target market is divided into two market sub – segment namely:

micro retail (Spaza shops, Kota outlets and Liquor outlets) in township across

inland South Africa and end consumers in South Africa’s suburbs and urban

areas.

The sub-segments are further discussed below:

Market

Segment

Characteristics

Spaza shop These are informal convenience store that specialise in trading general food

items. Generally the owner of the shop will operate the shop and perform all

other duties such as cleaning and etcetera; however in certain cases spaza

shops owners hire people to perform duties they would have to perform. Spaza

shops forms part of the South Africa SMMEs constitutes.

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Kota outlets These businesses usually operate from a physical structure and can employ 1

to 5 people. These outlets specialise in providing fast food namely a Kota which

is made up of Polony, Chips, Vienna, Russian, and etc.

Liquor

outlets

These are business that supplier South Africa Breweries (SAB) product and non

– SAB products. SAB already has programmes In place to benefit these outlets,

Okone Stocks shall seek to enable these businesses to procure non – SAB

products at manufacturer prices.

End

consumers

These are households who buy food with the sole objective of consumption.

SEGMENT ATTRACTIVENESS

Market segment

Micro retail Consumers

Low Medium High Low Medium High

Size

Growth potential

Risk

Profitability

Competition

The attractiveness of the various market segments is based on the market

size, growth potential of the segment, profitability, the risk associated with the

segment and the nature of competition in the market segment. The

attractiveness of the various market segments is based on the market size,

growth potential of the segment, profitability, the risk associated with the

segment.

LIST OF EXISTING AND POTENTIAL CUSTOMER

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Spaza shops

Fast food outlets

Tarvens

Households (end consumers)

Stokvels

BARGAINING POWER OF CUSTOMERS

In this market customers are price takers with little or no direct influence on

market prices. Customers compare prices from different suppliers and will

normally go with the price that gives them the most value.

GROWTH OPPORTUNITIES IN PRODUCTS AND MARKET

Growth opportunities in product diversification and market diversification are

plenty within the eCommerce sector.

Key drivers of opportunities

Increasing internet penetration levels

Increasing earning power amongst millenneals

Improvement in infrastructure

Increasing education levels

Product growth opportunities

In the long run, expansion of product offering is key to Okone Stocks

profitability and sustainability, the company plans to add the below products to

the offering in the long term

Farming supplies

Organic foods

Clothing

Electronics

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Media

Market growth opportunities

Farmers

Stokvels

DISTRIBUTION CHANNELS

Okone Stocks distribution channels are tailored to each market sub segment’s

marketing and sales material consumption behaviour thus ensuring the

desired reaction from potential clients .

Business to Business (B2B)

The micro retailer’s distribution strategy is unique and guided by potential

clients’ marketing material consumption behaviour, internet penetration levels

and client sophistication.

Goals of distribution

Launch a new service/product to a large market quickly

Grow revenue quickly and gain traction in new markets

Build a more efficient service and support operation

Exceed the needs of clients

Educate clients about the benefits of the service

Chanel type

Sales agents – Okone Stocks will recruit on the ground agents who will

sell/market the company’s services to potential. Furthermore sales agents will

be responsible for managing the clients’ relationship on behalf of Okone

Stocks.

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Sales agent’s responsibilities

Market and generate sales on behalf of Okone Stocks

Educate client about the service works and benefits.

Provide administration support to clients who do not have access to

digital platforms.

Be a link between the clients and Okone Socks

Sales force characteristics and targeted areas

Year Number

of

agents

Targeted areas

2018 50 Alexandra, Tembisa, Soweto, Diepsloot, Mamelodi,

Soshanguve, Attridgevile, Kathlehong, Voslorus,

Daveyton,Ga – Rankuwa, Kagiso, Mabopane,

Mohlakeng, Orange farm, Reiger park, Sebokeng,

Thokoza, Tsakane

2019

(additional

areas)

120 Seshego, Mankweng, Mahwelereng, Lebowakgomo,

Makwarela, Nancefield, Sekgakgapeng, Sekororo,

Lenyenye, Onkunkuwa,Block C sebokeng, Bthibelong,

Botleng, Ekanini, Embalenhle, Emjondini, Emthonjeni,

EMzinoni,Ezamokuhle, KaBokweni, Kanyamazane,

KwaDela, KwaThandeka, Mashishing, Phola, Phumula,

Sakhelwe, Sakhile, Siyathambe, Sibaboswa

2020

(additional

areas)

300 Agisanang, Boikhutso, Boitekong, Boitumelong,

Borolelo, Huhudi, Ikageng, Ipelegeng, Kanana, Khuma,

Lebalengang, Meriting, Mohadin, Molatswanene,

Montshioa, Promosa, Reagile, Tigane, Thlabane,

Tlhabologang, Utlwanang

2021

(additional

500 42nd Hill, Bohlokong, Bolokong, Borwa, Botshabelo,

Dipeleng, Dithlake, Fateng tse Ntsho, Hlohlolwane,

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areas) Ipopeng, Itumeleng, Kgotsong, Kutlwanong, Kwakwatsi,

Leratswane, Madikgatle, Mahalatswetsa, Malebogo,

Mangaung, Maokeng, Masilo, Matlakeng, Mautse,

Meloding, Nyakallong, Phahameng, Phomolong,

Ratanang

Business to Consumer (B2C)

Increasing internet penetration levels makes this market relatively easy to

access via social media and direct internet selling through an eCommerce

website, emails and SMSs.

Goals of the distribution channel

Reach clients with similar demographics.

Direct traffic to the company’s eCommerce website.

Launch a new service to a large market quickly

Grow revenue quickly gain traction in new markets

Engage with potential and existing clients

Tailor marketing communications to certain areas

Chanel type

Facebook, Twitter, Instagram and eCommerce website, sms and emails –

These platforms will enable the company to tailor marketing communication

and induce the desired response to and from clients with similar

demographics effectively.

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Geographic targets

Province Target areas

Gauteng

(2018)

Darrenwood, Cresta, Northcliff,Melvile, Randburg, Rosebank,

Sandton, Rivonia, Bryanston, Morningside, Inanda, Chartwell,

Bramley, Kempton park, Auckland park, Bassonia,

Braamfontein, Corlett Gardens, GraigHall, Elandspark,

Ennerdale, Glenhazel, Glenvista, Highlands north, Houghton,

Johannesburg central, Kensington, Kew, Kibler park, Killarney,

Lenasia, Linksfield, Lyndhurst, Meredale, Mondeor, Mulbarton,

Naturana, Norwood, Orange grove, Ormonde, Parkhurst,

Parktown, Rembrandt park, Ridgeway, Turfontein, Warvely ,

Westdene, Winchester hills, Adeon, Annilin, Arcadia, Brooklyn,

Capital park, Claremont, Danville, Doornpoort, Dorandia,

Equestria, Faerie Glen, Flrauna, Garsfontein, Hatfield,

Hazeldean, Heatherview, La Montagne, Lombardy , Lotus

gardens, Mahube valley, Menlo park, Montana, Mooikloof,

Mountain view, Mucleneuk, Olymous, Pretoria , Sinoville,

Waterkloof,

Kwa - Zulu

Natal

(2019)

Asherville, Berea, Bluff, Durban North, Essenwood, Greyvile,

Mayvile, Morningside, Ntuzuma, Newlands, Overport, Puntans

Hill, Springfield, Stamford Hill, Sydenham, Windermere, Arena

Park, Bellaire, Gato manor, Glen park, Glenwood, Hillary,

Jacobs ladder, Manor Gardens, Memorial park, Merebank,

Merewent, Montclair, Mount Vernon, Northden, North park,

Shallcross, Treasure Beach, Wentworth, Umlazi, Umbilo,

Woodhaven, Woodlands, Yellowwood park, Avoca, Canelands,

Glen Anil, Glen Ashley, La lucia, Mount Edgecombe, Parkgate,

Redcliffe, Tongaat, Umdloti, Umhlanaga, Verulam, Sunnindale,

Alverstone, Assagay, Bothas hill, Crestholm, Cliffdale, Clifton

Canyon, Drummond, Everton, Emberton, Forest Hills, Fredville,

29

Hammersdale, Harrison, Hillcrest, Waterfall, Winston park,

Clermont, Chiltern hills, Cowies hills, Berea west, Malvern,

Maryvale,, Moseley, New Germany, Pinetown, Wueensbridge,

Sernia, Resevoir Hills, Savanna park, Shallcross, Westvile,

Amadawene, Amanzimtoti, Athlone park, Clansthal, Clasnthal,

Craigieburn, Isipingo, Kingsborough, Lower illove, Lovu,

Reunion, Warner Beach

North West

(2020)

Atlanta, Bethanie, Bodentein park, Bokfontein, Brits ,

Buffelsfontein, De Kroon, De Wildt, Elandsrand, Kareepoort,

Kleinfontein, Lethabile, Premindia, Rashoop, Snadrif, Azelea

Park, Boitekong, Boons, Boschdal, Boschfontein, Boshoek,

Buffelshoek, Cashan, Drby, Geelhoutpark, Kroondal,

Midderdorp, Modderfontein, Olifantsnek, Protea

park,Rusternburg, Safari park, Waterfall, Waterkloof, Waterval

The target areas are not exhaustive and are subject to change as new trends

develop in the market.

PRICING

The objective of Okone Stocks is to be a cost saving enabler for micro

retailers and consumers guides the company’s pricing strategy.

The company does not add mark – up on the price of goods instead charges

clients one off and monthly fixed fees as illustrated below

Micro retail market sub segment

Registration fee R 60.00

Monthly fee R 300.00

30

End consumer market sub segment

Registration fee R 100.00

Monthly fee R 200.00

Costs associated with the delivery of goods will be borne by the client. This

will be agreed upon before the client registers for the service

COMPETITOR ANALYSIS

MARKET SHARE

There are currently 18.43 million eCommerce users in South Africa, with an

additional 6.36 million users expected to be shopping online by 2021.

From a revenue perspective the eCommerce industry in South Africa is worth

R38 billion and expected to grow to R66 billon in 2021. Grocery eCommerce

lagged other eCommerce sub sectors in terms of growth in the recent past

accounting for only 9 % of eCommerce sales. Outlook for online grocery

retailers see is bullish and is anticipated to be a catalyst for future growth in

eCommerce. Okone Stocks projects to capture 0.015% during the first year of

operation the market and 0.042 % by 2021.

BARRIERS TO ENTRY AND NEW ENTRANTS

There’s no denying that in today’s time e-Commerce is one of the most

popular and profitable medium of reaching out to customers. However other

challenges still remain for entrepreneurs who want to enter this sector.

Inventory and product offering – manufacturers are only willing to do

transactions if minimum purchases requirements are met. This requirement

limits eCommerce business’s ability to source stock form the right suppliers

31

Capital - is a primary aspect to take into consideration before starting any

business, start – ups require access to adequate capital to fund capital

requirements and operational costs which are imperative to the company’s

success especially during start – up phase.

Technical – start – ups need to partner with the right technical providers

however given the variety of technical providers in the market and cost

consideration it is not easy for a start – up to pick the right technical partner at

the right cost.

When to involve online marketers – this applies special to start – ups that

will request funding from government agencies and or financial institutions. It

is ideal to involve digital markers during the website development phase so

they could guide developer with SEO friendly developments. This includes site

architecture, URL structure, server errors, redirection and implementation of

CSS and more. The reality is digital marketers do not support this service

during the early stages of development because there are no guarantees that

the funds applications will be successful and if the entrepreneurs will become

a client of their agency.

Payment Gateway – most clients will only shop on a site if their preferred

payment model is included as a payment option. Having the right gateway

partner is important to the success of the company.

Customer service - can shape an entire business in a positive or negative

way. One angry customer could tarnish your brand image and throw off other

people from buying your product. Lack of unlimited funds can limit the

company’s ability to provide appropriate customer service.

Brand/Company Reputation – to get a company recognised and accepted

as the e-retailer of choice requires massive investments in marketing

32

activities. Entrepreneurs face major challenges in accessing substantial

investments from funding agencies.

SUBSTITUTE SERVICES

Substitute for online grocery retailers emerges from traditional retailers with

physical stores.

DETAILS OF MARKETING BUDGET

Marketing type Annual costs

Design 26,896

Billboards space rental 180,000

Online marketing maintenance 66,000

Total 272,896

MARKETING STRATEGY TO REALISE OBJECTIVES

The marketing efforts will focus on identifying and understanding the ever

changing needs and preferences of the clients in order to satisfy them. The

marketing mix will drive the value proposition of the Okone Stocks.

Promotion

Okone Stocks will use a combination of push and pull strategies to create

awareness for the business and appraise leads and sales. Communication will

essentially be directed to micro retailers and online consumers. The marketing

efforts of the business will be designed such that they, educate, create

attention, interest, desire and ultimately cause the target audience to take the

desired action. The Company will make use of the digital and print marketing

channels so as to ensure that the promotion efforts are effectively received

and consumed by the right audience. Marketing efforts will assist Okone

Stocks in establishing itself as a brand and promote services the company

provides. Branding and marketing activities will encompass the following

33

Media Comments

A Company

website

The Company will register a domain name and engage a web design

consultant to develop a website for the Company that provides

information to potential clients and enable the client to transact. This

will not only give the Company a local presence but also open up

opportunities for a national presence.

Company logo A business logo will be developed for the Company. This will be a

‘graphical icon’ that will help customers easily identify the company.

Professional

letterhead

The professional letterhead will be developed for the Company. It will

be used to write letters to suppliers, customers and other

stakeholders. The letterhead will form part of the branding for the

Company as it will essentially be used for communication purposes

Flyers A4 and A5 sized flyers will be made to promote the services of the

business.

Business

cards

These will be small wallet sized cards that will be made for each

member of the business. The cards will show the name of each

member as well as their contact details. The business cards will be

given to potential clients in order to engage further communication

Digital

marketing

This will encompass promoting the company’s services through social

media platforms such as Instgram, Facebook, Twitter, emails,

company website and SMS. Digital marketing communications will be

directed towards end consumer sub segment.

Direct selling Sales agents will perform door to door direct selling directed towards

micro retailers

Word of Mouth Word of Mouth is a cost effective and powerful marketing tool. Okone

Stocks will run a campaign that encourages clients to refer their

friends and etcetera to stand a chance to win monthly and yearly

prizes.

Okone Stocks will establish a unique selling advantage as it will look into all

aspects of adding value in terms of client intimacy and value based pricing.

34

This will be communicated to the clients via promotion and direct selling

means.

Appropriate and effective forms of advertising will include word-of-mouth,

hand-delivered flyer promotion. This can be extremely effective if coupled with

client referrals as a base with constant monitoring and follow-ups. Market

intelligence in the form of being aware of the market trends and development

will be vitally important. For example – new competitors, keeping customers

aware of any new product developments will be an integral part of the

promotion efforts of the Company. Keeping the name of the company and its

value proposition current in the mind of the client will also be of utmost

importance. Clearly targeted and consistent advertising will increase sales,

improve the market share and earns the Company greater profits while

expanding into new locations and markets. The promotion initiatives of the

company are categorised and summarised in the following table:

35

SUPPLIER ANALYSIS

NUMBER OF SUPPLIERS

Okone Stocks will source stock and/ or groceries on behalf of clients from

strategic suppliers specialising in stable and popular food items.

Number Supplier name category

1 Tiger brands General groceries

2 unilever General groceries

3 Truda Snacks Snacks

4 Wilmar Oil edibles

5 Kingsley Soft drinks

6 Coca Cola Soft drinks

7 Lucky star Canned grocery

8 Distell Alcohol

9 Diageo Alcohol

Okone Stocks will add new supplies based on client’s suggestions and trends

within the food industry.

BARGAINING POWER OF SUPPLIERS

Bargaining power levels varies across suppliers due to various factors.

Manufacturers have established bargaining power based on brand recognition

this power is underpinned by exclusive marketing and distribution rights that

some manufacturers enjoy. Brand recognition affords manufactures such as

Tiger Brands, Unilever and Coca Cola a significant degree of bargaining

power.

36

OPERATIONAL ANALYSIS

PRODUCTION PROCESS

Okone Stocks’ operational plan is designed and intended to be seamless to

the client and cost effective thus enabling clients to benefit from value adds.

TRANSACTION FLOW

Logistics Co

Bank OKONE STOCKS

Micro retailers and End consumers

Manufacturers and marketers

Clients send purchase orders via digital or manual platforms

OKONE STOCKS consolidate orders and negotiate them

as a bulk order with the supplier

Manufacturers confirms purchase order

OKONE STOCKS communicates confirmation to clients

OKONE STOCKS send delivery schedule to logistics partner

Logistic partner collects goods from manufacturer Clients settles

goods and transportation costs

OKONE STOCKS reconciles clients accounts and pays suppliers and logistics partner

Goods are collected and send to the warehouse for arranged and packaged and if no packaging is required goods will be sent straight to client’s premises

1

2 3

4

5

6

7

8

9

Packaged goods are delivered to client premises

10

Warehouse

37

Steps in the transaction

1. Clients will send purchase order via O.Stocks app/web or manually via

other electronic channels or sales agent.

2. Okone Stocks consolidate individual clients’ orders and negotiate them

as a single bulk purchase with the manufacturer.

3. Manufacturers confirm order and communicate the confirmation to

Okone Stocks.

4. OKONE STOCKS communicates the same to clients with an Okone

Stocks branded invoice detailing goods and transportation costs.

5. Okone Stocks furnishes logistics partner with delivery details.

6. Clients’ settles stock/grocery and transport costs into Okone Stocks

account for reconciliation purposes.

7. Okone Stocks affect payment to the manufacturer and logistics partner

8. Goods are collected from the manufacturer and delivered to a

warehouse for packaging and arrangements. In case of micro retail

orders that require no packaging and arrangement, goods will be

delivered straight to the client’s premises from the manufacturer.

9. Goods are packaged and arranged

10. Goods are delivered to the client’s premises from the warehouse.

Buying intervals

The main objective of Okone Stocks is to enable clients to buy in bulk from

manufacturers at favourable prices. This will be achieved through

consolidation of individual orders and negotiating them as a single bulk

purchase, this buying strategy requires purchases to be executed at certain

intervals, see the below for proposed purchasing intervals.

38

Delivery dates

Ordering intervals

SU MO TU WE TH FR SA

1 2 3 4 5 6 7

8 9 10 11 12 13 14

15 16 17 18 19 20 21

22 23 24 25 26 27 28

29 30

Please note the above is not final and will be amended to suit clients’

requirement and is dependent on order volumes

Service turnaround time

Okone Stocks seeks to execute transactions within a certain time line and only

during certain time intervals to ensure a streamlined end to operational

process.

Steps Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7

1

2

3

4

5

6

7

8

9

10

39

This time line will be shortened in the medium term as a result of client

sophistication, increasing volumes and automation.

WAREHOUSE EQUIPMENT REQUIREMENTS

Equipment type Notes

Scanners To record inflows and outflows of goods

Trolleys Move goods within the warehouse

Shelves Facilitate the organising and storage of goods in

the warehouse

Grocery containers Packaging and proctection of goods when in

transit

Forklift To facilitate the handling of goods

PLANT CAPACITY AND UTILISATION

The company will utilise warehouses to store goods temporarily, package

groceries items as per client’s request and store returns. This operational

approach enables the company to have access to a warehouse when

required.

Warehouse

Size: 20m2

Proposed location; Longmeadow

TECHONOLGY REQUIMENTS

Technology forms the backbone of Okone Stocks operational plan and goes

further in enhancing customer satisfaction. The company plans to automated

core processes such as delivery management, inventory management and

accounts management with the objective of reducing operational costs,

administration costs and labour cost.

40

Point of delivery technology

Point of Delivery (POD) enables clients and Okone Stocks to track delivery

status of grocery basket once they leave the warehouse, the POD system

includes a confirmation feature that enables client to confirm if and when they

have received their order.. This is an automated tool that will enable the

company to streamline management of delivery processes.

Inventory management

Efficient inventory management is critical to Okone Stocks’ operational

process and profitability. The company will employ an Easy scan inventory

management system that will automate inventory management and effectively

track the movement of goods in and out of the warehouse.

Account management

The company will utilise ZOHO invoicing system which is an automated

invoicing and account management tool that will assist the company in

automating account management activities (such as time tracking, spayment

reminders and etcetera)

QUALITY CONTROL/REJECT

Client orders will be double check to ensure contents are as per the client’s

order before they are delivered. This quality assurance methodology will

ensure client satisfaction and further foster the company’s imagine the client’s

mind.

41

MANAGEMENT AND HUMAN RESOURCES

MANAGEMENT EXPERIENCE AND QUALIFICATIONS

The management of the company comprises of four passionate, committed

and creative professionals with experience from various professions.

Name Qualification Experience Company

Dominic

Mothapo

Degree

Bcom Economics

Certificate

Management and

Leadership

Financial market

tools and

instruments

Treasury and Cash

management Sales

(Internship)

Trade Finance –

Product analyst

Standard

Chartered

Mathews

Molepo

Degree

Bcom in Financial

Management

(incomplete)

Product Coordinator

Sales Assistance

Branch Manager

Game Store

Vodacare

Barko

Financial

Services

Mamorale

Mothapo

Certificate

Business

Management

Early Child

Learning

Development

Debt Collector

Grade R teacher

Van der

Venter and

Mojapelo

Bapedi

Primary

School

Virginia

Montsho

Diploma

Logistics and

Supply Chain

Management

Inbound Clerk (SAP)

Stock Controller

(SAP)

Goods Return Area

Supervisor

Pick n Pay

Distribution

DHL

42

NUMBER OF EMPLOYEES

Full time employees

Position 2018 2019 2020 2021 2022

Managing Director 1 1 1 1 1

Sales Manager 1 1 1 1 1

Operations

Manager

1 1 2 2 2

Sales Associate 1 1 1 1 1

Operation

Associate

1 1 1 1 1

Logistics Manager 1 1 2 2 2

Sales Agents 50 120 300 500 550

IT technician 1 1 1 1 1

Total 57 127 309 509 559

Part time employees

Position 2018 2019 2020 2021 2022

Warehouse staff 5 10 25 50 50

43

Man power responsibilities and budget

Position Responsibilities

CEO Overall management of the company

Human resource recruitment and management

Supplier and outsourced functions management

Identify new growth opportunities

General administration

Logistics

Managers

Arrange the movement of goods to and from warehouse.

Manage inventory levels

Arrange clients’ orders

Ensure execution of deliveries.

Set monthly, quarterly and annual sales targets

Monitor and evaluate logistics plans

Remedy logistic inefficiencies

Sales Managers Formulate marketing, sales and distribution strategy

Execute sales strategy

Formulate marketing strategy

Ensure implementation of marketing strategy

Manage sales agents

Sales Associate Forecast monthly, quarterly and annual sales

Monitor market trends

Monitor clients and sales behaviour

Manage and execute digital distribution plan

Provide customer service

Manage customer service levels

44

Operation

Manager

Formulate operational plan

Execute operational plan

Integrate operation and business units

Manage 3rd party vendors

Remedy operational inefficiencies

Manage warehouse

Monitor and evaluate operational plan

Operation

Associate

Execute day to day operation activities

Assist operations manager in executing operational plan

Manage client’s accounts

Manage movement of goods

Sales Agents Execute sales and marketing strategy

Generate sales

Manage client relationships on behalf of Okone Stocks

Assist clients with purchases and other administrative

requirements

IT Maintain the company’s computers and network

Monitor the company’s technology requirements

Assist in systems upgrades

Warehouse staff Load and unload goods

Organise goods in the warehouse

Organise clients groceries

45

Outsourced functions

Functions Proposed supplier Monthly cost to

company

Legal Legal Legends 5000

Marketing Cognite 5500

Finance Real Accounting 7500

Total 18,000

Company organogram

CEO

Operations Manager Sales Manager

Operations Associate Logistics manager

Warehouse staff

Sales Associate Sales Agents

Outsourced functions

IT

46

% BEE SKILLS REQUIRED

Okone Stocks is fully black owned and has a fair representation of females in

management positions. The company will strive to recruit from previously

disadvantaged labour pool while maintaining a fair level of diversity and

inclusion.

Management team demographics and ownership

Name Gender ethnicity %

ownership

Dominic Mothapo Male African 100 %

Mamorale Mothapo Female African 0

Mathews Molepo Male African 0

Virginia Montsho Female African 0

Okone Stocks’ success depends on recruiting candidate with appropriate skills

and attitude. To achieve objectives the company will recruit employees with

the following skills; Sales Management, Operation Management, Logistics

Management, Financial Management, Administration Analytical and

eCommerce skills. The company will outsource function such as Legal, IT,

Human Resource, Finance and Marketing.

TRAINING PROGRAMMES

Okone Stocks acknowledges the importance of skills development and the

impact on the company and society at large.

The company will partner with the Sector Education Training Authority (SETA)

to ensure that employees are able to access training in areas of Retail,

leadership, management, Finance and Technology, Supply Chain

Management, eCommerce and etcetera. In the long term the company will

47

also enable employees to access fully paid eCommerce courses through

Dameline College.

STUFF TURNOVER

Career development and empowerment is important to Okone Stocks, clear

career paths will be designed for every employee ensuring stuff retention,

clear objectives for employees and employee loyalty.

In addition to the above Okone Stocks will put the below measures in place to

avoid involuntary and voluntary staff turnover.

Create opportunities for employees through company growth

Ensure employee satisfaction through fair remuneration and work life

balance

Listen to employees concerns

Encourage inclusive decision making processes

Skills and educational developments

Ideally the company would like to keep the stuff turnover rate at 0 % through

the first two years of operation. This will be accomplished through ensuring

that the right employees are recruited in the correct positions and the

company takes steps to ensure employee satisfaction.

48

SUMMARY OF INTERNAL AND EXTERNAL RISKS

INTERNAL RISKS

Financial risks

The first financial risk emanates from the fact that the owners’

contribution is insignificant compared to the funds required from the

National Empowerment Fund. Hence, the gearing ratio is therefore not

as desirable. To mitigate this risk, the company’s management shall

strive to reinvest at least 60% of profits into the business so as to

improve the gearing ratio.

The second financial risk emanates from client not making stock/grocery

and service fee payments on time. To mitigate this risks the company

shall encourage client to make use of automated payment mode such as

direct debits and credit cards. Automated account management tools will

also be employed to send clients payment reminders

Operational risks

The first operational risk emanates from not reconciling clients account

accurately and efficiently thus delaying processes. The company will use

automated, time efficient and cost effective tools and software to

streamline the reconciliation process.

Second operational risk emanates from inaccurate grocery items being

packaged in wrong client grocery containers. This risk will be mitigated

by double checking every container against client’s purchase order.

The third risk emanates from the company’s inability to manage

inventory levels efficiently. To mitigate this risk Okone Stocks will use

automated inventory management systems to streamline processes

The fourth risk will emanate from the company’s inability to satisfy

manufactures minimum order volumes/value. Okone Stocks will mitigate

this risk by kicking of marketing/sales activities a month before the

49

company is officially open for business and put arrangement in place

with price effective wholesalers in the short term. Additional Okone

Stocks is in discussion with The Small Enterprise Foundation to buy

stocks on behalf of their clients.

EXTERNAL RISKS

Market risk

The first market risk emanates from aggressive competition from

establish companies. Okone Stocks will mitigated this risk by providing

goods at production costs and only charge client a fixed monthly fee. In

addition to targeting the broader end consumer market the company will

also target niche markets such as the micro retail market.

The second market risk emanates from finding the right products from

the right suppliers. The company will mitigate this risk through

maintaining relationships with competitive suppliers

Economic risk

Economic risks emanates from VAT increase, unemployment, low

economic growth and etcetera decreasing clients spending power. This

risk will be mitigated by Okone Stocks providing stock and/groceries at

production costs and at zero mark – up.

Socio economic risks

The first socio economic risk emanates from crime. OKONE STOCKS

will mitigate this risk by taking out an appropriate insurance cover.

The second socio economics risk emanates from xenophobic attacks in

townships. The company will seek to promote relations between South

Africa and Foreign nationals.

50

SOCIO ECONOMIC BENEFITS

Okone Stocks is deeply rooted in township communities and is guided by

objectives that aim to empower previously disadvantaged groups.

JOB CREATION

Okone Stocks aims to be an engine for job creation with preference given to

candidates from previously disadvantaged groups. In the first year of operation

Okone Stocks will create 61 jobs

Total Female Male African Non -

African

Non -Management 58 60% 40% 96% 4%

Management 4 50% 50% 100% 0%

POVERTY ALLIVIATION

Poverty alleviation is one of Okone Stocks key objectives the company seek to

have a positive impact in the communities through providing employment to

previously disadvantaged groups and enabling consumers to purchase

groceries and/or stock at lower prices thus improving their purchasing power.

WOMAN PARTICIPAION

Woman empowerment guide the company’s recruitment strategy, the company

will go a long way in ensuring that woman are fairly represented in the

company’s management and staff.

51

SKILLS TRANSFER/TRANING

The company will cultivate an organisational culture that promotes

collaboration, idea and responsibilities sharing. This will enable employees

within the organisation to gain skills and experience across multiple

departments..

Through Sector Education Training Authority and private institutions the

company will seek to provide employees with training and education in fields

such as retail management, eCommerce, supply chain, leadership and

management and Information and technology to mention a few.

NUMBER OF HOUSEHOLDS TO BENEFIT

Through employment the company expects to directly benefit 61 households

during the first year of operation and indirectly benefit thousands of households

by providing groceries at lower prices.

52

FINANCIAL AND CASH FLOW ANALYSIS

First day statement of financial position

August

ASSETS 421,169

Fixed assets 421,169

Land and buildings -

Motor vehicles -

eCommerce website 146,625

Furniture and fitting 101,274

Machinery and equipment 173,270

Other -

Current assets

Debtors -

Stock 1,582,831

Cash surplus/(deficit)

Total assets

EQUITIES AND LIABILITIES 2,004,000

Capital and reserves

Share capital 4,000

Shareholders’ loan

Retained income

Non-current liabilities 2,000,000

Term loan 2,000,000

Other loan -

Current liabilities -

Creditors -

Bank overdraft loan -

Total equity and liabilities 2,004,000

Debtors’ days -

Creditors’ days -

53

PROJECTED INCOME STATEMENT

August September October November December January February March April May June July Year 2 Year 3 Year 4 Year 5

Sales

Sales in Rands 10,500 31,500 64,000 75,000 156,000 223,500 320,000 393,750 482,000 566,400 710,000 812,000 5,699,577 7,979,408 11,969,112 15,559,845

Less: Cost of sales

Direct labour 1,785 5,355 10,880 12,750 26,520 37,995 54,400 66,938 81,940 96,288 120,700 138,040 968,928 1,356,499 2,034,749 2,645,174

Gross profit 8,715 26,145 53,120 62,250 129,480 185,505 265,600 326,813 400,060 470,112 589,300 673,960 4,730,649 6,622,908 9,934,363 12,914,672

Less: Operating expenses 425,669 272,675 274,975 274,475 274,275 278,975 275,975 275,725 273,975 272,175 272,675 274,375 3,928,430 5,360,514 6,057,542 6,847,206

Accounting and auditing fees 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 130,000 180,000 190,800 207,500

Depreciation 7,138 7,138 7,138 7,138 7,138 7,138 7,138 7,138 7,138 7,138 7,138 7,138 85,654.40 299,940 299,940 299,940

Distribution Cost 38,000 38,000 38,000 38,000 38,000 38,000 38,000 38,000 38,000 38,000 38,000 38,000 483,360 912,000 912,000 912,000

Insurance 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 101,760 203,520 215,731 228,675

Interest 17,500 17,500 17,500 17,500 17,500 17,500 17,500 17,500 17,500 17,500 17,500 17,500 210,000 210,000 210,000 210,000

Travelling expenses 5,000 4,500 6,000 6,000 6,500 7,000 6,000 5,000 6,000 4,000 5,000 6,000 80,000 110,000 150,000 200,000

Marketing 47,396 20,500 20,500 20,500 20,500 20,500 20,500 20,500 20,500 20,500 20,500 20,500 500,000 750,000 1,000,000 1,500,000

Systems and maintenace 58,499 1,984 1,984 1,984 1,984 1,984 1,984 1,984 1,984 1,984 1,984 1,984 31,744 63,488 67,297 100,946

Legal expenses 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 63,600 67,416 71,461 75,749

Printing and stationery 70,283 1,200 2,000 1,500 800 5,000 3,000 3,750 1,000 1,200 700 1,400 12,000 68,000 75,000 100,000

Rental, electricity, water 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000 139,920 148,315 288,000 288,000

Salaries and wages 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 606,744 686,880 824,256 873,711

Directors’ salaries 90,000 90,000 90,000 90,000 90,000 90,000 90,000 90,000 90,000 90,000 90,000 90,000 1,224,936 1,386,720 1,469,923 1,558,119

Security costs 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 139,920 148,315 157,214 166,647

Telephone and internet 9,353 9,353 9,353 9,353 9,353 9,353 9,353 9,353 9,353 9,353 9,353 9,353 118,792 125,920 125,920 125,920

Income/(loss) before tax (416,954) (246,530) (221,855) (212,225) (144,795) (93,470) (10,375) 51,088 126,085 197,937 316,625 399,585 802,218 1,262,394 3,876,820 6,067,465

Income tax - - - - - - - - - - - - 8,217 47,676 118,272 170,464

Income/(loss) after tax (416,954) (246,530) (221,855) (212,225) (144,795) (93,470) (10,375) 51,088 126,085 197,937 316,625 399,585 794,002 1,214,718 3,758,548 5,897,002

54

PROJECTED STATEMENT OF CASH FLOW

FROM OPERATING ACTIVITIES August September October November December January February March April May June July Year 2 Year 3 Year 4 Year 5

Net profit before taxation (416,954) (246,530) (221,855) (212,225) (144,795) (93,470) (10,375) 51,088 126,085 197,937 316,625 399,585 802,218 1,262,394 3,876,820 6,067,465

Adjustments for:

Depreciation, amortisation 7,138 7,138 7,138 7,138 7,138 7,138 7,138 7,138 7,138 7,138 7,138 7,138 85,654 299,940 299,940 299,940

Interest paid (amortised) 17,500 17,500 17,500 17,500 17,500 17,500 17,500 17,500 17,500 17,500 17,500 17,500 210,000 210,000 210,000 210,000

Interest received - - - - - - - - - - - - - - - -

(Increase)/decrease in debtors - - - - - - - - - - - - - - - -

Increase/(decrease) in creditors - - - - - - - - - - - - - - - -

(Increase)/decrease in stock - - - - - - - - - - - - - - - -

Cash generated from operations (392,316) (271,168) (246,493) (236,863) (169,433) (118,108) 14,263 75,726 150,723 222,575 341,263 424,223 506,564 1,772,334 4,386,760 6,577,405

Dividends paid - - - - - - - - - - - - - - - -

Preference dividends (paid) - - - - - - - - - - - - - - - -

Income taxes paid - - - - - - - - - - - - 8,217 47,676 118,272 170,464

Net cash from operating activities (392,316) (271,168) (246,493) (236,863) (169,433) (118,108) 14,263 75,726 150,723 222,575 341,263 424,223 498,347 1,724,658 4,268,488 6,406,942

CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditure 421,169 - - - - - - - - - - - - (1,500,000) - -

Interest received 0 - - - - - - - - - - - - - - -

Net cash used in investing activities (421,169) 0 0 0 0 0 0 0 0 0 0 0 0 (1,500,000) 0 0

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds on issue of shares 4,000 - - - - - - - - - - - - - - -

Proceeds on disposal of fixed assets - - - - - - - - - - - - - - - -

Holding company loan - - - - - - - - - - - - - - - -

Preference shares - - - - - - - - - - - - - - - -

long-term loan 2,000,000 - - - - - - - - - - - - - - -

Net cash used in Financing activities 2,004,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Net change in cash (813,485) (271,168) (246,493) (236,863) (169,433) (118,108) 14,263 75,726 150,723 222,575 341,263 424,223 498,347 224,658 4,268,488 6,406,942

Cash equivalent at beginning of period 2,004,000 1,190,515 919,348 672,855 435,992 266,559 148,452 162,715 238,440 389,163 611,738 953,001 953,001 1,451,349 1,676,007 5,944,495

Cash equivalent at end of period 1,190,515 919,348 672,855 435,992 266,559 148,452 162,715 238,440 389,163 611,738 953,001 1,377,224 1,451,349 1,676,007 5,944,495 12,351,437

55

VALUE DRIVERS FOR BASE, BEST VS WORST CASE SCENERIO

Value drivers for best scenario

Adequate funding to fund start -up costs, operational costs and marketing activities

Company brand recognition by clients

Client referrals

Recognition of the company’s value proposition

Investment in communication infrastructure

Recovering economic environment

Adverse economic developments (i.e. high unemployment and increase in VAT)

Efficient and cost effective delivery systems.

Increasing earning power amongst millennials

Predictable cash flow

Value drivers for Worst scenario

Ineffective marketing strategy

Market resistance

Aggressive competition from traditional retailers

Lack of brand and value proposition recognition

Lack of awareness about the company’s service

56

CASH FLOW CYCLE, SEASONAL, MONTHLY

The company’s pricing model enables projection of cash flow with an accurate certainty; monthly fees will be collected

from clients via debit orders, credit cards and deposit collection modes on the fifth last working day of the month.

Cash flows will be driven by the company’s existing and additional clients.

PROFIT MARGINS

PROFITABILITY

Okone Stocks profitability will be underpinned the below economic, industry and company specific factors elaborated

below.

The South African economy appears to have turned a corner with sentiments largely buoyed by the appointment of Cyril

Ramaphosa to the presidency of the African National Congress and the Republic. With an improvement in most

economic indicators, Okone Stocks in particular will benefit from growth in consumer expenditure, which is boosted by

growth in salaries and wages to employees. High unemployment and restrictive fiscal policy is bond to have an impact on

August September October November December January February March April May June July Year 2 Year 3 Year 4 Year 5

Gross profit margin 83% 83% 83% 83% 83% 83% 83% 83% 83% 83% 83% 83% 83% 83% 83% 83%

Operating preofit margin -3804% -727% -319% -260% -82% -34% 2% 17% 30% 38% 47% 51% 18% 18% 34% 40%

Net profit margin -3952% -776% -343% -280% -92% -41% -3% 13% 27% 35% 45% 49% 14% 16% 32% 38%

57

consumer spending patterns at Okone Stocks we anticipate that consumers will start looking for cheaper grocery

suppliers and Okone Stocks is posed to provide consumers with a cheaper mechanism of acquiring groceries.

Economic indicator 2018 2019 2020 2021 2022

GDP (real %) 2.1 2.3 2.6 2.7 2.9

Consumer inflation % 4.9 5.2 5.0 5.4 5.5

Salaries & Wages % 6.5 6.9 6.9 6.9 7.2

Consumer expenditure (real %) 2.4 2.5 2.7 2.9 3.0

Employment growth rate % 2.5 1.8 1.1 1.6 1.3

Fixed Capital Formation % 1.4 2.4 3.7 4.1 4.4

Repo Rate 6.5 6.5 6.5 6.5 6.5

At an industry level Okone Stocks is set to benefit from an accelerated growth of 43 % in eCommerce expected by the

2021. Grocery eCommerce is tipped to be the catalyst of this projected growth, with a recent study conducted by Nielsen

indicating that 40 % of current online shoppers are open to shopping for grocery online.

Okone Stocks Pty Ltd was conceptualised to exploit opportunities that are presented by the abovementioned factors that

are currently and will continue to drive growth within eCommerce in the future. Furthermore Okone Stocks profitability will

be enhanced by the company’s value adding solution, differentiated pricing structure and a marketing and/or distribution

strategy that ensures that the company is able to reach and educate the right clients about the company’s cost effective

offering are factors that boost potential profitability.

58

KEY ASSUMPTIONS USED IN COMPILING CASH FLOW FORECAST FLOW

No further capital investment will be made post the second quarter of operation until 2020

Term loan is calculated at an interest rate of 10.5%

Fees will be collected every month end as will be the case

59

COST DRIVERS (WHICH PORTION IS FIXED)

Okone Stocks’ biggest cost drivers include: directors salaries, salaries &

wages, distribution cost, interest and marketing accounting for 70 % of the

company’s costs. Marketing cost will be partially fixed and be allowed to

fluctuate within a pre - determined band as to allow the company to react to

sales performance and try to direct

the company towards sales

objectives through marketing

activities.

Fixed costs

Director’s salaries

Wages and salaries

Depreciation

Interest

Distribution costs

Okone Stocks will analyse costs on

a monthly basis with the intention

identifying opportunities that

enables the company to cut costs

and pass on cost saving to clients

and maximise profits.

3% 2%

13%

3%

6%

2%

8%

2%

2% 3%

4% 16%

31%

2% 3%

Accounting and auditing fees

Depreciation

Distribution Cost

Insurance

Interest

Travelling expenses

Marketing

Systems and maintenace

Legal expenses

Printing and stationery

Rental, electricity, water

Salaries and wages

Directors’ salaries

Security costs

Telephone and internet

60

FINANCIAL STATEMENTS COMMENTARY AND BREAKDOWN

Okone Stocks operational cost were arrived at through thorough research and reasonable assumptions

Statement of Financial position

Cost Source of estimate Breakdown Amounts

Altivex Discovery and Planning 6,000

US & Design 48,000

Component Build & Development 60,000

Quality assurance & Testing 75,000

Deployment and Training 6,000

Project management 19,125

Total 146,625

Ukhuni Furniture 82,074

Fittings 19,199

Total 101,274

Q.Store, MrShelf and Universal

Storage SystemsUni - light Shelves 32,490

50 litre container 17,500

Trolley 7,280

Computers and printers 116000

Total 173,270

eCommerce website

Furniture and fittings

Total cost of designing and launching the eCommerce website

Quote provided is exclusive of fitting costs, the amount for fittings is an industry average provided by Ukhuni

Uni light shelves cost includes transportation and fittings

Machinery and equipment

61

Statement of Financial Position

Cost Break down Amounts per annum Package Specifications

Direct labour Estimate Commission 653,591

Accounting Real Accounting Accounting fees 90,000

Total 90,000

Okone Stocks will be able to have access to comprehensive account ing services at fraction of the cost as compared to having an in house finance team

Sales agents will earn 17 % of fee income provided the agent is involved in

• Generating the sale

• Manages the clients

This rate is above the industry standard however it embodies what Okone Stocks aims to achieve.

• SARS and CIPC tax submission

• Online payroll

• Free phone support for Tax and

Accounting quiries

• Reminder and Tax alerts

• Year-end financial statements

• Management reports

• Management report review

meeting and consultation

• Bookkeeping

• Budget and variance reports

• Tax structuring and planning

• Strategy and Business

62

Continued

Distribution Cost Property 24 Rent 396,000

Water and electricity 36,000

Municipal and other expenses 24,000

Total 456,000

Insurance N/A -estimate Transit 33,600

Warehouse 48,000

Office furniture and equipment 14,400

Total 96,000

Interest Interest payments 185,574

Interest is calculated at annual rate of 10.5 %

• Rental expenses will remain fixed throughout the year and it is in line with rental rates in the Longmeadow area

• Water and electricity costs will be kept within an annual budget of ~ 36,000.

• Other costs represent unexpected costs the company might have not budgeted for.

We have made contact with Santam to provide a quote for insurance and we were advised that is impossible for Santam and other insurers to provide a quote based projections.This is a

rough estimate of what the company budgets to pay for insurance cover and we believe is reasonable amount to pay for cover.

63

Continued

Travelling expenses Estimates Acommodation 43,550

Transportation 23,450

Total 67,000

Marketing Cognite Marketing designs 26,896

Billbordes space rentals 180,000

Online marketing maintenance 66,000

Total 272,896

Okone Stocks will have to travel extensively in order to conduct physical inspection of targeted areas and ensure a greater return on marketing and distribution

• Flyer design

• Signage design

• Print advert design

• Social media set up and branding

• Newsletter design

• Google adwords campaign planning and

set up

• Logo design

• MSWord letterhead design

• Business cards design

• Invoice design

• Marketing website

• Copywriting for website content

• Ad post space rental

• Digital marketing maintenance

Okone Stocks will seek to build a solid brand in a short time frame in order to gain clients trust and build company brand. This objective will require significant investment in marketing activities to ensure the

attainainment of the compay's goals

64

Continued

Systems maintenace JHB Reatial, Zoho, POD and Bluewave Zoho - Accounts management system 8,400

POD - Delivery management system 8,232

Blue Wave Client Management System 55,396 -48220

Easy Scan inventory management software 8,295 56,515

Total 80,323

Developments in technology has made softwares required to streamline process affordable and Okone Stocks will benefit from cost effective solution

Other expenses Legal legends Legal expenses 60,000 • 7 dedicated hours per month of legal

services

• Dedicated Lawyer

• Phone/Email/WhatsApp advice and

support

• Contractual drafting

• Contract reviews

• Intellectual property reviews and

assistance

• Legal research

• Intellectual property protection

Having an in house legal team can be expensive, with this package Okone Stocks will be able to access comprehensive legal services at asignificantly low costs

65

Continued

Printing and stationery General printing and Stationery 21,550

Promotional printing cost 70,283

Total 91,833

Rental, electricity, water Propert 24 Office rent 96,000

Water 14,400

Electricity 21,600

Total 132,000

Salaries and wages Budget Warehouse part time stuff 180,000

Associates 360,000

Total 540,000

• Business cards

• Flyers

• Posters

• T- Shirts

• Caps

• Stationery

• General printing

Printing costs a are slightly high for a company of Okone Stocks size, however it is important to note that these costs are associated with marketing activities which are critical to the success of the

company

Rent cost will remain fixed throughout the year, the company will look to be cost efficient and keep water and electricty consumption within a pre -determined budget of R36,000. Efforts will be put in

place to reduce consumption of utilities by 50%

Fair pay is important to the company as such the company will pay warehouse staff an hourly rate of R40 and its asociate/interns R10,000. Even though this remuneration strategy is above industry standard it

ensure employee motivation and job satisfaction

66

Continued

Directors salaries Budget Managing director 360,000

Directors 720,000

Total 1,080,000 90,000

Director salaries accounts for a significant portion of the company's operational cost however it is important to note that these are well below industry standard salesries

Communication and Technology Vodacome and Telkom Fixed landline rental 21,600

Calling palns 38,016

Cellphone plan 19,632

WIFI and Vitual Chief Information Officer 31,596

Subscription 1,393

Total 112,237

• Unlimited voice plan

• Unlimited and uncapped wireless

broadband

• 2 gig cell phone plan

• 200 all network minutes

• 2 gig of data

• 200 SMSs

• Four Apple phone smart phones

• Virtual Chief Information Officer

• Proactive network monitoring

Effective communication tools and client's information protection are critical to Okone Stocks brand image. Signicant investment will be required to ensure sufficient protection of data and acquisition of

appropriate communications tools

67

DEBT STRUCTURE

Term loan structure (amounts in

ZAR)

Amount requested 2,000,000

Interest rate 10.5%

Term 6 years

Interest and principal repayment At the end of the term

Credit unsecured

Principal repayment 2,000,000

Interest repayment 1,260,000

Total repayment 3,260,000

BREAK EVEN ANALYSIS

Number of client the Okone Stocks requires to break - even

Average month’s fixed running cost 287,162

Average revenue per unit 250

Average cost per unit 50

Break – Even point (number of

clients)

1099

68

ASSETS PROFILE

Asset type Asset sub - type Asset description Manager Notes 2018 2019 2020 2021 2022

Fixed Laptop Office laptop –Apple Mac Mathews MolepoOffice laptop to enable employees to carry

out daily duties

Fixed Printer Office printer - Cannon Mathews Molepo Output and input of physical documents

Fixed Packaging Delivery container Virginia Montsho Assist in organisation consumer orders

Fixed Furniture Chairs Dominic Mothapo Workstation

Fixed Furniture Tables Dominic Mothapo Workstation

Fixed Furniture Fridge Dominic Mothapo To store employees food

Intangible Systems Application/Website Mathews MolepoFacilitate placement of orders, account

managements and inventory management

Fixed Furniture Pool table Dominic Mothapo To enable employees to unwind during breaks

Fixed Furniture Soccer Table Dominic Mothapo To enable employees to unwind during breaks

Fixed Furniture Kitchen furniture Dominic Mothapo A designated area for staff to eat lunch

Fixed Furniture Television set Mathews Molepo To enable employees to unwind during breaks

Fixed Communication Landline Mathews Molepo To facilitate incoming and outgoing calls

Fixed Communication Mobile phones Mamorale Mothapo To facilitate incoming and outgoing calls