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5 genius passive income ideas in South Africa for 2021

One of the biggest misconceptions in the field of finance is the idea that passive income is money you make without working. Nothing can be further from the truth, there is more to it than what meets the eye. 

What is passive income?

Passive income is income earned in progression from investments and efforts that do not cease the income stream upon conclusion. Rental Property income, dividends, royalties are good examples of passive income.

Whenever people hear of passive income, they think of getting wealthy. The good news is that passive income is indeed one of the best ways to build your wealth and advance your lifestyle. In fact, it is nearly impossible to become a multimillionaire in South Africa and the world over without various sources of income.

Almost all 2300+ billionaires around the world earned their billions through passive income. 

It is normal to think the likes of Jeff Bezos are earning their billions because they work for Amazon. That would be unfortunate because it would stand to reason that the day he resigns from Amazon his income will dwindle. 

If Bezos were to resign from Amazon, the only thing he would lose is his salary which is about $US140, 000 per month. He will; however, continue to gain his share value and dividends, which is where his billions come from. That is what we call passive income, you work for it but even if you were to stop working you would continue to get the income.

5 Ideas for passive income for 2021

1. Buy shareholding from your employer

This may sound impossible or unlikely but it’s quite a normal practice by high performing employees who are financially literate. If you are working for a small to medium-sized company and you believe the company has a great future, you can talk to the company directors and offer to purchase company shares.

When proposing to buy the shares, you need to have a clear way of financing the purchase. If you are going to purchase them for cash, you need to have a sizable amount, preferable not less than your annual salary.

The best way to offer the purchase is a direct deduction from your salary on a monthly basis. This usually works well with companies that have cash flow challenges. This strategy will likely do well in 2021 when companies are extremely low on cash flow due to COVID-19 lockdowns.

Some companies are sceptical on selling shares to employees, but some are quite open about it. They see it as a vote of confidence in the future of the company.

Either way, it is a great source of passive income. The day you leave the company, you only forfeit salary and bonuses, but you will continue to earn through growth in share value and dividends.

2. Invest in Dividend Stocks

Investing in stocks is one of the most common ways of wealth creation in South Africa and throughout the world. However, you ought to be smart in picking your stocks. If you are investing for the purposes of generating passive income, you need to invest in certain types of stocks, ones that have a good track record of issuing dividends at least once per year.

Top 10 Dividend Stocks in South Africa

2021 RankingCompanyDividend Frequency Per YearMarket Capitalisation 000,000 (ZAR)
1Fortress REIT B22109
2Hyprop Investments26110
3Redefine Properties213200
4Vukile Property Fund25259
5Tsogo Sun Gaming23650
6Growthpoint Prop3139000
7MAS Real Estate Inc27140
8Nedbank Group253217
9Investec410153
10Absa Group Limited283053

3. Affiliate Marketing

Affiliate Marketing is fast emerging as a great source of passive income in South Africa. Basically, affiliate marketing entails marketing products of a company you do not work for. Whenever you make a sale you get paid a certain percentage, best known as a ‘commission’. 

That sounds like a lot of work, right? Yes, it is! That’s the theoretical explanation of what affiliate marketing is. Most affiliate marketers are website owners, YouTubers, podcasters, social media influencers and bloggers.

They have existing communities and followers, all they do is post a link of a product to their followers and get paid commission whenever a purchase occurs.

This has created a lot of millionaires in the past 10 years. This is most ideal for someone with basic web skills including but not limited to social media skills.

If you have a website that targets South Africans you can start your affiliate marketing by signing up for Admarula or Offerforge. Admarula and Offerforge are the two market leaders in South Africa on affiliate marketing.

4. Selling Information Products

If this era has proven anything, it is that information is both power and cash. If you are skilled in a certain area and know how to write, you can develop courses which you can sell through platforms like Udemy or Skillshare.

If you are not camera-shy, you can develop lessons and distribute them via youtube. You will be paid through google’s monetization program or you can even get sponsors whom you will have to mention during the video.

The long and short of selling information products is that if you know something that most people don’t, you can commercialise it. 

5. Peer to Peer Lending passive income

This is arguably the best way to earn passive income. Peer to Peer lending is the process of granting a personal loan to another person through a third-party platform.

This works well because you don’t have to do much, the platform vets all loan applicants and calculates the risk levels. 

Should you ever decide to make passive income through peer-to-peer lending, the best way to start would be focusing on platforms that provide lending for social good like Prodigy Finance.  

Prodigy Finance is a peer to peer lending platform that gives loans to postgraduate students mainly from developing countries to study in top universities around the world.

They have so far given loans to more than 19000+ students from 150 countries. Prodigy Finance was founded by Cameron Stevens a South African student, after facing challenges himself of raising funds to do his MBA at Insead in France.

Conclusion

These are five ways you can use to earn passive income in 2021. Some of them will require you to put effort and much focus on developing them until they get to a point where they can start generating income for you.

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